NY Times: House Rejects Bailout Package, 228-205; Stocks Plunge

Posted by Kendall Harmon

In a moment of historic drama in the Capitol and on Wall Street, the House of Representatives voted on Monday to reject a $700 billion rescue of the financial industry.

The vote against the measure was 228 to 205. Supporters vowed to try to bring the rescue package up for consideration again as soon as possible.

Stock markets plunged sharply at midday as it appeared that the measure would go down to defeat.

House leaders pushing for the package kept the voting period open for some 40 minutes past the allotted time, trying to convert “no” votes to “yes” votes by pointing to damage being done to the markets, but to no avail.

Read it all.

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Posted September 29, 2008 at 2:48 pm [Printer Friendly] [Print w/ comments]



1. Intercessor wrote:

Main Street has replied. The same folks that pounded Main Street with revised Bankruptcy “reform” to make it impossible to ever get out of debt even medical hardship now want what Main Street was denied. A much better package is needed Ms. Pelosi.
Intercessor

September 29, 3:07 pm | [comment link]
2. Chris wrote:

well, what is “better”?  Pelosi could very well try to pass a liberalized version of this plan on a party line vote.  and would the President sign it?  I fear he would….

September 29, 3:33 pm | [comment link]
3. John316 wrote:

I’m Main Street, but I’m Wall Street too.  I work for, and own stock in companies that may fail if something isn’t done.  This is a lose-lose situation.

September 29, 3:59 pm | [comment link]
4. DaveG wrote:

John 316 - I feel for you but please explain to me why I should, with my tax dollars, bail out your bad investments.  I didn’t make the bad loans.  I didn’t profit from the huge fees that the lenders charged when making the loans.  I have lost money in investments before.  If we bail out your portfolio, why not everyone else’s no matter what they invested in or how much risk they undertook?

September 29, 4:06 pm | [comment link]
5. John316 wrote:

Dave you don’t need you to bail me out, and I’m not a CEO with a golden parachute.  I’ve just got a retirement account invested in the market like a lot of other folks on Main Street. 

I’m not sure that I see the dichotomy.  Does anyone else on this list work for or own part of a publicly traded company?

September 29, 4:11 pm | [comment link]
6. DaveG wrote:

I own publicly traded stocks and they include financial instititions.  I also owned some in 1988 when a number of banks failed and I lost my investments in them.  If unprofitable and poorly managed companies are not permitted to fail, then the taxpayers are subsidizing my bad investment decisions.  I made the choices and I have to live with them.  So should they.

September 29, 4:19 pm | [comment link]
7. Irenaeus wrote:

“Pelosi could very well try to pass a liberalized version of this plan on a party line vote”—-Chris [#2]

Why would she want to?

The Bush Administration has sought a $700 billion bailout. But the administration has not convinced the American people that they will fare better with the bailout than without. That is the fundamental reason why this bill failed.

If the House had voted on the administration’s original proposal, it would have failed overwhelming—-and its failure would have further damaged the administration and congressional Republicans.

September 29, 4:30 pm | [comment link]
8. Intercessor wrote:

Nice to have you back Irenaeus…
Intercessor

September 29, 4:32 pm | [comment link]
9. CanaAnglican wrote:

If one trekked across our fair land and asked 100 people what provisions this bill contained and how it would have affected them, 98 would have said, “Huh?”

September 29, 4:50 pm | [comment link]
10. Little Cabbage wrote:

Right on, Irenaeus, you nailed that one!  Everyone, please recall:  this was a GOP BAILOUT proposed by GOP appointees and a GOP Prez.  We got into this mess after years of drinking the GOP kool-aid of ‘de-regulation’ and ‘let the market decide’....and so the fat-cats created the loopy ‘derivatives’ market which is behind all these failures.  (And of course, the speculators—oops, they like to be called ‘investors’, don’t they?) and writers of undocumented mortgages who churned up the real estate bubble by buying and flipping houses, instead of living in them.

Good grief, people!  Wake up!! Regulation of the financial system came to be PRECISELY because the rapacious fat-cats tanked the economy for all of us about 75 years ago!!!  And now, the followers of Reagan’s ‘trickle-down’ economics (having taken their cream, and retired to a tax-haven in the Caribbean, or some private investment firm headquartered in a mansion in Greenwich, CT) are AGAIN leaving US tax-payers to pick up the tab while they and their families retreat behind their castle walls.  20+ years of under-budgeted regulatory agencies, with GOP ‘free-market’ shills put in charge so that regulations would NOT be enforced has led us to this debacle.  The foxes were put in charge of the hen-house, and we (working and middle-class people) have been plucked.  Thanks, GOP!  Thanks, Reagan and Bush!  What a grim legacy you are leaving for us, our children and grandchildren!

