The Republicans' intransigence kills the bailout bill—and possibly McCain's electoral chances.

[one...two...tree 2,762]

Washington to New York: Drop Dead

By Daniel Gross

Well, maybe we don't need much of a private-sector financial system after all. That's the conclusion that most House Republicans, and a minority of House Democrats, seem to have reached in voting down the $700 billion bailout bill on Monday. Maybe it's best that, in a few weeks, there will be essentially two large banks left in the country, JPMorgan Chase and Citigroup. After all it has done, perhaps that's what the financial sector deserves.

Was the bailout bill killed by malice or by incompetence? It's hard to argue against incompetence since it has been so rampant, especially on the Republican side of things in Washington. The congressional leadership and the White House clearly lacked the heft—or the energy—to whip recalcitrant members into line. "I don't understand why President Bush didn't go to members of his party and say vote on this," Maria Bartiromo wondered on CNBC Monday afternoon. (Maria, if you have to ask, you don't want to know.) Sen. John McCain, who interrupted his campaign to deal with the crisis, claimed—via his surrogates—that he wielded great influence in improving the deal and making it palatable. Then he left town as it collapsed.

Sure, the bill could have passed if more Democrats had voted for it. But Speaker Nancy Pelosi and co. were able to bring along 60 percent of their caucus. Why did so many House Republicans bail? Some say it's because Pelosi hurt their feelings by pointing out that Republicans were in charge when things went to hell. It also could be that a lot of them got religion on fiscal matters. (Of course, having approved an expansion of Medicare, massive increases in all sorts of spending, and huge tax cuts that led to the addition of trillions of dollars in public debt, this is a strange moment to stand on principle.)

Obviously, Republicans were motivated in no small part by political calculations—short- and long-term. But it's really hard to figure out what those calculations might be. Yes, incumbents of both parties—especially those incumbents facing tough re-election campaigns—don't want to be on the hook for this vote. But consider the big picture: Despite all the hemming and hawing, investors and analysts seem to think there will eventually be a deal—because there has to be. So, let's say that the House Republicans manage to draw out the process for a few more weeks. Maybe the final deal will be less costly to taxpayers—say, $300 billion instead of $700 billion. And maybe they will succeed in stripping some of the measures that corporate America and Wall Street find abhorrent (like limits on executive pay). Even in that best-case scenario, is there any reason to think that GOP politicians will be rewarded for their intransigence?

For in the meantime, the chaos they've created by coming to the table and then throwing a fit works to their disadvantage. Each time a deal is close to done and then gets scuppered, the market (and its many participants) freaks out. Huge quantities of wealth are destroyed. The markets fell about 8 percent after today's stunt, likely wiping out close to $1 trillion in wealth. In so doing, they're turning off whatever base the party had left on Wall Street and likely closing off a huge source of campaign cash. Asked for his evaluation of what took place today, Lawrence Fink, the CEO of asset management giant Blackrock, said, "Major disappointment came from the Republican side." A Republican congressman who shows up for a fundraiser in Manhattan this week is likely to get tarred and feathered. In some congressional races, I suppose financial dislocation and bank failures could plausibly be good news for Republican challengers—but only if the challengers can pin them on the incumbent Democrats.

Finally, it's clear that the chaos is poison for the top of the ticket. McCain's poll numbers have eroded throughout September as the financial crisis picked up pace. The volatility in the markets doesn't seem to be doing much for the more volatile candidate in the race. Every time the market falls a few hundred points, Obama seems to pick up support. On Intrade, where the price of McCain's presidential contracts have slipped to their lowest levels in months, traders now give Obama a 60 percent chance of winning.

In general, I've found a lot of the analogies between the present situation and the Great Depression to be way off. But there's one area in which the analogy might hold true. Just as happened in 1932, it's possible that the Republicans' incompetence and bullheadedness in managing a financial crisis could lead to Democrats controlling both the White House and Congress.

http://www.slate.com/id/2201175/

[Pooky 3,792]

Maybe the Republican and Democrat Congressmen listened to their constituents, the majority of whom OPPOSED the plan.

[one...two...tree 2,762]

Maybe the Republican and Democrat Congressmen listened to their constituents, the majority of whom OPPOSED the plan.

Yes, incumbents of both parties—especially those incumbents facing tough re-election campaigns—don't want to be on the hook for this vote. But consider the big picture: Despite all the hemming and hawing, investors and analysts seem to think there will eventually be a deal—because there has to be.

[IAMX 3,055]

They're completely overlooking the fact that Obama wanted this bailout too, and continues to show where his interests lie (in covering corporate ###) in pushing for it even after it's failure:

Here's the article before they updated it:

http://news.yahoo.com/s/ap/obama

Obama says Congress will produce bailout bill

WESTMINSTER, Colo. - Democrat Barack Obama called on Congress to stay in Washington and pass a bailout for the hobbled financial industry, minutes after the House rejected the latest plan.

