Pelosi: Democrats don’t have the votes to pass the bailout bill; Update: Vote unlikely before Wednesday?
posted at 6:05 pm on September 26, 2008 by Allahpundit
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“We don’t have the votes to do it on our own,” Pelosi told reporters.
Pelosi said many House Democrats still have strong reservations about the bill, especially if it does not include bankruptcy protections or does not include a way to pay for the massive $700 billion price tag…
Pelosi acknowledged that at first glance, the bill was “very unpopular” among the American people. However, Pelosi highlighted new polling data stating that the majority of Americans favor some form of government intervention to calm jittery financial markets.
Probably just her way of building leverage for some of those left-wing goodies they want in the final package, but I don’t know. There must be a few Blue Dogs looking at the polling on this and getting nervous. How long does the leadership have to pass something before people on their own side start defecting and the whole thing turns into Amnesty Debacle redux? Or am I just being naive, and in fact this is a classic Pelosi gambit a la her original maneuvering on drilling in which she encourages House members whose reelection prospects are dicey to vote however they need to knowing that she’ll get her way anyway? In fact, losing a few Democratic votes arguably makes it easier for her to claim that support for the bill is bipartisan, since it means that the few votes they already have among the House GOP will be decisive, not mere ornamentation.
Update: Debaclemania!
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Rich Lowry at NRO cites a WaPo.com update:
onlineanalyst on September 26, 2008 at 8:12 PM
Kini:
If they buy them at a steep discount they will increase in time. The truth is many of these loans are not bad loans, their value is just not known.
And if they do not gain in value, then just lending the banks more money will not help, just the opposite.
Once they are out of the market, and credit loosens up their value will rise along with the rest of the market.
Terrye on September 26, 2008 at 8:13 PM
Yeah, that isn’t much these days. I assure you if we word breaks that there definitely will be no deal the stock market will tank. More importantly, the credit market, which is on life support, will basically come to a halt. Even now anemic credit is curtailing economic activity as we speak. Economists have been taking down their GDP estimates from modest growth to no growth or contraction. No deal and we see severe contraction. Hope of the bailout has supported the credit market to continue to function in a reduced capacity, with liquidity being removed at a slower pace. This has prevented a severe downturn, and if this hope is removed we will see signs of chaos very quickly.
phronesis on September 26, 2008 at 8:14 PM
onelineanalyst:
I think they are trying to find a way to use Cantor’s plan for some of the securities and Paulson’s plan for the rest of them.
Terrye on September 26, 2008 at 8:15 PM
This is getting comical. What a leader we have in Nancy Pelosi….not. If she can’t make a speech blaming George Bush she is utterly useless. She went out on a limb and promised her caucus all sorts of liberal goodies in this bill, and then the Republicans called bullshit and made her take them out. So now SHE has a revolt on her left flank. Good. Let’s see how well she can herd cats.
I heard some Republican today on CNBC saying that the draft the Dems came out with yesterday also included a requirement for a union representative on the Board of Directors of any company that got bailed out. If that’s true, then any Democrat who says “we had a deal before John McCain showed up” is 100% lying. Senate Republicans would NEVER have agreed to such a bill.
rockmom on September 26, 2008 at 8:17 PM
rockmom:
I just read that in the Cantor/Paulson the union stuff was out, along with ACORN.
I think Nancy thinks it will be dicey in the short term, better in the long run and she wants the Republicans to go along too. Short term is an election.
Terrye on September 26, 2008 at 8:22 PM
Not inflationary, counter-deflationary. Liquidity is being removed from the system, which casues deflation, and we are now starting to see that in measures such as the CPI. As kudlow pointed the treasury can’t buy 700B of assets at once, so you aren’t going to see a trillion dollar introduction of money. It will take a lot of time, and indeed we want it to inflate the now toxic debt bringing down the banking system.
