Senate bailout bill hits the Internet; Update: File added; Update: Not earmarks?

posted at 10:24 am on October 1, 2008 by Ed Morrissey

The Senate will begin debate within minutes on their attempt to revive the bailout bill rejected by the House.  They have released the bill text this morning, and the Senate Conservatives Fund website has it for public perusal.  The new version has no allocations going to the Housing Trust Fund, which the Dodd version originally did, so ACORN will get no money from the bailout.

However, the Senate did add a few winners to this new version:

New Tax earmarks in Bailout bill
- Film and Television Productions (Sec. 502)
- Wooden Arrows designed for use by children (Sec. 503)
- 6 page package of earmarks for litigants in the 1989 Exxon Valdez incident, Alaska (Sec. 504)

Tax earmark “extenders” in the bailout bill.
- Virgin Island and Puerto Rican Rum (Section 308)
- American Samoa (Sec. 309)
- Mine Rescue Teams (Sec. 310)
- Mine Safety Equipment (Sec. 311)
- Domestic Production Activities in Puerto Rico (Sec. 312)
- Indian Tribes (Sec. 314, 315)
- Railroads (Sec. 316)
- Auto Racing Tracks (317)
- District of Columbia  (Sec. 322)
- Wool Research (Sec. 325)

I love the auto racing tracks in particular.  I can see the headlines now: “Global financial markets melt down, NASCAR, Caribbean rum hardest hit”.  As many people have said now, I’d be more inclined to take this crisis seriously if people on the Hill didn’t use it to butter up their favored constituencies.

The Senate will vote at around 7:35 PM tonight on this bill.  I’d expect an easier passage, thanks to provisions to expand FDIC insurance and an added authority to suspend mark-to-market rules that may make some of the rest of this bill unnecessary.  Senate leadership isn’t taking any chances; they’ve added this as an amendment to a bill containing some legislation sought by both liberals and conservatives, making it difficult to oppose from any direction.

Update: My friend Sean from Everything I Know Is Wrong returns to blogging on this issue, and takes issue with Arianna Huffington’s analysis of the crisis.  We need more people pushing back on the notion that a lack of government action caused this collapse; it was a government distortion of lending and investment sectors that caused the problem.  But to the extent that government inaction contributed to it, it’s good to recall exactly who the obstructionists were.

Update II: Apparently the load on the SCF server has created some problems.  I’ve loaded the PDF file here.

Update III: I’m being told from multiple sources that the term “tax earmarks” is incorrect and misleading.  Americans for Tax Reform has sent out a memo explaining the difference (and note that the “Ed” in this does not refer to me but a staffer on the Hill):

The language Ed uses below here is very unhelpful and completely wrong from a fiscal conservative perspective.  There is no such thing as a “tax earmark.”  Earmarks are spending.  There are appropriations earmarks.  There are authorization earmarks.  There are no “tax earmarks.”  To claim that there are puts tax deductions and credits (which is what we’re talking about here) on the same par as bridges to nowhere.  Was the creation of HSAs a “tax earmark?”  How about the home mortgage interest deduction?  One might call for lowering the rates and broadening the base, but we should not fall into the trap of equating tax cuts and spending increases.  That’s how some Senate Republicans got in such massive trouble over health care last year and energy this year vis-à-vis taxes.

This is precisely the same logic that Treasury’s Steve Surrey used in the 1960s to create the “tax expenditure” concept.  This faulty doctrine treats tax exclusions, adjustments, deductions, and credits as if they were the same as a federal appropriation.  They are not.  They might not be ideal tax policy, but they are federal revenue reductions—not budget increases.

I would exempt from my statement the outlay effects of refundable tax credits.  Those are, indeed, spending and could rightly be sullied with the term “earmark.”

I’m sorry to be so firm about this, but it’s this confusion between tax cuts and spending increases that I’ve found is the number one cause of well-meaning offices slipping into Taxpayer Protection Pledge violations.  When I see things communicated that would contribute to this confusion (and I know Ed meant no harm by it), I try to jump all over it.

So these are tax breaks, not earmarked spending.  Perhaps some of them are unwisely added to this bill, but this tax extenders bill passed the Senate with overwhelming support, including the anti-pork Tom Coburn.  It didn’t pass the House initially because of the lack of tax increases to accompany it through Pay-Go.


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Damiano on October 1, 2008 at 1:05 PM

I’m not one for conspiracies, but you are right, something stinks. According to Rep. Brad Sherman on Larry Kudlow last night, this whole thing was demanded by foreign investors.

Rep. Sherman said in part:

The bill is very clear. Assets now held in China and London can be sold to US entities on Monday and then sold to the Treasury on Tuesday. Paulson has made it clear he will recommend a veto of any bill that contained a clear provision that said if Americans did not own the asset on September 20th that it can’t be sold to the Treasury.