September 29, 4:51 pm | [comment link]
11. Sarah1 wrote:

DaveG—thank you for what you said above.  That takes a lot of character.

My investments will go down too.  And I say . . . Bring It.

The bailout needed to be rejected.

September 29, 4:53 pm | [comment link]
12. Jim of Lapeer wrote:

Little Cabbage:
Your comment is so naive I don’t know where to begin to respond. The roots of this are so deep in both parties it is impossible to untangle them. Try the 1990s when Clinton, et al decided that everyone, whether they had the income, bank account, or otherwise, should able to own a home.
  Bad loans were authorized and back by OUR money. People who didn’t have jobs were allowed to borrow money to buy homes. As Rev. Wright said in Barack Obama’s church: The chickens have come home to roost.
  You would not have seen Pelosi, et al, scrambling to fix this thing so fast if their butts weren’t up to hilt in this also. They are ALL complicit in this problem.
  Fannie Mae and Freddie Mac are just one part of the problem, but they belong almost entirely to the Democrats. The Republicans are not off the hook either.
  Try being intelligent and not just partisan.

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

Hey Little Cabbage - There is enough blame to go around for everyone.  The origin of this little debacle is with FNMA and with HUD under Andrew Carey in the Clinton Administration.  The Clinton Administration and Congress pressured FNMA and Freddie to expand home ownership by buying up mortgage loans made to unqualified buyers.  This was to make up for “redlining” in minority communities.  Bush and his appointees lacked the guts to take the politocal backlash and in fact, expanded it.  Anytime there is a guaranteed buyer for your product, no matter how poor it is, you get what we got.  Garbage.  Bush shares the blame along with Carey, FNMA, Freddie and the Barny Frank and other Congressional cowards too weak to say no to the special interests.

September 29, 5:04 pm | [comment link]
14. Chris wrote:

#7 - why would she want to?  because then she can say she got something through (she has previously accomplished very little) and then the ball is in the President’s court (the Senate is going to vote for just about anything).  Does the President want to veto it and be blamed for a recession or depression?  Hardly, he’s been very cavalier about spending heretofore and this time will be no different.  So the House Republicans have voted down a bad bill and in return will likely see a worse one passed - talk about a pyrrhic victory.

check out National Review’s The Corner, which is just one of the sites positing this scenario.

September 29, 5:11 pm | [comment link]
15. Henry Greville wrote:

The early school curriculums of “Main Street” Americans have generally included emphasis on everything that might be useful in adult life EXCEPT AMERICAN FINANCE. I usually put considerable stock in the “common sense” of “the people” - but today I shudder for the ignorance in the House of Representatives that has held sway. It is ignorance among self-congratulating “conservatives” that has further inhibited the confidence in necessary for liquid capital to flow so that for everyday business with one another can continue, and ignorance among the same self-congratulating “conservatives” that has further devalued many hard-working Americans’ small retirement holdings. The most promising aspect of the rejected compromise was the institution of moderate regulatory authority - in the name of “the people” - over the capital-formation marketplace that has shown how it will fail the people if left to itself without limits.

September 29, 5:13 pm | [comment link]
16. Chris wrote:

#13 I believe you mean Andrew Cuomo, not Carey.  But the substance of your post is entirely correct IMO.

September 29, 5:13 pm | [comment link]
17. Chris wrote:

very cogent commentary from volokh.com:

Speaker Pelosi’s speech before the House today was remarkable, but not in a good way. She was trying to round up votes for a bailout package that shes claims to believe is essential for the stability of the American economy. She can’t, and doesn’t want to, pass the bill without a substantial number of Republican votes. So what does she do? You would think she would say, “let’s pass this emergency measure now, in the best interests of the country, and talk about who is to blame later.” Instead, Pelosi began her speech with a highly partisan tirade against “Bush” and “Republican” economic policies, which were allegedly to blame for this situation. She focused on an attack on the growth of federal deficits, which clearly are at best tangential to the current crisis. That, to me, is the sort of irresponsible thing you do when (a) you’re not claiming there is a vast emergency; and (b) you are in the minority, and not claiming to exercise leadership. . . .

