Bailout deal collapses, Democrats try to blame McCain
posted at 8:07 pm on September 25, 2008 by Allahpundit
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Down goes Frazier. I missed the report on Fox earlier but Ace says it sounds like the Dems are trying to shift the blame for it from the House GOP to Maverick. Fair or no? Let’s see. Dodd lands the first blow:
Republican presidential nominee John McCain was blamed for de-railing negotiations by blindsiding lawmakers with his support for an alternative plan.
The ‘very contentious’ meeting broke up after Republican leaders said they had to go back to their rank-and-file to discuss the new proposal…
After the hour-long White House meeting, [Dodd] said: ‘What has happened here is that we have spent seven straight days to find a rescue plan for the economy.
‘What this looked like was a rescue plan for John McCain. To be distracted for two to three hours by political theatre doesn’t help.’
Democrats said the Republicans were on board with the deal until Mr McCain intervened an injected presidential politics into the situation.
The only problem? According to Marc Ambinder, citing four independent sources, McCain didn’t say much of anything during the White House meeting let alone float any alternative plans. Boehner, apparently, brought up some of the House GOP’s ideas; the Dems claim they got the impression that McCain supported those ideas, but “they concede that he did not raise them directly.” Even Reid, ever sneering, admits McCain played no major role.
Which isn’t to say that he doesn’t, in fact, support the House GOP. Quoth The Hill from an article published earlier this afternoon:
[A] key Republican lawmaker stated that Sen. John McCain (R-Ariz.) wants to explore new ideas, like loaning money to financial institutions or insuring the companies, rather than buying their toxic debt…
Rep. Spencer Bachus (Ala.), the ranking Republican on the House Financial Services Committee, attended the meeting at which some say a deal was reached. But he later issued a statement saying he wasn’t authorized to negotiate or approve any deals for House Republicans…
He added that McCain is interested in using loans or insurance rather than having the government purchase the toxic debts of Wall Street institutions.
“We would prefer a loan or supplying insurance,” Bachus told reporters. “These are the ideas Sen. McCain tried to maximize. He feels strongly we have to design a program where taxpayers won’t lose.”
Bachus, wearing a “McCain-Palin” lapel pin, said he’d talked to McCain on Wednesday night and had breakfast with McCain’s advisers Wednesday morning.
The insurance angle is at the core of the House GOP’s alternative plan. See here for the particulars. In essence, they want to scrap a taxpayer bailout, expand the feds’ power to insure mortgage-backed securities, and lift regulations to encourage private investment and rescue the financial industry that way. As for McCain, it sounds like he’s being coy because he’s not sure yet which way to break on this politically. Better hurry up: If that Hill article I linked is correct, they’re nowhere near the 100 Republican votes Pelosi wants before she’ll send the bill to the Senate and the markets, shall we say, won’t like that. Exit question: If they can’t get a deal done to save the farking economy, will next week bring us Congress’s first ever zero percent approval rating?
Update: For what it’s worth, here’s what HuffPo’s sources are telling them about the meeting:
Towards the end, McCain finally spoke up, mentioning a counter-proposal that had been offered by some conservative House Republicans, which would suspend the capital gains tax for two years and provide tax incentives to encourage firms that buy up bad debt. McCain did not discuss specifics of the plan, though, and was non-committal about supporting it.
Paulson, however, argued directly against the conservative proposal. “He said that he did not think it would work,” according to the source. At another point in the meeting, President Bush chimed in, “If money isn’t loosened, this sucker could go down” — and by sucker he meant economy…
Following the meeting, Democrats stayed talking in the Roosevelt room and Paulson approached them. Speaker Pelosi and Rep. Barney Frank shot back at Paulson that the real problem was with House Republicans, according to sources. Paulson replied, “I know, I know,” as he got down on one knee to lighten the mood. Pelosi joked back, “I didn’t know you were a Catholic.”