Hundreds of billions of dollars are going to bail out foreign investors. They know it, they demanded it and the bill has been carefully written to make sure that can happen.

If this is true, I think it’s an outrage and we deserve to be told the truth.

flyfisher on October 1, 2008 at 1:18 PM

mike volpe on October 1, 2008 at 1:10 PM

OH, and on an aside, you may want to go read some of Rockmom s posts… she was an insider on a lot of the mess…

Romeo13 on October 1, 2008 at 1:19 PM

mike volpe on October 1, 2008 at 1:10 PM

Look, troll. CRA compels lenders to make loans to low income borrowers… compels them to make loans in communities with poorer credit history… not racism… just fact. They began doing that. That directly resulted in the birth of sub-prime.

You still haven’t explained you goofy economics where increasing prices increases demand? You cannot, no matter how hard you try, revise history. What’s your next argument? That we should continue to frisk grandmothers at the same frequency we frisk 30 year old muslim men at airports? Plant and water your astroturf somewhere else.

CC

CapedConservative on October 1, 2008 at 1:20 PM

Romeo13 on October 1, 2008 at 1:19 PM

Romeo… time to ignore this “Twitter”head…

CC

CapedConservative on October 1, 2008 at 1:25 PM

Thanks for telling me what CRA does. I know because I have been in the business for seven years. Furthermore, if you clicked over to my blog you would see how dumb it is to call me a troll. I am as conservative as just about anyone.

I also was in the business when this happened and it didn’t happen because of CRA. It happened because Greenspan dropped rates so much that it flooded the banks with money and they turned around and put it all into the only industry moving at the time, real estate.

It’s ironic and absurd for you to argue so hard given that until four weeks ago you hadn’t even heard of CRA and you likely hadn’t heard of Fannie/Freddie until two months ago. Yet, here you are pretending to argue like an expert about concepts foreign to you not two months ago.

mike volpe on October 1, 2008 at 2:15 PM

I also was in the business when this happened and it didn’t happen because of CRA. It happened because Greenspan dropped rates so much that it flooded the banks with money and they turned around and put it all into the only industry moving at the time, real estate.

It’s ironic and absurd for you to argue so hard given that until four weeks ago you hadn’t even heard of CRA and you likely hadn’t heard of Fannie/Freddie until two months ago. Yet, here you are pretending to argue like an expert about concepts foreign to you not two months ago.

mike volpe on October 1, 2008 at 2:15 PM

Do you really believe that the banks would’ve been offering so many subprime loans had Fannie/Freddie (in accordance with the CRA) not been backing them?

No one is arguing that no bad loans would’ve been issued if not for the CRA and related policies of Fannie/Freddie. But there’s no denying that they contributed greatly to the current problem.

Hollowpoint on October 1, 2008 at 2:19 PM

Fannie/Freddie weren’t backing sub prime loans. That is just a bunch of nonsense. MBS for sub prime loans were created in the late 1980′s by Lew Ranieri. They are completely separate sub set of loans than anything that Fannie/Freddie did or do. Now, Fannie/Freddie went into the market place and bought a bunch of these loans along with investors of all other shapes and sizes, and that is a major scandal, however there is so much misinformation about how the market worked that it is just shocking.

Bonds of fannie/freddie loans were totally separated from the MBS’ bonds of sub prime loans.

mike volpe on October 1, 2008 at 2:24 PM

Volpe is more correct than most. The housing bubble fed on itself, well beyond effects of CRA on the market, based on the steadfast belief that RE never goes down and aided by the belief that your line of credit based on your paper-profit equity was YOUR money. As housing became unaffordable to everyone, which was and is the real crisis, lenders created the illusion of affordability through crafting affordable monthly payments. That illusion has crumbled, home prices are correcting down to historic levels, and the discussion of a bailout really comes down to where we want to hide the losses.

That being said, McCain and Palin should be beating the Hell out of their opponents with general and specific links between policy-enabled finance failures and Democrats. The most important thing for the voter to understand is that giving the government over to Democrats is not change, its allowing the same bunch and the same policies that helped get us here to continue mucking things up.

shuzilla on October 1, 2008 at 2:27 PM

Folks let’s make sure everyone understands the difference in terminology. There were at the height of the real estate boom three sub sets of loans. There were prime loans. Those were backed by Fannie/Freddie. There was Alt A. Those were banks that lent Fannie/Freddie loans that held these loans in their own portfolios. Then, there was sub prime. Those were loans backed by wall street investors that went to folks with marginal credit.