"One of the message I have for Congress: Get it done," Obama said.

The Democratic presidential candidate said he's confident Congress will eventually work out something, however. "I'm confident we're going to get there, but it's going to be rocky," the Illinois senator said.

Obama had planned to return to Washington for a Senate vote. Before the defeat in the House, that vote had been anticipated for Wednesday. The candidate has been keeping in touch with the negotiators by telephone.

The House voted down the $700 billion bailout bill Monday, and panicked investors sent the stock market plunging as they realized no immediate help was coming from Washington.

Obama said he talked with Treasury Secretary Henry Paulson, House Speaker Nancy Pelosi and other leaders, who were trying to figure out the next step.

Obama said he knew the vote "was a hard thing to do for Congress."

But "today, Democrats and Republicans in Washington have the responsibility to put make sure that the emergency rescue package is put forward that can at least stop the immediate problem we have," Obama said.

Here's the new one:

http://news.yahoo.com/s/ap/obama

WESTMINSTER, Colo. - Democrat Barack Obama said Republican John McCain's long advocacy of deregulation contributed to the current financial crisis and letting his GOP rival continue those policies as president would be a gamble "we can't afford."

After the House defeated a bill Monday to bail out the financial industry but also impose new federal controls on it, the Democratic presidential candidate said that McCain has "fought against commonsense regulations for decades, he's called for less regulation 20 times just this year, and he said in a recent interview that he thought deregulation has actually helped grow our economy."

"Senator, what economy are you talking about?" Obama asked.

Speaking to a packed gymnasium at Mountain Range High School, Obama associated McCain's economic views with a news report about the six-term Arizona senator's closeness to the gambling industry, without ever mentioning the news story itself.

"I read the other day that Sen. McCain likes to gamble. He likes to roll those dice. And that's OK. I enjoy a little friendly game of poker myself every now and then," Obama said. "But one thing I know is this — we can't afford to gamble on four more years of the same disastrous economic policies we've had for the last eight."

The New York Times reported in its Sunday editions that McCain, a lifelong gambler, has had a close and complicated relationship with the industry and its lobbyists during his nearly three decades in Congress. The story raised questions about whether gambling interests seeking an edge benefited by courting McCain or hiring individuals close to him.

McCain spokesman Tucker Bounds said no one has done more than the Arizona senator to regulate the Indian gaming industry and root out corruption in Washington. "Barack Obama's willingness to ignore his own history of gambling with lobbyists reveals just how dishonest he's willing to be with voters," he said.

Speaking minutes after the House bailout vote, Obama also called on Congress to stay in Washington and pass a bailout bill.

"One of the messages I have to Congress is: Get this done," Obama said. "Democrats, Republicans, step up to the plate, get it done."

Obama said he's confident Congress will eventually work out something, however. "But it's going to be a little rocky," the Illinois senator said.

Obama had planned to return to Washington for a Senate vote. Before the defeat in the House, that vote had been anticipated for Wednesday. The candidate has been keeping in touch with the negotiators by telephone.

Obama said he talked with Treasury Secretary Henry Paulson, House Speaker Nancy Pelosi and other leaders, who were trying to figure out the next step.

Obama said he knew the vote "was a hard thing to do for Congress."

But "today, Democrats and Republicans in Washington have the responsibility to put make sure that the emergency rescue package is put forward that can at least stop the immediate problem that we have so we can begin to plan for the future," Obama said.

Obama called on the stock market to not panic because of the bill's failure. The Dow Jones industrials dropped nearly 780 points in their largest one-day point drop ever as the House voted down the bailout package.

"Things are never smooth in Congress," Obama said. "Understand that it will get done, that we are going to make sure that the emergency package is put together because it is required for us to stabilize the markets and to make sure that when the small business person wakes up tomorrow morning, he's going to be able to make payroll."

Obama called bailing out Wall Street an "outrage" but had indicated his support for the bill. On Sunday, he told a Detroit crowd Congress had to act because their jobs, life savings and "the stability of our entire economy" were at risk.

The Obama campaign released a television ad calling for restrictions on corporate pay, and noted McCain's economic adviser, former Hewlett-Packard CEO Carly Fiorina, left the Palo Alto, Calif.-based company with a $42 million package.

"You've got corporate executives who are giving themselves million dollar golden parachutes and leaving workers high and dry," the ad said. "That's wrong. It's an outrage."

If both Obama and Pelosi still can't convince nearly half their party of this, in the House, while their party usually votes in lockstep, it might be a good idea to just let it go before they look even more stupid since everyone knows they have ties to the same sector of the finance industry.