phronesis on September 26, 2008 at 8:27 PM
Well, Terrye, someone on Fox about an hour ago said that ACORN was STILL IN THE BILL. I think it was a Repub congressman, but I’ve been switching channels and going from radio to TV to the internet so much that I can’t remember who it was
Pelosi is a lying skank, but she is a ruthless clever lying skank, and when you look up the word ‘devious’ in the dictionary her picture is there. She wants that ACORN pay-off and she’ll use ANY methods to keep it
Janos Hunyadi on September 26, 2008 at 8:29 PM
It is out of the Paulson/Cantor compromise and Nancy will have no choice but accept it to get the house GOP on board so she’ll have CYA bipartisanship.
phronesis on September 26, 2008 at 8:31 PM
From the kudlow piece,
phronesis on September 26, 2008 at 8:34 PM
Janos:
I am hearing so many things from so many people it is getting really confusing. It might be that the guy you heard did not know that had changed.
Terrye on September 26, 2008 at 8:37 PM
I think waiting is actually the smartest thing they can do.
The market didn’t tank on Friday and these guys live and die by the news cycle. The public is seeing what happens when a large bank or brokerage goes down and it’s a good education: FDIC and SPIC cover the vast majority of accounts and they’re quickly sold off to another large firm – typically with similar lousy service. The world doesn’t end and, to anyone who’s been through a bank or brokerage merger or buyout, it all looks very familiar; systems get cut, redundant functions are phased out, people lose jobs and the majority of them find new ones pretty quickly at rival firms.
I have a question for those who insist on framing this a taxpayer bailout of “Wall Street”: Just who do you think works on Wall Street? Can you understand that just a tiny percentage of them are what you’d regard as wealthy and why do you think your tax dollars are somehow more important than their tax dollars?
sanguine4 on September 26, 2008 at 8:37 PM
sanguine:
The market did not tank because they were in limbo waiting for a deal. That will only last so long, sooner or later something has to give.
Terrye on September 26, 2008 at 8:39 PM
Oops. I think Tom Shipley’s head just exploded.
fossten on September 27, 2008 at 12:04 AM
What is this, the Dem’s have the leverage to pass what they want. They want the republicans in on this to take some of the heat if and when it goes south. As it stands now, we are in this predicament because of the Dem’s. Sure they are blaming this on Bush and McCain, as it is Bush’s watch, but it is not as if they both did not warn us and the congress. As far as the two idiot Dem’s that are the ones that screamed about this,it was to cover their own posteriors as they were instrumental in this. As far as the market goes, look back a few years when it tanked,(if I recall it was 900 points in one day) we are still here. It cleaned out a lot of the shady speculators, and margin buyers. Mortgage companies and credit lenders were more than anxious to restructure loans to get something instead of taking a total loss. The money isn’t lost or does it just vanish, it changes hands. Those that have, will put it back some place to avoid excessive taxes. It all works out, maybe this time we will look back at the past and correct the mistakes that got us here.
N4646W on September 27, 2008 at 12:14 AM
I was just wondering, does anyone know where the $700 billion figure comes from? It seems to me that Paulson just pulled it out of a hat, but maybe there is some algorithm that was used to arrive at it?
progressoverpeace on September 27, 2008 at 5:30 AM
As I understand it, that number represents 5% of total outstanding mortgage debt and is the amount currently in default or foreclosure.
RedWinged Blackbird on September 27, 2008 at 6:55 AM
If that’s so, then we can forget profits from the government’s purchases. If what the government will be purchasing is mortgages on houses in foreclosure, then the government will be saddled with foreclosure costs. The normal return on a mortgage in foreclosure is something like $.40 on the dollar, even if it’s a perfectly good house.
Most people don’t understand — clearly Barack Obama doesn’t understand — that the problem is NOT primarily sub-prime loans going bad, the problem is really a severe drop in the value of homes that’s reflected in the books of financial institutions. Even with the high default rate of sub-prime loans, total mortgage defaults is only around 2%. The big losses are from re-valuing mortgage assets to include downside risk as required by FASB 157, which means that instead of reporting the face values of the mortgages, financial institutions have to report repo value — which is next to nothing.
So, if the government is going to use the money to buy homes that are not in default just to raise the value of the struggling bank’s assets, they’ll eventually realize a decent return from the money. However, if they’re only going to buy the loans that are headed for default, they’re going to lose their socks — which are really our socks.