If you use a baseball analogy, the fannie/freddie loans were the major leagues, Alt A were triple A, and sub prime were Single A.

mike volpe on October 1, 2008 at 2:27 PM

So everyone now publicly admits that if they can just find the right sweetener, the senate votes can be bought.

rockhauler on October 1, 2008 at 2:37 PM

FWIW, I did go over and read some of volpe’s stuff (even went to the archives to see what he was writing about in the distant past) and he doesn’t appear to be a troll to me. He’s just a guy with a different insider’s take. Not that he needs me to defend him.

After all of this my evolving opinion on it all is that the Fed’s desire to control the potential ill effects of 9/11 led them to do what they did (flood the market with moola in volpe’s estimation). This is part and parcel with certain people’s desire that no one ever endure any hardship in this country. These people are mostly Demos, fueled by the MSM and their constant doom and gloom reporting, reacted to by those in charge (the Fed and W in this case).

I’ve been trying to wrap my mind around this mess for a sum total of two weeks. So if you don’t like what I think, call me a troll and tell me to take a flying leap.

rockhead on October 1, 2008 at 2:39 PM

Fannie/Freddie weren’t backing sub prime loans. That is just a bunch of nonsense.
mike volpe on October 1, 2008 at 2:24 PM

Want to know why people are calling you a troll? It’s dishonest baloney such as this.

Lets see what Fannie Mae had to say last year:

Fannie Mae has a history of working with lenders to serve families who don’t have perfect financial profiles. “Subprime” is, after all, simply the description of a borrower who doesn’t have perfect credit. We see it as part of our mission and our charter to make safe mortgages available to people who don’t have perfect credit. In the past several years, for example, we have designed mortgage options to give borrowers with blemished credit access to high-quality, low-cost, non-predatory loans. We also set conservative underwriting standards for loans we finance to ensure the homebuyers can afford their loans over the long term. We sought to bring the standards we apply to the prime space to the subprime market with our industry partners primarily to expand our services to underserved families.

Read the whole thing. Even if they aren’t 100% responsible, to say that Fannie/Freddie weren’t backing subprime loans is completely false.

Hollowpoint on October 1, 2008 at 2:40 PM

Listen, I know what sub prime is. They are split up into categories on my lender list. You don’t have to have perfect credit to qualify for a Fannie loan. You just have to have relatively good credit and relative certainly to sub prime.

It is really annoying to have someone that just learned all of these terms a month or two ago start telling me about my business.

Let me make it clear to you. Ask any mortgage professional that has a lender list. Their lender list will be split into prime and sub prime. Sometimes, they will be called A and B. Also,, they might called them conforming and sub prime. Either way, Fannie/Freddie loans were given to those with good credit and sub prime were given to those with marginal credit.

That doesn’t mean that any blemish meant that you didn’t qualify. In fact, one of the problems became that more and more blemishes became acceptable to fannie/freddie. That didn’t happen in response to CRA. It happened because sub prime began to take significant market share from Fannie/Freddie.

mike volpe on October 1, 2008 at 2:45 PM

mike volpe on October 1, 2008 at 2:45 PM

There’s no point in continuing with you. You’re either being intentionally dishonest or ignorant. There’s no other explanation for your argument that Fannie/Freddie weren’t involved in the subprime market and that the Clinton-era stict enforcement of the CRA had no influence in the issuing of subprime mortgages.

Perhaps you’re merely trying to defend your profession. I don’t know. But if you are the expert you claim to be, you’re being willfully dishonest and I’ve no use for such a person.

Fannie/Freddie weren’t involved with subprime loans… but had to be bailed out due to the failure of subprime loans. Quite the leap in logic there, duder.

Hollowpoint on October 1, 2008 at 3:09 PM

Oh, that reminds me. Bush just making comments and a few sporatic reports of the unintended consequences of this credit market freeze up..

State and local governments can’t borrow money.

Now there is a tragedy. States, counties, school boards, cities, can’t borrow more money. Why its obviously the end of civilization as we know it.

No wonder there is hysteria in the streets and on the tube.

rockhauler on October 1, 2008 at 3:15 PM

That’s it. I’ve given money I can’t afford to Republican campaigns in the hope that we, the taxpayers, might get some return on our investment. Never again.

These guys aren’t interested in protecting us. They’re too busy slapping each others’ back and covering up each others’ crimes. Not to mention soaking us within an inch of our lives.

McCain is supposed to be a “reformer” and he’s going right along to the tune of “Bipartisonship.” When bipartisonship becomes more important than doing what is right, there is nothing left.