I have no idea why any particular member, or group of members, of the House, voted for or against the bill. All I’m saying is that if you are trying to rally the House to pass an emergency bill, you make it seem like there is AN ACTUAL EMERGENCY, which more or less precludes partisan attacks. To the extent any Republican voted against the bill because of Pelosi’s speech, it may not be a question of them being offended by her partisanship, but the perspective that if Pelosi thinks that the situation calls for partisanship, it must not be a serious emergency, because leaders simply don’t engage in such antics when a true emergency is at hand. For that matter, if I were a Democrat skeptical of the bill, Pelosi’s speech may have discouraged me from voting for it for the same reason.

September 29, 5:18 pm | [comment link]
18. athan-asi-us wrote:

Right on Dave G. Little Cabbage should do a little more non-partisan research before he spouts off. I have heard that the bailout is socialistic. Socialism presumes that the government will own the means of production. Our government has been flushing the means of production right out of the country. The bailout is more a form of Fascism of the 1920’s/30’s genre in Italy which was/is a collusion of Government and Corporations to control the country. Mussolini would be proud. Both parties and the Administration are handinglove in this. I’m surprised that there were enough people in Congress to vote against it; however, just wait - they’ll dream up something just as bad (or worse).

September 29, 5:22 pm | [comment link]
19. Bob Lee wrote:

DaveG and Sarah,
Agree, let the stocks tumble. But, do you really wish another Great Depression? That is what your posts indicate. Or is it that you do not know what you are talking about. If you guys think this is just another little bear market, and we should clean out all the mean ole fat cats on Wall St., then you do not understand. If the central banks fail. You will fail. Your family will suffer. This is not a little thing. Sarah, yes your ivestments will go down. They may go to zero. Can you stand that? The value of your house to zero. Can you stand that? Your credit cards cancel your cards and call in the loans—due next week. Your home equity line of credit—-gets called, due next week. This magnified all across America. And you say “no big deal”. Sick, very sick.

September 29, 5:28 pm | [comment link]
20. Jeffersonian wrote:

Right on, Irenaeus, you nailed that one!  Everyone, please recall:  this was a GOP BAILOUT proposed by GOP appointees and a GOP Prez.  We got into this mess after years of drinking the GOP kool-aid of ‘de-regulation’ and ‘let the market decide’....and so the fat-cats created the loopy ‘derivatives’ market which is behind all these failures.  (And of course, the speculators—oops, they like to be called ‘investors’, don’t they?) and writers of undocumented mortgages who churned up the real estate bubble by buying and flipping houses, instead of living in them.

The problem isn’t derivatives, but the assets upon which those derivatives are based collapsing in value.  The reason they lost value is because the bubble burst.  Of course, the bubble can’t burst if it doesn’t exist, so the real question is what caused the bubble.  And the answer to that is Fannie, Freddie and the CRA…none of which are anything close to being instruments of the Vast Right-Wing Conspiracy.

No, LC, Democrats got exactly what they wanted and fought hard for over many years.  Some people tried to blow the whistle, some tried to rein in these irresponsible behemoths, but none of them had a “D” behind his name.

September 29, 5:33 pm | [comment link]
21. Jim of Lapeer wrote:

Not all of us live on credit. Those of us who have no credit card balances, have paid off a mortgage and own our cars do not feel like we are responsible for paying off other people’s irresponsibility.
  The stock market is a risk. Things can go up, things can go down. You pay your money and you take your chances.
  Take all the risk out of the system and you have, well, Russia.
  If you believe in captalism, take your lumps, if you don’t, move elsewhere. I have a hard time feeling badly for loan companies who ignored safety measures for making loans, and it is hard to feel badly for folks who traded up to homes, cars, etc. they couldn’t afford on a turn of the card.
  The card was turned and it was the Ace of Spades. Sorry, I have better things to do with my money that bail out a bunch of fat cats.

September 29, 5:40 pm | [comment link]
22. Kendall Harmon wrote:

#20, that is quite a naive post.  The problem definitely is in part derivatives, especially the CDS market, a giant shadow market which is totally unregulated and not even known about by most americans.

One again, with feeling: any assigning of responsibility has to include all four players in this : govt, wall street, lenders, and borrowers.  And part of wall street’s responsibility is the gigantic cds market with all its counterparty risk all over the globe.