If somebody can tell me where my analysis is wrong, I’m all ears, but from where I sit, that’s what we’re looking at.
philwynk on September 27, 2008 at 7:48 AM
What Treasury will be buying is mortgaged backed securities consisting of ‘bundles’ of mortgages which include both good and bad loans. From what I’ve read, the average mark-to-market value of these MBS’s is in the range of 20-30% of the hold-to-maturity value, while the actual value is probably around 65% of the hold-to-maturity value. Obviously, the success of the investment will depend on how much Treasury winds up paying for the securities. That’s why Paulson has proposed contracting with private firms to manage the portfolio. I plan to keep an eye out for any mutual fund managers who might be involved, as they might have an opportunity to snag some good deals for their funds, assuming that such activity is not prohibited.
RedWinged Blackbird on September 27, 2008 at 8:19 AM
I read that the $700 B number is some kind of procedural maximum for a single government outlay, and that he basically just asked for the maximum he could get with one bill. I don’t know if that is correct, though.
Count to 10 on September 27, 2008 at 8:24 AM
That is consistent with the calls I have read to ax “mark to market.”
Count to 10 on September 27, 2008 at 8:27 AM
Right. But that market is far different, more diverse and larger than the underlying mortgages. It’s pretty weird, as far as I see it. I mean, I haven’t heard anyone talk about the actual dollar loss we are estimating (even just a ballpark in orders of magnitude) or the size of these markets we’re bidding into (well, there have been some stories about that). I don’t know.
LOL.
progressoverpeace on September 27, 2008 at 8:33 AM
This is what I posted to Ed yesterday, Pelosi was bluffing about votes. If they had the votes they would have voted.
McCain flew in and backed Boehner, shored up the opposition.
It just shows the real leader of the country is McCain…the dems know they have to go through McCain to get it passed, Obama is a puppet.
right2bright on September 27, 2008 at 8:37 AM
The simple truth…
http://blogs.knoxnews.com/knx/silence/archives/2008/09/hey_congressman.shtml
Keemo on September 27, 2008 at 8:44 AM
The ‘loss’ of capital directly related to subprime mortgages is a loss of capital that never existed. The origination of these mortgages created the illusion of money much like the paper profits that were created by the tech bubble.
The loss in value of viable mortgages bundled with subprime is an aberration caused by the mark-to-market rule. My feeling is that this would correct itself given time and elimination of MTM. Unfortunately, we don’t have time to wait for that to happen.
RedWinged Blackbird on September 27, 2008 at 8:58 AM
Everyone will be glad to know that talking points for today are the same as yesterday. Sen. Hoyer was just on to tell everyone that the deal was done until Sen. McCain came into town and blew it. It must be great not to actually have to think about what you are going to say. Do you think they practice?
Cindy Munford on September 27, 2008 at 9:07 AM
Well, that’s not exactly true. The loss is real, since the bubble wealth made its way through the system. Just like counterfeit money that’s been released into the system (and it should be legally treated the same way, IMO). But I haven’t seen any estimates of this, anyway. I would have thought that the expected loss would be one of the big numbers someone would throw up in committee when he’s asking for $700 billion.
You know, that’s what I thought, too. But if it’s just a question of marking, then just changing to Newt’s moving average or something else like that should immediately relieve pressure, without any cash needed. All the government bids are going to do is raise the marks for those issues they participate in (well, at least after they make one transaction). You know what I mean.
progressoverpeace on September 27, 2008 at 9:09 AM
Actually, that’s the aspect of the plan that I find most appealing. To the extent that it creates an active market, complete with greed and speculation, it moves back toward the capitalistic system that we all know and love.