Screw the lot of ‘em. I’m out. Not a penny more will any of them get willingly from me. They’ve already taken more than I’ll ever earn.

hachiban on October 1, 2008 at 3:16 PM

So these are tax breaks, not earmarked spending. Perhaps some of them are unwisely added to this bill, but this tax extenders bill passed the Senate with overwhelming support, including the anti-pork Tom Coburn. It didn’t pass the House initially because of the lack of tax increases to accompany it through Pay-Go.

Thanks for the clarification, Ed.

I think that this still points to a dysfunctional Senate. I thought we were in a crisis. If so, why muddle up the bill with things that do not address the current fiscal crisis? It’s ridiculous that these guys (and gals) can’t stay on point to get the job done. Perhaps they need to be on Ritalin.

Y-not on October 1, 2008 at 3:28 PM

They had to be bailed out because they bought up a lot of the end loans of sub prime and because they loosened their own restrictions in response to sub prime’s explosion. At the height sub prime became something in the neighborhood of forty percent of the entire market. It usually runs somewhere in the neighborhood of fifteen percent of the entire market. Responding to the usurption of market share, both these two began to loosen up their own restrictions. On top of this, the got into the act of buying up the end MBS bonds that were the securitization of these sub prime loans. They got into this act along with just about every financial institution all over the world.

That is the real scandal here. Why were these two buying up the end MBS of such risky investments. That had nothing to do with their mission statement. They did this because the products were selling like hot cakes. They got themselves involved in a risky investment for no reason besides the pursuit of more profit. They risked tax payer dollars, since they get a Treasury credit line, to try and maximize their profits with risky investments.

mike volpe on October 1, 2008 at 3:31 PM

Go to Ed’s PDF and read the top of page 41:

(3) If, at any time after the certification in paragraph (2) has been made, the President transmits to the Congress a written report detailing the plan of the Secretary to exercise the authority under this paragraph, unless there is enacted, within 15 calendar days of such transmission, a joint resolution described in subsection (c), effective upon the expiration of such 15-day period, such authority shall be limited to $700,000,000,000 outstanding at any one time. (emphasis added)

Doesn’t that mean this bill has no real spending limit? It only has a limit of $700 billion outstanding at any one time.

flyfisher on October 1, 2008 at 3:49 PM

Everyone has called these tax extenders “earmarks” forever, and now suddenly everybody is redefining it so that McCain doesn’t have to live up to his word to vote against earmarks since they aren’t “spending” earmarks.

What a complete joke.

Dave Rywall on October 1, 2008 at 3:59 PM

flyfisher on October 1, 2008 at 3:49 PM

It means the maximum value of the TARPs portfolio will be capped at 700B. Upon selling a certain value of securities, the funds derived could then be used to buy securities from other sources. Think of TARP as a giant hedge fund.

phronesis on October 1, 2008 at 3:59 PM

hachiban on October 1, 2008 at 3:16 PM

Well said, Number 8

LimeyGeek on October 1, 2008 at 4:00 PM

He’s just a guy with a different insider’s take

Just because he [claims to] work ‘in the biz’, doesn’t actually imply he knows a damn thing. He’s just played the game, big deal. Like it’s hard, or something. Pffft.

His commentary on the FM/FM debacle is his real resume.

FAIL

LimeyGeek on October 1, 2008 at 4:04 PM

Small government, enumerated powers conservatives are getting the same treatment here (suck it up and take one for the party) that the anti-war left got in 2002. Unless McCain can find his conservative small government, enumerated powers, Lincoln Dinner roots in the next 35 days, this will be a major bloodbath for Republicans.

Of course, house Republicans could decide to spit with McCain and avoid the disaster. Americans love divided government and would welcome anyone who would voice even the slightest of concern over spending nearly a trillion dollars on a mortgage lender bailout.

Angry Dumbo on October 1, 2008 at 4:07 PM

No reform, no bailout.

Angry Dumbo on October 1, 2008 at 4:07 PM

This morning very early, I tried to call both my Senators to voice my opposition to the bailout. Both email boxes were full. Anybody else find that? I ended up sending emails to each and I have also sent faxes to each just to be sure the message is communicated.

Since their voice mail boxes were full, I suspected outside efforts to fill their voice mail boxes with calls expressing pro bailout opinions. Either that or there happened to be tons of calls before 7am eastern.

Anyway, if you tried to call and couldn’t get through, go to senate.gov and get their fax number and fax them your desires just to be sure they are heard.