Update: An astute point from Baseball Crank. In all the frenzy over McCain, you know whose name you haven’t heard much of at all as mattering to this deal? Barack Obama’s.
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Can the market drop that far in a single day? I thought there were systems put in place to shut down trading before that happened again.
Slublog on September 25, 2008 at 8:29 PM
There are curbs in place to stop massive falls but even if they close the market on monday, tues will open up 500pts down and go from there. The 25% will happen it might take a day or it might take a week but with no deal the market will see DOW 7,000 before the election. I have been calling for dow 7,000 if BHO wins for months now. Now it seems like the election no longer matters. If we hit 7,000 before the election I could see DOW 5,000 after a BHO win.
Still the market is EXTREMLY risky to even bet on the downside. A deal could be reached and we could see DOW 12,000 in a blink of the eye. There is no way to tell which way the market will go and every trade is a pure bet. This in itself causes panic. If you can not define the risk most big money people will simply sit on the sidelines until the risk is defined which leads to selloffs as lack of demand of stocks makes the supply of stock massive and the price must be lowered.
Wall Street works on supply/demand law just like everything else.
unseen on September 25, 2008 at 8:40 PM
Now, a half hour ago, Goldfarb told Dean Barnett on the radio that the deal was not dead. So, who to believe?
Blake on September 25, 2008 at 8:40 PM
MCCAIN WILL DELIVER A PLAN TONIGHT
Trust me, he will deliver a plan and enough Republican votes.
Watch and learn grasshopper………….
ArmyAunt on September 25, 2008 at 8:40 PM
And when they come to you asking to help bail out the dying social security and health care system, still choose (b)?
LastRick on September 25, 2008 at 8:40 PM
Exactly. The fact that they haven’t been paying attention until now will make the shock of the market crashing all the more acute, and the panic that much worse.
Slublog on September 25, 2008 at 8:40 PM
And then tomorrow, Obama will be crying, “But the American people want to see us debate!” What a wuss!
Queen0fCups on September 25, 2008 at 8:40 PM
All these funds have ALREADY been cherry-picked for the valuable mortgages. None of this is random; it’s a shell game.
The people who bought the funds thought they could always find bigger suckers. Now there’s only one sucker left – the biggest one of all.
logis on September 25, 2008 at 8:41 PM
MAVERICKY ;-)
Mercy4Me on September 25, 2008 at 8:41 PM
If McCain can not get a compromise, I think it hurts him and the Republicans. People will blame the Republicans if the economy crashes and burns. I really believe that.
Bush asked for them to come up with a plan, at this point I doubt if he even cares what it is so long as it has a chance of staving off disaster. I blame both Democrats and Republicans. This is more important than their incessant partisanship. Just every now and then I wish they would put the good of the country first.
Terrye on September 25, 2008 at 8:41 PM
Why wouldn’t a panicky trillion dollar bailout only cause people to see it as buying them a few extra weeks to pull out in extreme panic? The only way that people wouldn’t be in extreme panic after this bailout is if they feel like there will be another bailout after everything goes to hell again in a few months or years.
Whatever happens to the economy, it will be worse because of any bailout than it would have been by letting the market take its course.
Buddahpundit on September 25, 2008 at 8:41 PM
This is one hell of a night to be out of gin.
Then again, it may be a godsend that I don’t have any.
turfmann on September 25, 2008 at 8:42 PM
If they can’t get a deal done to save the farking economy, will next week bring us Congress’s first ever zero percent approval rating?
It should. All the Republicans have to do is air commercials with Harry and Nanny saying, “We don’t know what to do.” Stunning, really.
Heading into the weekend without a deal is not good. When the Asian and London markets open Sunday night and early Monday morning it could be really ugly.
Currency markets are reactive, and since Monday USD denominated pairs have traded in a tight range. Once this deal pops all hell should break loose. Can’t do much but wait…and wait…and wait….and wait.