Edited September 29, 2008 by SRVT

[one...two...tree 2,762]

If both Obama and Pelosi still can't convince nearly half their party of this, in the House, while their party usually votes in lockstep, it might be a good idea to just let it go before they look even more stupid since everyone knows they have ties to the same sector of the finance industry.

It's not that a bailout (probably not the best word to use) bill is bad per se - the gripes among both Democrats and Republicans in Congress is over the provisions of the bill. The Dems want salary caps places on CEO's pay, want to let homeowners keep their homes, etc. Some kind of rescue is badly needed...just how it will do it and to whom is where the opinions vastly differ.

[JohnSmith2007 353]

[IAMX 3,055]

If both Obama and Pelosi still can't convince nearly half their party of this, in the House, while their party usually votes in lockstep, it might be a good idea to just let it go before they look even more stupid since everyone knows they have ties to the same sector of the finance industry.

It's not that a bailout (probably not the best word to use) bill is bad per se - the gripes among both Democrats and Republicans in Congress is over the provisions of the bill. The Dems want salary caps places on CEO's pay, want to let homeowners keep their homes, etc. Some kind of rescue is badly needed...just how it will do it and to whom is where the opinions vastly differ.

Quite honestly we will not learn a lesson if we don't let this fall happen. I don't mean the government. I mean us. If we allow Congress to bail themselves out on our dime when they helped create this mess. The worse the economy gets, the more pissed people will get at them, the more "change" it will demand. Integrity of one of the three branches is at stake, and the importance of it is helping in ridding of the collusion between government and private/corporate interests, rather than executing the vested interest in the people.

Plus, if people decided to get a house at an unaffordable rate, it also means they participated in inflating their credit ratings and income, and more or less helped participate in what we have today. The second reason why this bailout should not happen. Yes they lose their house, but they also get a second chance at another home at an affordable rate with new regulations in place. This was quite a prominent story over the radio a few weeks ago on NPR.

[Ban Hammer 13,352]

"One of the messages I have to Congress is: Get this done," Obama said. "Democrats, Republicans, step up to the plate, get it done."

he's not even president and he's a lame duck.

[IAMX 3,055]

Political slant aside (the higher-ups in the Republican party unfortunately were swinging the same way), including, in kaydee's article, Boehner, it shows that the Democratic party indeed played a role here in preventing oversight on this industry that so badly needed it again.

I also recall, with the votes, that Maxine Waters voted FOR this bailout plan, which is, once again, not surprising.

THIS is the Democratic party you guys plan on voting for?

Edited September 29, 2008 by SRVT

[one...two...tree 2,762]

Here's an article from Newsweek back in July...pretty interesting in light of what is now happening:

Fannie Mae and Freddie Mac, the two government-sponsored enterprises that play an important role in the mortgage market, are tanking today and helped briefly drag the Dow Jones Industrial Average to below 11,000 for the first time in two years. Investors are concerned that the companies, after racking up big losses (with much more red ink to come), might have difficulty raising needed capital from investors. Between them they have on their books or stand behind about $5 trillion in mortgages, including plenty of junk. As Charles Duhigg reported earlier this year in The New York Times, "By the end of last year, the companies had guaranteed or invested in $717 billion of subprime and Alt-A loans, up from almost none in 2000."

While the Senate today pushed through a foreclosure rescue plan, there have also been reports that the Bush administration is considering plans to place the two companies into receivership. Should Fannie and Freddie fail, there's no question that executives and policymakers should blame themselves for poor decisions made over the last several years. But Fannie and Freddie's current travails can also be ascribed to the more recent screw-ups of the big investment banks.

The troubles of the private-investment sector will make it much harder to rescue Fannie and Freddie. For much of the past year, the CEOs of the nation's iconic financial firms have reported unexpected losses, declared their troubles over and raised money from investors (frequently foreign ones) to make up for those losses, only to report fresh losses a few months later. Lehman Brothers CEO Richard Fuld on April 15 boldly proclaimed, "the worst is behind us." In the three months since then, Lehman reported further losses and its stock has lost half its value. Last year, we noted the challenges facing investors and institutions that tried to catch falling knives in the financial sector.

....

As JPMorgan Chase CEO Jamie Dimon's now-famous formulation about Bear Stearns has it, "'Buying a house is not the same as buying a house on fire." Fannie Mae and Freddie Mac are houses on fire. And this mentality leads to a vicious cycle: investors jump ship because they fear dilution, and the more the stock slips, the more dilutive capital-raising becomes. As I write, Fannie Mae's market capitalization has shrunk to about $10 billion. In addition, potential foreign investors would face thorny political issues. If Americans are upset that a Belgian company wants to buy Anheuser-Busch, just imagine the uproar if a Persian Gulf emirate took a huge position in Fannie Mae, and hence stood to benefit from an implicit taxpayer subsidy.