CC

CapedConservative on October 1, 2008 at 4:34 PM

Wooden arrows for children??
Arm the singing kids for Obama with wooden arrows, the new playground toy to eliminate any discord from opponents.

maverick muse on October 1, 2008 at 4:44 PM

CapedConservative

When the e-mail server gets overloaded, I used my cell phone to call the local Congressional office. Anticipating the problem, I emailed last night and early this morning Senators. Cornyn’s webpage did not want to open this morning, but Hutchison’s did right away.

maverick muse on October 1, 2008 at 4:47 PM

Doesn’t that mean this bill has no real spending limit? It only has a limit of $700 billion outstanding at any one time.

flyfisher

MERCY!!!

maverick muse on October 1, 2008 at 4:51 PM

You know the words ear and marks don’t sound to bad when they are seperate but when you put them togeather ‘EARMARKS’ man does it sound, well it sounds like “give, give, give and give more”. Is earmarks kinda like pigears? Darn I am feed up with all of it.

foxone on October 1, 2008 at 4:51 PM

I contacted my Senators some time ago and ask for action on this. I know some people have a philosophical problem with all this, but when I hear The Heritage Foundation, Forbes, and even Kemp are all supporting action, I can not help but feel it is needed.

There are more tax breaks for middle class too, and that might help.

But I think it is just bizarre for people to treat this like it is some big conspiracy to rip them off. This is real. If we don’t do anything there will be consequences for a lot of people, not just Wall Street firms.

Terrye on October 1, 2008 at 4:54 PM

Doesn’t that mean this bill has no real spending limit? It only has a limit of $700 billion outstanding at any one time.

flyfisher

Yes, so the FED could buy 300 bill worth for 700 bill… sell it for 500… buy ANOTHER 700 bill… sell if for 500…

Rinse… repeat… with no real oversight.

Romeo13 on October 1, 2008 at 4:56 PM

I hope that McCain’s “Yea,” does not cost him the election.
We must defeat Obama.

mindhacker on October 1, 2008 at 5:00 PM

My commentary on the FM/FM debacle does speak for itself and apparently where it “fails” is that it differs from you. Each and every point anyone made to me was countered and no one challenged any of my counters. As I said, FM/FM weren’t involved in underwriting or securitizing the bad sub prime loans, however they were allowed to buy billions of them in the open market. That is shameful and that is something that Barney Frank et al need to be held accountable for.

They loosened their own restrictions to respond to losing market share. That is what happened. None of this has been challenged because there is no talking point to respond to this, and that’s because in my argument I don’t have to rely on talking points or looking things up on the internent.

mike volpe on October 1, 2008 at 5:03 PM

Tomato, tomato… it’s the same thing to Joe Taxpayer.

madmonkphotog on October 1, 2008 at 5:05 PM

But I think it is just bizarre for people to treat this like it is some big conspiracy to rip them off. This is real. If we don’t do anything there will be consequences for a lot of people, not just Wall Street firms.

Terrye on October 1, 2008 at 4:54 PM

Or… as Senator Obama his own self just admitted on the Senate floor…. maybe not. To say “there will be” is an absolute statement of fact and that is just not true. Saying “there may be” is completely different and EVERY SINGLE PERSON WHEN PRESSED says MAY not WILL.

CC

CapedConservative on October 1, 2008 at 5:13 PM

Once the bailout passes the argument will be lost. Those who blame unrestrained free markets will have victory. No one will listen to the “why” from us blaming government intervention into the mortgage industry in the first place. Barney Frank and Chris Dodd and their ideology will be shielded from their rightful scrutiny. Weather it ends up good or bad, the notion that a “Washington that works together” is needed to take care of us, will be cemented in the American psyche even further.

Norbitz on October 1, 2008 at 5:15 PM

Norbitz on October 1, 2008 at 5:15 PM

I actually saw some moron referencing Warren Buffet when arguing in favor of this thing…. Warren Buffet… gee, what will happen to the $5 billion he just put in Goldman Sachs when they pass this bill? Smart man. He could see the writing on the wall just like we see it, only he had a chance to make a quick billion or so on it.

CC

CapedConservative on October 1, 2008 at 5:18 PM

Here is the most troubling aspect of this bailout. It is in effect history repeating itself. There is a liquidity crisis so the government will create artificial liquidity. That’s exactly what Greenspan did in 2002-2003 when he dropped the Fed Funds Rate as low as he did. He created an explosion of bank borrowing because there was literally almost no interest to borrow. that created artificial liquidity and all this artificial liquidity went straight into real estate and the ball began rolling on this crisis.

Now, the federal government will create about $700 billion in artificial liquidity and that artificial liquidity will also find its way into lending. It likely won’t be residential mortgages because banks have learned their lesson there. So, maybe it will be commercial which hasn’t been hit at all YET. Commercial lending is ingenuous because the bank won’t allow someone to borrow unless their monthly cash flows are about 120% of monthly expenses. Once money floods into commercial there will be more money than loans. So, they will create new loans. Soon one will only need 110% or even less, or maybe the standard will be removed entirely. That’s basically what happened in this mortgage crisis. Banks had more money than they had loans, and soon, new loans were created and ultimately that created a monster.