Although time is of the essence I would like to see the Republicans hammer this thing out all the way after the 29th when the Dems were hoping to skip town and go on vacation.
Cody1991 on September 25, 2008 at 8:42 PM
Oh, yeah. I forgot that even without this crisis, an Obama election would tank the market.
Blake on September 25, 2008 at 8:42 PM
If the figure to right the markets is actually $700 billion then there is no entity or group of large entities that could afford to make that investment. The US government is big enough to do the deal. I’m liking the new way to look at this problem though, that is, have government insure the bad paper instead of buying it outright.
JonPrichard on September 25, 2008 at 8:42 PM
Panic has already begun here, with WAMU rumor….
Oh, and I prefer Hornet to Sting…and the panties…it’s from a movie…”When you’re done having your pink panty party…..”
HornetSting on September 25, 2008 at 8:43 PM
Dude. This Fat Queen played a major role in causing this mess and now he’s putting his fat face all over the place and spewing his rightous indignation.
You chill- DUDE.
FiveWays on September 25, 2008 at 8:43 PM
I think one of us should change our screen name to Cassandra.
phronesis on September 25, 2008 at 8:44 PM
i’m googling wamu and can’t find anything about the fdic takeover. does that mean if you had over 100k in their bank it’s gone?
anna on September 25, 2008 at 8:44 PM
JP Morgan bought their assets. You bank is now JP Morgan.
phronesis on September 25, 2008 at 8:44 PM
I’m liking the new way to look at this problem though, that is, have government insure the bad paper instead of buying it outright.
Yeah, but am I even dumber than I think, or isn’t the government the only one who can afford to throw that much money down a hole? How is insuring it a better idea? Then they couldn’t even sell it off. That sounds like it’s protecting a profit for somebody else rather than relieving companies of debt.
If private companies have to do it, a) it won’t get done, not to that scale, which is obviously what we’re talking about, and b) if they do, the whole economy is going to contract on a huge scale. That much I’ve managed to grasp. Is that a fair summation … somebody?
Anwyn on September 25, 2008 at 8:45 PM
Alwyn:
The point is the securities do have value, but they are tied up in securities. It is not that they don’t have value, it is that their value is not known. They are to be bought at a discount, and then sold later at auction once they have been scrubbed and the market has stabilized. The idea is that the proceeds from the auction goes back the governmet. That means it is not a straight pay out of $700 billion.
Terrye on September 25, 2008 at 8:45 PM
Because just the news that there was a potential bailout sent the market up 240 points today alone. People aren’t going to start panicking if the market flies up hundreds of points, the financial chiefs are out there applauding the move, and financial institutions don’t keep collapsing.
I doubt the economy will be worse by passing the legislation rather than having everything collapse around us.
amerpundit on September 25, 2008 at 8:45 PM
McCain is a craps player. He just threw a 7 with Bush’s loaded dice trying to make his point on the 6th roll with all his chips in play. Busted. New shooter coming out.
Fletch54 on September 25, 2008 at 8:45 PM
Federal regulators have been heavily involved in orchestrating the transaction, which comes as WaMu grapples with its bad mortgage loans. Regulators were hoping to fend off a collapse of WaMu, which, with more than $300 billion in assets, would mark by far the largest banking failure in U.S. history.
http://online.wsj.com/article/SB122238415586576687.html?mod=yahoo_hs&ru=yahoo
It begins read the whole story…who do you think is going to pick up the bad loans…If you answered FDIC you are almpost certainly correct which means that we the taxpayers are going to buy these bad loans one way or the other.
unseen on September 25, 2008 at 8:46 PM
We just lost the election.
JoeBrooks on September 25, 2008 at 8:46 PM
I second that…this is one of the ONLY places that you will see the real reason for blame spelled out.
Tired of chilling. Tired of the MSM. AND DAMN TIRED OF THE SH(T STICKS IN WASHINGTON!