September 29, 5:40 pm | [comment link]
23. Bob Lee wrote:

Saddest Thing About This Mess: Congress Had Chance To Stop It

Political full-court press by Dems kept reforms of errant banks at bay
What Caused The Loan Crisis? FIFTH IN A SERIES


BY TERRY JONES INVESTOR’S BUSINESS DAILY

 

Could the crisis at Fannie Mae-Freddie Mac and the subprime meltdown have been avoided?
  The answer is yes.
  As early as 1992, alarm bells were going off on the threat Fannie and Freddie posed to our financial system and our economy. Intervention at any point could have staved off today’s crisis. But Democrats in Congress stood in the way.
  As the president recently said, Democrats have been “resisting any efforts by Republicans in the Congress or by me . . . to put some standards and tighten up a little on Fannie Mae and Freddie Mac.”
  No, it wasn’t President Bush who said that; it was President Clinton, Democrat, speaking just last week.
  Interesting, because it was his administration’s relentless focus on multiculturalism that led to looser lending standards and regulatory pressure on banks to make mortgage loans to shaky borrowers.
  Freddie and Fannie, backed by an “implicit” taxpayer guarantee, bought hundreds of billions of dollars of those subprime loans.
  The mortgage giants, whose executive suites were top-heavy with former Democratic officials (and some Republicans), worked with Wall Street to repackage the bad loans and sell them to investors.
  As the housing market continued to fall in 2007, subprime loan portfolios suffered major losses. The crisis was on — though it was 15 years in the making.

Democrats Blocked Reform  

Just as Republicans got blamed for Enron, WorldCom and other early-2000s scandals that were actually due to the anything-goes Clinton era, the media are now blaming them for the mortgage meltdown.
  But Republicans tried repeatedly to bring fiscal sanity to Fannie and Freddie. Democrats opposed them, especially Sen. Chris Dodd and Rep. Barney Frank, who now run Congress’ key banking panels.
  History is utterly clear on this.
  After Treasury Secretary Lawrence Summers warned Congress in 1999 of the “systemic risk” posed by Fannie and Freddie, Congress held hearings the next year.
  But nothing was done. Why? Fannie and Freddie had donated millions to key congressmen and radical groups, ensuring no meaningful changes would take place.
  “We manage our political risk with the same intensity that we manage our credit and interest rate risks,” Fannie CEO Franklin Raines, a former Clinton official and current Barack Obama adviser, bragged to investors in 1999.
  In November 2000, Clinton’s HUD hailed “new regulations to provide $2.4 trillion in mortgages for affordable housing for 28.1 million families.” It made Fannie and Freddie take part in the biggest federal expansion of housing aid ever.
  Soon after taking office, Bush had his hands full with the Clinton recession and 9/11. But by 2003, he proposed what the New York Times called “the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.”
  The plan included a new regulator for Fannie and Freddie, one that could boost capital mandates and look at how they managed risk.
  Even after regulators in 2003 uncovered a scheme by Fannie and Freddie executives to overstate earnings by $10.6 billion to boost bonuses, Democrats killed reform.
  “Fannie Mae and Freddie Mac are not facing any kind of financial crisis,” said Rep. Frank, then-ranking Democrat on the Financial Services Committee.
  North Carolina Democrat Melvin Watt accused the White House of “weakening the bargaining power of poorer families and their ability to get affordable housing.”
  In 2005, then-Fed Chairman Alan Greenspan told Congress: “We are placing the total financial system of the future at substantial risk.”

McCain Urged Changes  

That year, Sen. John McCain, one of three sponsors of a Fannie-Freddie reform bill, said: “If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole.”
  Sen. Harry Reid — now Majority Leader — accused the GOP of trying to “cripple the ability of Fannie Mae and Freddie Mac to carry out their mission of expanding homeownership.”
  The bill went nowhere.
  This year, the media have repeated Democrats’ talking points about this being a “Republican” disaster. Well, McCain has repeatedly called for reforming the mortgage giants. The White House has repeatedly warned Congress. This year alone, Bush urged reform 17 times.
  Some GOP members are complicit. But Fannie and Freddie were created by Democrats, regulated by Democrats, largely run by Democrats and protected by Democrats.
  That’s why taxpayers are now being asked for $700 billion.

September 29, 5:42 pm | [comment link]
24. Kendall Harmon wrote:

#15 that is a great post, to it I would only add that too much of the media is in the same boat.  I remember watching an interview led by Ted koppel, one of my favorites on Nightline a while back.  When he got to economic questions he was totally out of his element.