Maybe it won’t be commercial but it will be small business loans. Then, maybe banks will soon no longer require a business plan or maybe they will just loosen their restrictions on the balance sheet.

Think it can’t happen, well a few years ago it would have been crazy to qualify for a loan without showing tax returns and banks stoppped requiring that as well.

mike volpe on October 1, 2008 at 5:23 PM

mike volpe on October 1, 2008 at 5:23 PM

I think that is a legitimate concern, but I fear the alternative far more. I wonder if Bernanke thinks this plan poses less danger than a 50bps or 25bps Fed funds rate. This seems to target the things you intend to inflate more precisely. Also credit market failure is a bigger liquidity drain than a stock market bust, so you have more liquidity being drained from the system this time.

phronesis on October 1, 2008 at 5:33 PM

…As I said, FM/FM weren’t involved in underwriting or securitizing the bad sub prime loans, however they were allowed to buy billions of them in the open market….
mike volpe on October 1, 2008 at 5:03 PM

Self-contradiction, thy name is mike volpe.

Hollowpoint on October 1, 2008 at 5:37 PM

Mary had a little lamb
It’s feet were black with soot
And into Mary’s nice clean lap
His sooty foot he put!

A poem suitable for Congress critters!

Pat in NC on October 1, 2008 at 5:37 PM

As I said, FM/FM weren’t involved in underwriting or securitizing the bad sub prime loans, however they were allowed to buy billions of them in the open market. That is shameful and that is something that Barney Frank et al need to be held accountable for.

True enough Mike, however therein lies the confusion in this general conversation. A distinction without a difference so to speak.

What Fannie and Freddie did in effect is establish a demand floor. They basically hit the ask on everything the bundlers put in front of them. They dominated the market. Once that insatiable demand was established it allowed ethically challenged brokers to write “liar” loans with abandon knowing that Fannie and Freddie would buy them.

True, Fannie and Freddie did not originate the loans but they bought them. As I said a distinction without a difference.

Good nuts and bolts summary of the day to day machinations during the go go days on your web site.

patrick neid on October 1, 2008 at 5:39 PM

The sixty four thousand dollar question is whether or not we are really facing a liquidity crisis. I don’t know. I know that the problem loans are bad really bad and I also know that a lot of these banks and financial institutions bought these bonds on heavy margin. I still firmly believe that the Republican plan can do enough to stop a credit freeze.

The bottom line is this. There should be significant credit tightening. Just about every financial institution went all in on really bad investments. They shouldn’t have money to lend. Trying to fix that situation artificially, in my opinion, creates a much bigger monster.

Frankly, criticism of Greenspan at the time was rather muted because then people said it was necessary because our credit markets were in a state of crisis. It seems we allow drastic action during times of crisis.

I for one will NOT be a fair weather capitalist and free market thinker. A speculative market got us into this mess, and I believe free market solutions are the best way out.

mike volpe on October 1, 2008 at 5:40 PM

Again FWIW, a liberterian view of the crisis.

Where it addresses FM/FM it sounds like volpe with some “give money to people that can’t afford it” red meat.

rockhead on October 1, 2008 at 5:40 PM

I stand by my statement here and elsewhere about tax earmarks or extenders…I DON’T CARE WHAT THEY ARE.

If we are in the crisis we are in, there is no time or energy to consider ANYTHING related to “wooden arrows for children” (which is an issue beneath the ken of the highest legislative body of the land, anyway) or similar issues.

Fix the “crisis” or stop acting as if there is one.

Can’t you clowns focus on one thing at a time, prioritize your efforts on bigger issues?

Oopps. Think I already have my answer…

Harry Schell on October 1, 2008 at 5:42 PM

*puts on tin foil hat*

I have never been one for conspiracies, but this entire thing stinks to high heaven, even to a devout skeptic like me. Anyone who looks at the market and the news cycle can see that the entire doomsday scenario is manufactured BS. Couple that will the complete blackout of all Republican responses and the MSM’s insistence in playing up the “it’s the Booosh/ McCain Republican’s fault” angle, in spite of nearly a decades worth of evidence to the contrary, Pelosi’s first-in-history support of a White House plan, adoption it as her own (while a week earlier, all she and Reid could talk about was adjournment by last Friday and Reid was running in circles babbling “no one knows what to do”)and Pelosi’s absolute failure to do anything to ensure the bill’s passage with her caucus while doing everything possible to lay blame and piss of the Republicans…

This is nothing by a manufactured crisis build on long-standing corruption and ignorance. One look at the polls and you see the motivation behind it. If were not for the “sky falling”, McCain would be blowing Obama off the map by now; like the irrelevant, worthless piece of shit that he is.