HornetSting on September 25, 2008 at 8:46 PM
That’s exactly what I’ve been thinking to myself during this thing. Our political class is seriously dysfunctional and out of touch.
I think I just became a term limits supporter.
Slublog on September 25, 2008 at 8:46 PM
SteveMG, Ive heard people tell me its like dumping a bucket of water on a forrest fire though, so to throw that much money into a bottomless pit, to ward off the inevitable, is it worth it? Banks may fail between now and Nov. 4 even with the bailout, but whatever, I think its going to get done.
Cardiganfox on September 25, 2008 at 8:47 PM
NO. The takeover has nothing to do with FDIC funds or the $100,000 limit. JP Morgan took over WaMu’s deposits and branches. Your money is still there.
amerpundit on September 25, 2008 at 8:47 PM
Terrye, I’ve grasped that, the problem is that the word “scrubbed” conveys nothing to my mind. Does it simply mean that a basic value will be attached at the price the gov’t bought it at?
Anwyn on September 25, 2008 at 8:47 PM
So Paulson wanted to simply grab $700 billion and go toss it (unsupervised and immune from consequences) to his buddyroos on Wall Street?
And good ol’ Chris Dodd and Barney Frank wanted to give more to the people — illegal aliens and other unqualified homebuyers — who played a big part in getting us into this mess?
And Bush was pushing this as if the USA will be destroyed tomorrow without all the giveaways?
Each and every one of them should be run out of D.C. on a rail. And they should take Osama Obama, that miserable little whining Marxist, with them.
MrScribbler on September 25, 2008 at 8:47 PM
phronesis on September 25, 2008 at 8:39 PM
Thanx for the good thought –
Funny, I just called and got a recording that they “are updating their automated phone system” but no other explanation. Ha.
This does not bode well…. I mean, for whatever’s out there. Also have accounts through Chase!!
tru2tx on September 25, 2008 at 8:48 PM
Well there certainly is the option of not taking the apocalyptic prediction of “Er, 30-50 million+ American unemployed” as some kind of divine revelation for what will happen if we don’t let the government commit by Sunday to spending another $
700750,000,000,000.00 and counting that we and they don’t have. That might be worth a little bit of a look.MB4 on September 25, 2008 at 8:48 PM
Well, those are already nationalized (if you mean Medicare). So, I think the analogy is misplaced.
But I get your point. When do we (okay, I) say enough?
Er, how about: that’s above my pay grade?
SteveMG on September 25, 2008 at 8:48 PM
Looks like I picked the wrong week to stop sniffing glue!
–McCroskey
Y-not on September 25, 2008 at 8:49 PM
McCain should say.. , Why didn’t the Democrats pass the FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005 that I co-sponsored? then we wouldn’t be in the situation that we are in now, it would have been caught and rectified a few years ago
Then flip off the Democrats.. and say Country First Mofo’s.
Chakra Hammer on September 25, 2008 at 8:49 PM
We just lost the election.
JoeBrooks on September 25, 2008 at 8:46 PM
What? Breathe man, jesus.
Cardiganfox on September 25, 2008 at 8:49 PM
Yep.
HornetSting on September 25, 2008 at 8:49 PM
If Reid wants to play with fire!
What would happen if McCain made an
ad about Obama’s’friends’from Fannie Mae,
and Freddie Mac,and mention what roll,
Chris Dodd and Barney Frank played,
or would the Liberals go to DefCon 2?
canopfor on September 25, 2008 at 8:50 PM
unseen:
When this all started the Russians had to suspend trading twice in one day their markets were falling so fast. I am afraid that if this deal {or some deal} is not reached, the global sell off will begin again.
People could lose their pensions, their life savings in less time than it takes to tell about it.
Terrye on September 25, 2008 at 8:50 PM
It’s not the economy I’m worried about. (Or the election.) If stabilizing the economy comes at the cost of a free market where the federal government stays out of the way, then isn’t a little of “America” lost in the process?
Isn’t a bailout just more of the same bad government intervention that led us here?