It was sad, and it stuck out like a sore thumb.

September 29, 5:42 pm | [comment link]
25. Chris wrote:

#19, calling credit lines would seem to be a waste of time - people don’t have the assets to pay them off all at once unless they can liquidate another asset, which the banks are making very difficult to do since they aren’t loaning money to buyers of those assets.  the banks would be smart to keep performing loans right where they are - but then again, they’re the same people who made bad loans in the first place, so they really can’t be trusted, or respected.

and don’t forget people can just file for bankruptcy if the banks get too strong armed…..

September 29, 5:49 pm | [comment link]
26. Jeffersonian wrote:

Sorry to disagree, Kendall #22, but absent the incentives provided by the federal government and the implicit (now explicit) promise to bail out Fannie and Freddie in the event of an implosion, this is a crisis that would never have happened.

September 29, 5:53 pm | [comment link]
27. Bob Lee wrote:

Agree #26.

But…like #25 said…”..people can just file for bankruptcy…”

It will be interesting to see if people are so flippant when the reality hits home..
bl

September 29, 6:02 pm | [comment link]
28. Katherine wrote:

Kendall is right about the CDS business.  These are private agreements among banks and insurers whereby they made payments to each other in return for guarantees to cover losses if risky assets fail.  But after the housing bubble burst, the effect was magnified by these derivatives and CDS agreements.  Nobody had enough capital to cover it.

IF warnings about Fannie&Freddie;had been heeded, a fair amount of this could have been prevented; not all.

It is true that Democratic policies and politicians contributed heavily to the underlying housing bubble and sub-prime mortgage mess.  What advisers will Obama bring with him to fix this?  Jim Johnson, ex-Fannie Mae CEO and recipient of huge secret payouts as this built up, and who is STILL advising Obama on financial affairs?  I don’t know who can fix this, but I’m pretty sure the people who helped break the system aren’t the ones I want to call on.

September 29, 6:07 pm | [comment link]
29. Intercessor wrote:

If the all lenders call in all their loans then they have just committed suicide. They will still run out of cash and will have crashed their balance sheets with hard assets that have no or very little market value. If fact now by becoming illiquid the crash has already in reality begun to take effect. Private enterprise could harvest those assets and over time turn them into a profit opportunity. Our government’s “Pelosi Plan” is doomed for they can artificially manaufacture the short term cash but can ONLY fail when trying to turn these “assets” into a return. Look at War surplus items over the decades. Private entreprenuers made vast sums of profit from surplus as our leeches in Government were striving for the riches of retirement…not profit generation and consequently lost billions upon billions of taxpayer money without losing one moment of sleep. 700 trillion in the hands of the House and Senate would not even cover the bill. Put that into the hands of people who actually work to feed their families every day and you would have a different outcome. That is why socialism (read the Pelosi Plan) fails all ...even the bureaucrats.
Intercessor

September 29, 6:16 pm | [comment link]
30. Irenaeus wrote:

Jim of Lapeer [#12], DaveG [#13], Bob Lee [#23] repeat the Big Lie that the Clinton Administration caused the mortgage debacle.

I have responded to that assertion elsewhere on this blog. See, for example, comments 5-6, 9, 11, 13-14, and 16 of the following thread: http://www.kendallharmon.net/t19/index.php/t19/article/16417

For a quick synopsis, see http://www.kendallharmon.net/t19/index.php/t19/article/16417/#282378

September 29, 6:16 pm | [comment link]
31. Bob Lee wrote:

Irenaeus, sorry, your “opinions” do not stand up to facts.

September 29, 6:27 pm | [comment link]
32. Jeffersonian wrote:

#30, I think it’s you being naive here, particularly in re the CRA.  While the law itself doesn’t require banks to make bad loans, what regulators do with it is an entirely different story.  Just as Affirmative Action doesn’t require a business to hire an unqualified minority, it’s just easier for a business to do so to keep the numbers balanced and the EEOC off your back.  It’s like saying the Mafia never shook down shops for protection money because only a handful of cases of actual leg-breaking can be shown to have occurred.

Couple that with Fannie and Freddie buying up every mortgage they could lay their hands on, especially subprime, with an implicit guarantee from the federales, and you have the seeds of this crisis.