Treasury Secretary Henry Paulson today tried to scupper talk of a bailout. "Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission." Should Washington intervene and explicitly do what has been implicitly assumed all along--backing Fannie Mae and Freddie Mac's debt--critics on the left will correctly claim that it's another example of privatizing profit and socializing risk. Critics on the right will argue that the government has effectively nationalized the mortgage industry.

http://www.newsweek.com/id/145741

[Trompe le Monde 1,107]

Political slant aside (the higher-ups in the Republican party unfortunately were swinging the same way), including, in kaydee's article, Boehner, it shows that the Democratic party indeed played a role here in preventing oversight on this industry that so badly needed it again.

I also recall, with the votes, that Maxine Waters voted FOR this bailout plan, which is, once again, not surprising.

THIS is the Democratic party you guys plan on voting for?

Exactly - and if you look at some of their top donors you will find a who's who of all the culprits who got us here in the first place. This was in many ways a terrible bill - for one thing, it would have given Paulson unprecedented authority to spend government money as he deemed appropriate. There was no requirement for him to seek out the lowest possible price for the assets being purchased. This is the same Paulson who only in July assured us that everything was right in the banking world after Indymac imploded. Two months later he's practically blackmailing the American taxpayer because the situation is do dire we're led to believe that unless we give him a trillion dollars with few strings attached we're all f*cking doomed. Please!

[one...two...tree 2,762]

Exactly - and if you look at some of their top donors you will find a who's who of all the culprits who got us here in the first place. This was in many ways a terrible bill - for one thing, it would have given Paulson unprecedented authority to spend government money as he deemed appropriate. There was no requirement for him to seek out the lowest possible price for the assets being purchased. This is the same Paulson who only in July assured us that everything was right in the banking world after Indymac imploded. Two months later he's practically blackmailing the American taxpayer because the situation is do dire we're led to believe that unless we give him a trillion dollars with few strings attached we're all f*cking doomed. Please!

I'm trying to wrap my head around the whole situation as I'm sure most Americans are...it's incredibly complicated and lots of finger pointing in all directions.

Paulson back in July:

"Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission." Should Washington intervene and explicitly do what has been implicitly assumed all along--backing Fannie Mae and Freddie Mac's debt--critics on the left will correctly claim that it's another example of privatizing profit and socializing risk. Critics on the right will argue that the government has effectively nationalized the mortgage industry."

[Trompe le Monde 1,107]

I'm trying to wrap my head around the whole situation as I'm sure most Americans are...it's incredibly complicated and lots of finger pointing in all directions.

And you should do so with a healthy dose of scepticism divorced from political partisanship - this bailout would cost each person (not taxpayer, person) somewhere around $40,000. Lot of money to buy a house or send your son to college. You should not allow our politicians to treat you as a mug because it's a little complicated. And if you are getting your information on this from an NBC station who have been totally on-message and cheerleading for this bailout? Bear in mind that half of parent company GE's business is in financial services. Read up a little bit on people like Jim Kramer's entanglements with the SEC.

Paulson in July:

"It's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation."

It's right there on his wikipedia page.

I agree some kind of intervention is necessary but this was the wrong bill.

[IAMX 3,055]

I'm trying to wrap my head around the whole situation as I'm sure most Americans are...it's incredibly complicated and lots of finger pointing in all directions.

Paulson back in July:

"Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission." Should Washington intervene and explicitly do what has been implicitly assumed all along--backing Fannie Mae and Freddie Mac's debt--critics on the left will correctly claim that it's another example of privatizing profit and socializing risk. Critics on the right will argue that the government has effectively nationalized the mortgage industry."

Disregard the finger pointing. Look at actions, not words or fingers. Take a lesson from kaydee and don't even have your ears open to Congress at all in the matter.

When doing this, I don't see the complicated part. Congress has a huge hand in this. If I had one single power to use right now over the government it would be to entirely kill lobbying money. I don't care how many whine about freedoms. Right now this government is being ruled by money, and the people who have the most of it to give to them, not the people. The whole reason behind deregulation and allowing these companies to go self-regulating is because the people who repealed the important regulations from the Glass-Steagall Act had corporate interests in mind. Of course, these people's interests at the time were Republican because Republicans had the majority of the House and Senate. Now, with Democrats holding it, they got the better share of the pie, and now they want to bail out these corporations.

If people like Maxine Waters thought bailing them out was a good idea, why didn't she think deregulating the financial industry (as she voted against it) in 1999 was such a good idea? The conflict of interest has nothing to do with Republican or Democrat or logic as it's related to money.

[IAMX 3,055]

And you should do so with a healthy dose of scepticism divorced from political partisanship - this bailout would cost each person (not taxpayer, person) somewhere around $40,000.

So you're saying it would cost us 12 trillion dollars?