LastRick on September 25, 2008 at 8:51 PM
Checked on this. Thanks! Husbat in airplane now, thought it was $100,000 but for a minute there I was confused. Too many numbers floating around today!
freeus on September 25, 2008 at 8:53 PM
An OBambi fan, huh?
AubieJon on September 25, 2008 at 8:53 PM
Here’s what I want to know: Where’s the money coming from to buy this stuff out? Does the gov’t have $700 bn. sitting around, or are we borrowing this from China too?
Because if we have it sitting around, taxes have been even more way too high than I thought, and if we don’t ….. pffffffft.
Anwyn on September 25, 2008 at 8:53 PM
McScribbler:
No, that is not what Paulson wanted, he did not want to throw $700 billion dollars at Wall Street. That is not even sort of fair.
\btw, if those markets fall like some people are saying they will fall, we will lose more than $700 billion.
Terrye on September 25, 2008 at 8:53 PM
Terrye:
I agree about both Democrats and Republicans being responsible for the mess. Cap’n Ed had a post here on the 17th outlining the bill (S 190) McCain and three other Republican senators crafted in 2005 to address the problems with Fannie and Freddie, WHEN THE REPUBLICANS CONTROLLED THE SENATE. The bill never made it out of the Finance committee. I don’t remember who the Republican committee chairman was.
Link here: http://tinyurl.com/4adgdp
JackOkie on September 25, 2008 at 8:54 PM
Was the last Great Depression followed by brilliant days of free market capitalism?
phronesis on September 25, 2008 at 8:54 PM
Mine too. And I fear we elected people incapable of solving this. So do I want the people that led us into this mess trying to fix it?
LastRick on September 25, 2008 at 8:54 PM
Aubie:
I am not an Obama fan, I would not vote for him under any circumstances, but I think there is a good chance that we did just lose the election.
Terrye on September 25, 2008 at 8:55 PM
Well the Nasdaq went from over 5,000 to not that much over 1,000 (although it took a while) and the world ended. That’s why. Oh, wait!
MB4 on September 25, 2008 at 8:55 PM
The sentiment of “at least we didn’t give up a little bit of ‘America’ for the moment in the process” isn’t going to matter to people needing to feed their children.
What happened after the last depression? We got more social programs and intervention. That worked well.
amerpundit on September 25, 2008 at 8:56 PM
If McCain had anything to do with derailing this deal, I’d be even MORE excited about voting for him.
Sarjex on September 25, 2008 at 8:56 PM
Every option sucks!!! Whats the difference between a direct bailout of “toxic debt” or offering insurance against “toxic debt”? Nothing! Either way the tax payer will get stuck with the bill.
It doesnt matter if you buy it or insure it. Bad paper is Bad paper. No one is ever going to recoup the money lost in these bad mortgages. EVER!!! So why bother trying.
jesterstear on September 25, 2008 at 8:56 PM
Money Supply didn’t evaporate when that happened. That’s the difference.
phronesis on September 25, 2008 at 8:57 PM
Well, I’ve heard the opposite. The problem is that these bad loans need to be “exposed” and sold off. Once they are, confidence among the institutions can be restored and the credit spigot turned on again.
We’re talking about 6% of mortgages that are bad. But they’re spread out over so many institutions that no one trusts each other.
Look, I can barely understand what a “derivative” is. So take whatever I say with a lot of your best gin.
As far as I can tell, the critical part of this is the unknown. And what Keynes called the “animal spirits” don’t like unknown situations.
SteveMG on September 25, 2008 at 8:57 PM
No. So maybe this time we could learn our lesson.
LastRick on September 25, 2008 at 8:57 PM
LastRick:
Those people have a responsibility to fix this and if they do not, then there will be repercussions. We can hope for miracles I guess but I think that is what it would take for the economy to avoid a sharp, long and deep downturn.