As a right-wing madman at the AEI said in 1999:

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

September 29, 6:30 pm | [comment link]
33. Bob Lee wrote:

Shocking Video Unearthed Democrats in their own words Covering up the Fannie Mae, Freddie Mac Scam that caused our Economic Crisis
http://ca.youtube.com/watch?v=_MGT_cSi7Rs

September 29, 6:35 pm | [comment link]
34. Irenaeus wrote:

Bob [#31]: I’m offering a great deal more than opinions. You offer recycled tripe.

To respond briefly to a few points in your #23:
—- The Bush Administration did virtually nothing about Fannie and Freddie until the summer of 2003, when the two firms’ accounting frauds became too conspicuous to ignore. (The frauds were, BTW, uncovered by Armando Falcon, a Democrat appointed by President Clinton.)
—- During this lost time, the Bush Administration’s chief GSE policy-maker lived as the D.C. houseguest of Daniel Mudd, recently deposed as head of Fannie Mae. The Bush Treasury did nothing to follow up on the Clinton Administration’s 2000 declaration that the government did not stand behind Fannie and Freddie—-and that investors purchased Fannie and Freddie securities at their own risk.
—- Fannie and Freddie (particularly Freddie) hired plenty of Republican political operatives.
—- Fannie and Freddie entered the subprime business to boost their profits. Fannie’s CEO repeatedly gave speeches about how doing so would enable his firm to maintain its record of phenomenal earnings growth.
—- Republicans like Sen. Robert Bennett (R-Utah) played key roles in subverting reform of Fannie-Freddie. Bennett’s amendments to the administration’s 2003-04 proposal were so bad that the administration wisely let the bill die rather than become law in that form. BTW, Bennett’s son works for Fannie.

September 29, 6:44 pm | [comment link]
35. Irenaeus wrote:

“I think it’s you being naive here, particularly in re the CRA”
—-Jeffersonian [#32]

If the Community Reinvestment Act, as implemented, compels banks to make bad loans, then does a carefully conducted Federal Reserve study indicate that CRA loans are as profitable as other loans?
http://www.kendallharmon.net/t19/index.php/t19/article/16417/#283561

September 29, 6:47 pm | [comment link]
36. Irenaeus wrote:

“It is true that Democratic policies and politicians contributed heavily to the underlying housing bubble and sub-prime mortgage mess”
—-Katherine [#28]

Take a good look at . . .

—- The role of Utah Republicans, known to their detractors as the “Mormon Mafia,” in running Freddie Mac. Leland Brendsel, Freddie’s longtime (and now disgraced) CEO, was the most recent and prominent exemplar.

—- The role of Senators Jake Garn (R-Utah) and Alfonse D’Amato (R-N.Y.) in transforming Freddie Mac from a cautious guarantor into a high-rolling portfolio investor.

—- The role of Senator Robert Bennett (R-Utah) in blocking the administration’s Fannie-Freddie reform proposals.

—- Fannie’s hiring of Robert Zoellick, a political operative in the first Bush Administration and now this administration’s U.S. Trade Representative.

—- Fannie’s hiring of Arne Christensen, Newt Gingrich’s top aide.

—- Fannie’s hiring of James C. Miller, Director of the Office of Management and Budget during the Reagan Administration.

—- Freddie Mac’s hiring of Newt Gingrich.

—- The consulting fees Senator McCain’s campaign manager received from Freddie until Freddie went broke. It’s not clear what the campaign manager ever did to earn those fees.

To name only a few examples.

September 29, 6:50 pm | [comment link]
37. Irenaeus wrote:

Although I’d like to continue the discussion, I’m due elsewhere for the evening.

September 29, 6:58 pm | [comment link]
38. Jim of Lapeer wrote:

Irenaeus: When you return you might want to ask yourself, if the Democrats are not to blame, why are they so eager to at post haste fix the problem as President Bush (their very good friend) wants and to appoint Henry Paulson as a czar of all the country’s money. That simply doesn’t make sense.
  The sooner they get something passed, the sooner everyone will stop looking into the sordid history of how we got here.
  Notice I’m not saying Republicans aren’t up to their eyeballs in this, but the actions of Barney Frank, Harry Reid, et al, show that they are up to this to their forehead.
  When was the last time Pelosi, Reid, Frank, et al, decided it was a good thing to do what President Bush said. Com’n, you’re much smarter than this.

September 29, 7:30 pm | [comment link]
39. Jeffersonian wrote:

If the Community Reinvestment Act, as implemented, compels banks to make bad loans, then does a carefully conducted Federal Reserve study indicate that CRA loans are as profitable as other loans?