RedWinged Blackbird on September 27, 2008 at 9:21 AM
From my research, there is $13 trillion in mortgages in the US, and half of that is within the Fannie and Freddie portfolio. There is an estimated $2 trillion in subprime, of which around 25% is late or in default. Not sure where the $700 billion number came from, but one would need to relate it to the numbers above. Additionally, the debt securities, like CDOs and swaps, are highly leveraged. Last number I heard was upwards of $40 trillion in that market. I know that a major portion of the problem was the mark to market, where all tranches of debt securities were being marked down as if close to 30% were in trouble, which is why the credit markets are so frozen – banks have to raise capital or sell securities noboby wants right now to maintain their ratios, and in the absence of capital, there is none to lend to other businesses like car dealerships or businesses wanting to short term borrow.
Vashta.Nerada on September 27, 2008 at 9:27 AM
I still have my original two concerns…Any eventual money recovered by the government is not locked into going to pay this new debt down…they intend to spend the returns as they come in. Next, as indicated by Graham’s ‘Acorn’ comment the other day the 102 page and growing plan is larded with pork to liberal special interest groups, basically wasted billions.
JIMV on September 27, 2008 at 9:41 AM
I believe Paulson mentioned $14 trillion in his testimony. I’m not going to quibble over a lousy $1 trillion. It’s close enough for government work. $700 billion is 5% of $14 trillion. I don’t remember if he gave a specific number for the amount in default and foreclosure. Maybe he just wanted to keep the math simple. I guess he figures that $700 billion is what it would take to convert the aforementioned ‘illusion of money’ into the real thing.
RedWinged Blackbird on September 27, 2008 at 9:47 AM
I think the thing has been derailed and was pretty well destined to be if they didn’t rush it through before the political junkyard dogs smelled the blood of all that red meat trying to pass through. From here it will be hundreds of Congresspeople all wanting a chunk and it will collapse like Shamnesty. And that’s a good thing.
And who do we likely have to thank for the failure to introduce full socialism into the financial sector? John McCain and his ’stunt’; which is exactly why I think he did it
OT: Look like Joe Biden is MIA these days; is he dodging gaffes, or creditors?
michaelo on September 27, 2008 at 10:40 AM
So far I have not seen or heard what happen to the 300 billion congress approved just a little while ago. That was supposed to stop this crises now its 700 billion to stop the same peoples crises (dead beats and the wealthy). Help me understand my senators and congressman has no idea even if you could get them to respond which they in frequently do when you write. I would even be able to go see them if I could get a schedule of where they are in the state, buts that’s more closely guarded then whats left of Fort Knox.
Release on September 27, 2008 at 11:25 AM
epresentative Sessions:
you wrote:
Common Sense Plan to Have Wall Street Fund More of the Recovery, Lessen Taxpayer Exposure
- Rather than providing taxpayer funded purchases of frozen mortgage assets to solve this problem, we should adopt a plan to insure mortgage-backed securities through payment of insurance premiums.
- Currently the federal government insures approximately half of all mortgage-backed securities (MBS). We can insure the rest of current outstanding MBS; however, rather than taxpayers funding insurance, the holders of these assets should pay for it. Treasury Department can design a system to charge premiums to the holders of MBS to fully finance this insurance.
My Question to you:
What can you do to get government and the taxpayers out of the process entirely? That is where the focus needs to be.
You wrote:
- Limit Federal Exposure for High Risk Loans: Mandate that the GSEs no longer securitize any unsound mortgages.
My reply as stated to you initially:
Better yet, how about not allowing GSEs to securitize anymore loans at all, with the ultimate goal of getting the government out of this business entirely?
The polls this week have been telling you repeatedly, this is what the American tax payers want. Will you please comply?
My friends and I have been discussing your letter at length on hotair.com
They like me feel the details you stated do not go far enough, becuase it fails to recognize where the responsibility for this problem lies.
We feel your plan only bandaids and perpetuates the current problem.
Let me be perfectly clear, it was not Wall Street that created this mess it was Congress and the federal government through those GSEs that did this. We the taxpayers do not want this process to continue. It must be halted. This is not the role of government. This corrupts government officials.
Compromise on this issue is unacceptable.
paulsur on September 27, 2008 at 11:30 AM
They don’t have the votes to pass the bailout? They had the votes to cause the problem.
Akzed on September 27, 2008 at 12:32 PM
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