Terrye on September 25, 2008 at 8:57 PM
Just every now and then I wish they would put the good of the country first.
Terrye on September 25, 2008 at 8:41 PM
History has shown that when the Republicans play ball with the Democrats, its the dems way or you get the bat shoved up you a$$!
belad on September 25, 2008 at 8:57 PM
phronesis on September 25, 2008 at 8:44 PM
sorry I know it was a joke but I don’t understand the context.
unseen on September 25, 2008 at 8:58 PM
The Office premiere in 5 MINUTES…I need a breather AND a laugh.
Then back to the “Bailout Watch Thread” – aka HotAir
LordMaximus on September 25, 2008 at 8:58 PM
Cassandra, the prophet of doom who no one believed only to realize she was right after it was too late.
phronesis on September 25, 2008 at 8:59 PM
leider klar / unfortunately true
Paulson is one of those Very Rich Democrats who made Lotsa Money by knowing which way the wind was gonna blow
how he knew, nobody knows……….
Janos Hunyadi on September 25, 2008 at 8:59 PM
What are you? A ventriloquist? Don’t give it up yet. OBambi keeps getting caught flatfooted and OBiden keep gaffing up hairballs.
AubieJon on September 25, 2008 at 9:00 PM
Of course, the people who like the idea will drive up the stocks for awhile to sell the idea. All those same people will be pulling out as soon as the bailout is signed. That is, unless they see never ending bailouts on the horizon.
This thing isn’t happening in a bubble. Everyone sees it. No one will be fooled by it. It’s like the idea of emptying our strategic petroleum reserves to drive down the price of oil. The speculators are watching your desperate move so why would they bid lower knowing that it’s only a few days worth of oil?
Buddahpundit on September 25, 2008 at 9:01 PM
Last Rick:
Learned what lesson? That if there was a two thirds majority of Democrats in both houses and a Democrat in the White House there would be a deal right now? That may very well be the lesson people get from this. They are not just blaming government you know, they are blaming the folks on Wall Street who were more than willing to go along with all this so long as there was money in it. They are mostly just worrying about their future, their jobs, their savings and their families. That is what most regular ordinary people worry about.
I think it hurts Republicans to let this go without some sort of rescue plan. If not this one, something.
Terrye on September 25, 2008 at 9:01 PM
thanks for reminding me! i almost forgot :-)
anna on September 25, 2008 at 9:01 PM
Newt is on Haanity and Colmes!!!!
I trust what he says!
Queen0fCups on September 25, 2008 at 9:02 PM
jesterstear on September 25, 2008 at 8:56 PM
You forgot to mention that the only winners in this whole deal is the Wall Street boys.
belad on September 25, 2008 at 9:02 PM
The sky is falling! The sky is falling!
Vince on September 25, 2008 at 9:02 PM
Or we just WON the election. The glass is half full, ma’am, not half empty. Obama has looked like semi-colon on an unread sentence
Janos Hunyadi on September 25, 2008 at 9:02 PM
The only money that is now “evaporating” is the funny money.
MB4 on September 25, 2008 at 9:03 PM
Terrye on September 25, 2008 at 8:50 PM
Yes, but from the posts and comments I think only about 3 or 4 of us on here understand the ramifications of this. If that is any indications with the general population we are done and might as well start preparing for the coming depression. Central NC is already out of gas. I don’t even know if I will be able to get to work this weekend. I will be buying more canned goods and ammo if there is no deal reached by Monday. People just do not understand what is hanging over our heads. They think they are protected, they think their job is secure, they think that their home is paid for yet forget that gov can and will raise property taxes 2 or 3 times higher to pay for everyone else. They think it is abailout of irresponsible people which it is but it is also a bailout of the responsible people.
So I have been fighting this fight for the last 10-12months and am about tired of hearing form people that do not understand. And I am just starting to except that we will go thru another depression because the people of this country do not understand economics….
unseen on September 25, 2008 at 9:03 PM
If the Republicans stop this bailout, they will be out of power for the next 30 years.