Considering that loans to iffy purchasers tend to have higher interest rates attached to them, the fact that they are only as profitable as the low-interest, low-risk bores like me tells me that, even in a housing boom where a bubble is swelling they are defaulting at an alarming rate.  As soon as ARMs adjust upward, balloons come due…the jig is definitely up.

Your 2002 study is dated, I.

September 29, 7:36 pm | [comment link]
40. DaveG wrote:

Sorry Intercessor but those loans have already had to be written down on the balance sheets of the holders.  What is going to happen, if a bailout is approved, is that you and I will be buying those loans for more than they are worth.  If we buy them only for their present fair market value, the balance sheets of the holders don’t improve one bit.  If this bailout is going to happen, we (the taxpayers) need an upside.  If we pay more than the loans are worth, the gov’t has to get warrants or options to convert the costs incurred into part ownership - like was done with Chrysler.  It might be necessary to shore up Wall Street, but if we do, we need to be compensated for the risk.  The upside has to go to the taxpayers whose investment made it possible, not to the stockholders whose elected boards caused the problem.

September 29, 8:15 pm | [comment link]
41. Jim of Lapeer wrote:

Keep this out of the hands of the politicians. Let a man like Warren Buffet watch over this, rather than a Goldman Sachs guy like Paulson, and I think you get closer to a deal.
  Bush’s credibility is dead. Likewise Paulson. The Democratic leaders and Republican leaders are likewise damaged goods.
  We need a financial czar, I nominate Warren Buffet with wide ranging powers.

September 29, 8:24 pm | [comment link]
42. Little Cabbage wrote:

Ol’ Warren is too smart to take the job!!

September 29, 8:26 pm | [comment link]
43. Little Cabbage wrote:

Irenaeus, please keep up the good work of bringing the truth to light.  The Big Lie technique of the McBushies is plain disgusting.  Why aren’t they talking about good ol’ Phil Gramm (remember him?  McCain’s no. 1 economic advisor & probable Treas. Secy.).  He’s the one who called working and middle-class Americans ‘whiners’ about their falling standard of living!  McBush quickly greased his exit from the front office of the campaign, but ol’ Phil was hugely responsible in the 90s for the founding of the blasted derivatives market that made SO much $$$ for his fat-cat friends and now threatens the rest of us (and our children and grandchildren) with continued plummet of our economic lives.  McBush has NEVER repudiated his ol’ buddy’s stands; and that’s why my mother, a life-long GOP, is voting for Obama this year.  She’s deeply concerned about McBush’s choice of advisors on the economy.  (And you should be, too!)

September 29, 8:33 pm | [comment link]
44. Intercessor wrote:

#40-Dave G
I do not disagree with you, but that was not what I was talking about. Earlier in the thread someone was concerned that financial institutions en masse would call in their loans to raise liquidity. My point was whether or not there was a bail-out or in your
point the asset base was already charged off the balance sheets the people like homeowners would not pay off these loans but would walk away from the assets especially if refinancing mechanisms were no longer available. These lenders have no recourse but to merge with more liquid companies, get a hand out from Uncle Sam, file for bankruptcy to buy time or close shop. Foreclosures and repossessions happen all the time with little effect on our economy but they only work if they can be refinanced. With that option gone shifting the debt to the taxpayer and the government (an oxymoron for smart business) puts the standard of living of Americans in harms way. Would you let anyone in Washington run your family’s budget? I would not either.
Intercessor

September 29, 9:35 pm | [comment link]
45. Karen B. wrote:

Re: #42 & #43—I’m beginning to think Warren Buffett would be a good write-in candidate for President!  Sigh.

September 29, 9:42 pm | [comment link]
46. Jeffersonian wrote:

Irenaeus, please keep up the good work of bringing the truth to light.  The Big Lie technique of the McBushies is plain disgusting.  Why aren’t they talking about good ol’ Phil Gramm (remember him?  McCain’s no. 1 economic advisor & probable Treas. Secy.).  He’s the one who called working and middle-class Americans ‘whiners’ about their falling standard of living!

No one is talking about Phil Gramm because A-he’s not relevant to the topic as the deregulation meme being propagated by mindless southpaws is without merit and B-he left the McCain campaign months ago.

September 29, 10:24 pm | [comment link]
47. Sarah1 wrote:

RE: “Your family will suffer.”