Damiano on October 1, 2008 at 1:05 PM

I’m not one for conspiracies, but you are right, something stinks. According to Rep. Brad Sherman on Larry Kudlow last night, this whole thing was demanded by foreign investors.

Rep. Sherman said in part:

The bill is very clear. Assets now held in China and London can be sold to US entities on Monday and then sold to the Treasury on Tuesday. Paulson has made it clear he will recommend a veto of any bill that contained a clear provision that said if Americans did not own the asset on September 20th that it can’t be sold to the Treasury.

Hundreds of billions of dollars are going to bail out foreign investors. They know it, they demanded it and the bill has been carefully written to make sure that can happen.

If this is true, I think it’s an outrage and we deserve to be told the truth.

flyfisher on October 1, 2008 at 1:18 PM

//with tinfoil hat securely in place//
Remember how George Soros made his billions betting on the devaluation of (or “shorting”) the British pound? Are his fingerprints all over this? On Nov. 5 will the lefties be saying, “George, you magnificent bastard
?”?

NightmareOnKStreet on October 1, 2008 at 5:49 PM

mike volpe on October 1, 2008 at 5:40 PM

http://en.wikipedia.org/wiki/Fractional-reserve_banking

If you look at the charts near the bottom of the page, you’ll see the real problem.

There is less than a trillion Dollars that the Actual FED made, another trillion held in Accounts, and then 8 to 9 Trillion dollars in fractional lending, or bank created money.

MBS were used as assets for Reserves… but when they both lost worth, and then could not be realisticly priced due to Mark to Market, the system froze because it had no capital on which to base the pyramid. So, companies had to write down both the MBS Reserves price, and all the Fractional money based on them…

Romeo13 on October 1, 2008 at 5:56 PM

I love the way they quibble with Ed about “earmarks” vs “tax breaks”: thus missing the point entirely!!!!

How about if we purge both “earmarks” and “tax breaks” and other mischief which might have a different name, and demand a corruption-free, one-subject bill with rigorous accountability and monthly financial reporting over the Internet???

landlines on October 1, 2008 at 5:58 PM

Instead of the term “earmark” the correct term would be pork. What I consider “pork” is any spending in a bill that does not have to do directly with what the bill is suppose to be for. As an example is every Iraq spending bill has been packed with 1/3 of pork that has nothing to do with the War in Iraq.

JeffinSac on October 1, 2008 at 6:09 PM

Marked to market and the manner in which these weakened MBS’ had to be accounted definitely caused a massive problem for everyone holding them once it went into effect. I think that repealing marked to market and instead applying a three year rolling average, like what Newt suggests, will go along way to relieve this crisis.

mike volpe on October 1, 2008 at 6:12 PM

BTW, what is so “mavericky” about going along with a bi-partisan, bury the bodies til we are re-elected, 700 billion dollar wet kiss to the Wall Street investment banking crowd? If Senator McCain was truly the maverick he says he is he wouldn’t be so chummy with both sides of the aisle. Senator McCain, time to bust some bi-partisan balls and start naming names. You know well where the bodies are buried in this Fannie/Freddy/AIG mess, time to make good use of the experience you have. If your experience is an asset, prove it.

Angry Dumbo on October 1, 2008 at 6:13 PM

The Dow ended down 19.59 today after a near 500 pt. rally yesterday. So, the long and short is that it is exactly where it should be.

Let’s set aside the doomsday talk and Armageddon scenarios and face facts. Real estate and financial sectors have been full of crap paper and hot air for nearly a decade. It HAD to burst. Unload the crap and you end up with a stable market that is down slightly.

Now, all that has to happen is to let the strong, well managed firms pick up the pieces at bargain basement prices. NO ONE is going to let cheap real estate and halfway decent paper sit. Too much money to be made there and it’s just waiting for someone to pick it up.

The market numbers over the past 2 weeks have been reacting to Washington, not reality. If Washington simply adjourns without doing squat, the market will stabilize itself and be ripe for a well planned, surgical stimulus after the elections are over. Get the politics out of the way first, then come back with a rational plan to get rid of some of the toxic paper and help the Average Joes and Janes that were legitimately screwed.

It will cost less than 1/3 to do it this way and have a massively positive impact. Do it as loans to the players that pick up the pieces and it’s a win-win of exponential proportions.

Somebody get Reid and Pelosi back on their planes home and stuff a ball gag in Paulson’s yap. Meanwhile, start the investigations into the Democrats dealings with plenty of media leaks and we’ll have ourselves a nice election and Pelosi and Reid will not have an in-session bully pulpit.