Because the markets worldwide and here will collapse. Panic will set in and people will take their money out of the market.
And the credit needed for each of the companies we work for will disappear. With the result that a lot of people reading this – and me writing it – will be laid off.
Yeah, that bad.
SteveMG on September 25, 2008 at 9:04 PM
Thank God for John Boehner, Richard Shelby, and most of all John McCain.
Jdripper on September 25, 2008 at 9:04 PM
Buddhapundit:
No, that is not true, it is not just people who like the idea who drove up stock prices. If this deal does not pass, faith will be lost in the credit sector. The stocks will fall, the dollar will fall. An up day on Wall Street is a bet on the future, a down day is the opposite. And that is not good for any of us.
Terrye on September 25, 2008 at 9:04 PM
phronesis on September 25, 2008 at 8:59 PM
Oh ok. i’ve thought over the last year to changing my name to chickenlittle becaue that is what everyone has been calling me.
unseen on September 25, 2008 at 9:06 PM
Yup, buy on the rumor sell on the news.
MB4 on September 25, 2008 at 9:06 PM
NEWT on H&C right now!
FiveWays on September 25, 2008 at 9:06 PM
But hey, at least they’ll get to keep their ideological purity, right? Isn’t that more important than a complete worldwide financial meltdown?
/s
Slublog on September 25, 2008 at 9:06 PM
If the government insures the bad MBS rather than buying them, the market can get back to work and private investors will start buying up the MBS if they have a giverbnment guarantee. Should cost far less than $700 billion and be much easier to implement.
Anyone who thinks this Paulson plan is a good idea, tell me this: who gets to be first in line for the Treasury purchases? Who is second? How does this get done in an orderly fashion when suddenly every bank and pension fund and investment fund in the country can say “we need to sell this stuff NOW or we go under”? Isn’t there a near guarantee of adverse selection here, wher the worst paper gets dumped on the Treasury?
I think Bush should close the markets until this deal gets done. There is no reason for avreage 401(k) owners to lose their shirts over this.
rockmom on September 25, 2008 at 9:07 PM
We are all
GeorgiansAl Gores now.MB4 on September 25, 2008 at 9:07 PM
Absolutely.
People don’t appreciate how psychology influences so much of this. If investors believe that the credit market is unsafe, they’ll flee it for safe investments.
Without that credit available to run businesses, everything will come to a halt.
SteveMG on September 25, 2008 at 9:07 PM
Newt’s VERY strong on McCain.
Pianobuff on September 25, 2008 at 9:07 PM
Newt – open another can of Whoop-a$$ on Alan.
tru2tx on September 25, 2008 at 9:08 PM
As regards Washington Mutual it is no big deal, in fact it was a foregone conclusion. Despite whatever tomorrow’s headlines may be, the only real suspense among the players was how it would actually be eaten.
The market place is the only problem solver when left alone. It allocates without regard to sentimentality or politics.
If the politicians, Paulson and crew really wanted to do something they could suspend FASB 157, the mark to market requirement that is bringing all this useless paper to the market contaminating the 95% of healthy balance sheets. It’s no surprise that this provisio only kicked in the first quarter of 2008. Hmmm, look when all the shit hit the fan.
Previously, meaning the last 100 years, this technicality would not have forced this current debacle. Now don’t get me wrong, the markets are under pressure, as they should be, because we are living through one of history’s greatest bubble collapses–housing.
The fact that the market is only down 22% is a testament to the greatest of our economy and enterprise. Lifting the mark to market rule that is FASB 157 won’t end the crisis but what it will do is stop forcing every institution to drop paper on the same day.
If they suspended short trading, a stupid move akin to throwing Barabbas to the mob, they can certainly suspend this stupid regulation that has been debated for decades before it was finally implemented. The cons predicted this event would occur somewhere out in the future.