Yes—my family will suffer whether there is a bailout or not, simply because we are going to have to go through the misery of the consequences of our economy and most consumers being leveraged to the hilt and consuming everything in sight, whether they had the money or not, from the top of the financial institution pyramid to the bottom of the under-employed mortgage holder, with no savings, and no “margin”.

It’s as old as time—what goes up, must come down.

We have two choices.  It can come down, and the government at the end not own another industry.  Or it can come down, and the government can own yet another piece of our economy.

I choose the former.

RE: “Yes your ivestments will go down.”

They already have.

RE: “They may go to zero. Can you stand that?” 

When I entered the investment world I acknowledged that that could happen—and yes, life’s sometimes hard, but there are worse things in life than losing all of your stock-based savings, measly as mine are.

RE: “The value of your house to zero. Can you stand that?”

Absolutely.

RE: “Your credit cards cancel your cards and call in the loans—due next week.”

I have no credit card debt.

RE: “Your home equity line of credit—-  . . . “

I have no home equity line of credit.

RE: “And you say “no big deal”. Sick, very sick.”

Why are you lying about what I said? 

I said what DaveG said . . . Bring On The Pain.

And yep—that’s healthy, very healthy.

It is healthy to be willing to go ahead and take the inevitable hit without wishing for the government to bail out corporations, and cause even more sickness and dysfunction, and more long-lasting sickness in the economy and in our nation.

I spoke with a high-level banker today in a community bank.  He opposed the bailout.  As he said “we are a sick people—and all Americans participated in the leveraging of ourselves to the hilt.  And . . . I believe that as far as the big sick corporations go . . . it is healthier to let those entities that made such terrible decisions to die.”

September 29, 11:45 pm | [comment link]
48. Now Orthodox wrote:

Irenaeus….who is Franklin Raines?  Could he be Obama’s chief economic advisor?  The same person that made $90 million in 6 years at Fannie?

Little Cabbage…do you have life insurance, car insurance, home owner insurance….then you are hedging my friend!

September 30, 12:58 am | [comment link]
49. Katherine wrote:

#48, in fairness, Franklin Raines doesn’t seem to be Obama’s chief economic advisor.  Jim Johnson is still involved in the Obama campaign.

Irenaeus, it is clear that there are offenders on both sides of the aisle, no question about that.

Warren Buffett has already put big money into this, which could be a sign that the mess will correct itself—and this is the argument that many Republicans (and some Democrats) are making.

September 30, 1:56 am | [comment link]
50. Clueless wrote:

47. Sarah wrote:

Amen.

RE: “Your family will suffer.”

This goes without saying.  We will all suffer thanks to the greed and stupidity of both borrowers and lenders.  There are no winners in a National Depression.  I choose that we come out of this as a country, with our debts paid, even if we all work into our 80s.

RE: “Your investments will go down.”

Ditto.  They already have.

RE: “They may go to zero. Can you stand that?”

Yes.  By definition stocks and bonds can go to zero.  I accepted that when I placed (a minority of) my portfolio in such instruments.

RE: “The value of your house to zero. Can you stand that?”

Absolutely.  I bought my home as shelter, and I will continue to live in it.

RE: “Your credit cards cancel your cards and call in the loans—due next week.”

Ditto.  I have no credit card debt.

RE: “Your home equity line of credit—- . . . “

Ditto.  I have no home equity line of credit.

That does not mean I will not be damaged by this Depression.  My pay will almost certainly drop like a stone.

It may be that there will be conditions attached to my job that will make it morally necessary for me to leave the field and find new work.

If so, then I will do so.  I have paid off my student loans and protected my children from debt.  I have paid up my kids college funds.  I can work at Wal-Mart or the Tyson chicken processing plant if I need to cover taxes, food and gas.  I can work as a substitute teacher.  I can do most any kind of work.

Bring on the pain.  It is better that our generation who caused this mess suffer the pain than that more than has already been appointed, fall on the shoulders of our children.

September 30, 10:25 am | [comment link]
51. Byzantine wrote:

#19 -
What stocks do you hold?  Do you think they’re worth zero?  I’ll gladly take them off your hands.  Same for your house.

This is what is SUPPOSED to happen in a recession (actually a correction):  nominal wealth unsupported by prior savings disappears and the wage-earning class takes shelter in falling prices.  What is sick and criminal is to pass off the cost of our profligacy on future generations.

September 30, 10:50 am | [comment link]
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