The sooner they adjourn, the better.

Damiano on October 1, 2008 at 6:18 PM

The market numbers over the past 2 weeks have been reacting to Washington, not reality. If Washington simply adjourns without doing squat, the market will stabilize itself and be ripe for a well planned, surgical stimulus after the elections are over.

Damiano on October 1, 2008 at 6:18 PM

YES

RushBaby on October 1, 2008 at 6:25 PM

The Dow ended down 19.59 today after a near 500 pt. rally yesterday. So, the long and short is that it is exactly where it should be.

Let’s set aside the doomsday talk and Armageddon scenarios and face facts. Real estate and financial sectors have been full of crap paper and hot air for nearly a decade. It HAD to burst. Unload the crap and you end up with a stable market that is down slightly.

Now, all that has to happen is to let the strong, well managed firms pick up the pieces at bargain basement prices. NO ONE is going to let cheap real estate and halfway decent paper sit. Too much money to be made there and it’s just waiting for someone to pick it up.

The market numbers over the past 2 weeks have been reacting to Washington, not reality. If Washington simply adjourns without doing squat, the market will stabilize itself and be ripe for a well planned, surgical stimulus after the elections are over. Get the politics out of the way first, then come back with a rational plan to get rid of some of the toxic paper and help the Average Joes and Janes that were legitimately screwed.

It will cost less than 1/3 to do it this way and have a massively positive impact. Do it as loans to the players that pick up the pieces and it’s a win-win of exponential proportions.

Somebody get Reid and Pelosi back on their planes home and stuff a ball gag in Paulson’s yap. Meanwhile, start the investigations into the Democrats dealings with plenty of media leaks and we’ll have ourselves a nice election and Pelosi and Reid will not have an in-session bully pulpit.

The sooner they adjourn, the better.

Damiano on October 1, 2008 at 6:18 PM

Of all of the people that have said anything about this today, you sir, make the most sense of any of them.

leetpriest on October 1, 2008 at 6:27 PM

That s**t is 451 pages long. There is only one thing that can be done with it

Ropera on October 1, 2008 at 6:48 PM

The Dow ended down 19.59 today after a near 500 pt. rally yesterday. So, the long and short is that it is exactly where it should be.

Damiano on October 1, 2008 at 6:18 PM

Congressional action is baked into the price at today’s close. If congress signaled that it wasn’t going to act the market would probably drop another 1,000 points.

That the market hasn’t fallen further can be credited in part to the actions of Bernanke, Paulson & Bair. There is a credit contraction that is in the process of creating a recession. Paulson, at least, is trying to lessen the depth and duration. There are a million ways the gov’t can screw this up, but the alternative is likely worse for the country.

If you want a view of what 2009 is going to be economically look at how hard hit the auto industry has been hit so far. People generally don’t buy cars without credit. What is happening with autos will happen with other consumer spending.

dedalus on October 1, 2008 at 7:08 PM

Could this be put down as a Republican attempt to make this bill fail in the House, because of the Democrats?

As much as it might have been Pelosi’s strategering to make sure the intial House bill failed because of it’s lack of everything everybody wanted.

Now it seems that the bill on the Senate floor has everything the Republicans would like (no matter how much Blunt is “disappointed,” those constituents sure aren’t), but not enough to please Democrats.

PresidenToor on October 1, 2008 at 7:30 PM

Wool Research?

New Tax Breaks for wool research? Since when is research taxed anyway?

Why can’t these idiots EVER write an honest, straightforward bill without loading it up with a lot of completely unrelated nonsense.

Scroomall.

LegendHasIt on October 1, 2008 at 7:43 PM

If it walks like pork, and it smells like pork …

corona on October 1, 2008 at 7:45 PM

Did anyone else besides me find the word “Katrina” in the bill at least a dozen times? What a scam. VOTE NO ON THIS ONE, TOO! NOT. WITH. MY. TAX. DOLLARS!

MsUnderestimated on October 1, 2008 at 7:49 PM

Yup, just more smoke and mirrors bullshit. Katrina nonsense, little wooden arrows. They ought to shove a load of little wooden arrows up these Senators’ wooly tails.

Jaibones on October 1, 2008 at 8:44 PM

A protest on Wall Street?

http://www.liveleak.com/view?i=096_1222744802

capitalist piglet on October 1, 2008 at 9:15 PM

A protest on Wall Street?

http://www.liveleak.com/view?i=096_1222744802

capitalist piglet on October 1, 2008 at 9:15 PM

At first glance it looks like the usual suspects to me – hippies, freaks, code pinkos - protesting capitalism and deoderant.

dugan on October 1, 2008 at 9:20 PM

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