The future is now.
the bill itself
http://www.fasb.org/st/summary/stsum157.shtml
In layman’s terms. The banks et al, everyday, have to take their “book” to the marketplace and get a price on it. Therein lies today’s problem, no one is making a bid so the banks etc are caught in a catch 22 technicality. They go home with a book, for reporting purpose, worth nothing. They then have to change all their bank ratios–more often resulting in technical insolvency when in fact maybe only 3% of their portfolio sucks. Yes its more complicated than that but you get the gist. The end result however is no one will lend to anyone because everybody is, or about to be, insolvent.
Paulson was hoping to sweep all that paper away and let it mature in our hands sending most banks home with reasonable balance sheets. I say first let’s lift this artificial requirement and see what happens. If the shit continues to hit the fan in such a way that the market can’t handle the deluge of paper, OK then go back to plan B. I just don’t want to start there.
patrick neid on September 25, 2008 at 9:08 PM
unseen:
Up here in Indiana I have gas so I can get to work. I am just afraid of losing the job. If I do I will be every bit as disgusted with the people cheering for failure here as I am the Democrats. At least the Democrats can make the argument that they did not know for sure what would happen when they started this. A lot of these socalled conservatives seem to relish the idea of a collapse. That makes me wonder about them and their motivation.
Terrye on September 25, 2008 at 9:08 PM
Why should the government buy up “toxic debt” with taxpayer money when investors like Warren Buffet are willing to do so with their own money?
This question exposes the fundamental flaw in the Paulson plan: it does not address the root cause of the problem!!!
The immediate problem is that inappropriate and unworkable government regulations which force a “mark-to-market” valuation of mortgages which are NOT in default!!! When the market is disrupted, this forces a false and ridiculously low valuation of these assets, and an unwarranted writedown of every financial institution in the country…even though the small number of actual defaults would be manageable.
So the obvious way to solve this is to FIX THE BAD REGULATION rather than disrupt the economy now and decades into the future with a huge and unwarranted government takeover of the entire financial industry!!!
Washington caused this crisis with a stroke of the pen, and it can fix it with a simple eraser!!
landlines on September 25, 2008 at 9:09 PM
Yeah, apparently so.
Hey, but we’ll go down with the flags flying.
And the Democrats will run things and it’ll be 100 times worse (in terms of idelogical purity) than this bailout.
No one here likes this. It’s not a question of wanting to do this; it’s a issue of having to do it.
SteveMG on September 25, 2008 at 9:10 PM
What if it’s not done for a week, a month?
MB4 on September 25, 2008 at 9:11 PM
rockmom on September 25, 2008 at 9:07 PM
I like the insurance angle better myself with massive tax cuts to spur investment. Also SEC, FED, and FM amd FM regulator should oversee the types of loans.
I and I think the market could care less what type of deal gets done just that a deal does get donw to aviod a systemic risk.
As far as the dollar it will be worth more under the house plan than paulson’s plan which also means oil and food will be less.
unseen on September 25, 2008 at 9:11 PM
Newt think they are going to knock it out of the park! The Republicans have a great strategy here.
I have never felt more proud of the Republicans!
Queen0fCups on September 25, 2008 at 9:11 PM
Alas, poor Democrat, I fear you are right. You lose.
ExTex on September 25, 2008 at 9:11 PM
+1
phronesis on September 25, 2008 at 9:11 PM
McCain killed a BAD BILL.
He’s gonna be a Hero!
ExTex on September 25, 2008 at 9:12 PM
Sorry, the immediate problem is the perception by investors that the market is too risky to invest in.
Until they have confidence that their investments are (relatively) safe, the credit needed for our economy will disappear.
Yes, these other measures have contributed to the problem. And it won’t do any good long-term if we bailout the banks while allowing the conditions that caused the problem to continue.
But first we need to stabilize things.
Then we can go after Sarbanes/Oxley and other legislation.
SteveMG on September 25, 2008 at 9:12 PM
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