Bailout Package Almost Finished?

Someone has to act like adults. Can't expect the Repubs to acknowledge their mess

Is this bailout going to stabilize property values?

No. That's not even its intent. Nothing can prevent housing prices from eventually reverting to mean.

Property values are stable when the average house buyer can actually afford the average house, without a premium that depends on the expectation of price increase. Where I live, this means a further decline of 50%.

I hate this bill, but I also think it is absolutely necessary to pass. And yes, the stock warrants is the only feature that makes it acceptable.

But my biggest concern is how it will be funded and the impact it will have on the dollar. This plan is not a magic bullet that will instantly cure the economy. It will be a long hard road ahead and America will be a poorer, weaker place because of this mess probably for the rest of our lives.

I say we pay for it by selling China the naming rights to our country.

Instead of "USA" we will be "Xing Xung Bi" or something like that.

In exchange for $700B.

I would ideally prefer to see the executive compensation stuff cut out (speaking as someone without the remotest stake in that decision). If restraints are going to be placed on compensation, they should be industry-wide; you don't want to drive talent away from the very firms that need it most. But law reform is messy, and I can imagine that a lot of Congress-persons on the edge might need to be able to say "We gave 'em the money, but we sure enough kicked 'em in the ass hard enough to remember for awhile". So it goes.

I don't expect to see much Congressional damage from this: the Reps who are vulnerable to challengers won't vote for it, and those who aren't, will.

That gives it plenty of votes to pass.

If anything it hurts the Republlicans more, simply because they have more vulnerable seats in both the House and the Senate.

This should give us a boost in Kentucky.

And I presume McCain and Obama will both vote for it, so no change there.

It's almost frightening how little accountability for this there is - this time around, at least.

This is the kindest, bravest, warmest, most wonderful congressional bill I've ever known in my life.

do you even read what you're posting? "an opportunity ... to take an equity share". as in, if you don't want to, no big. did Paulson ASK for this in the first place? no. so if we leave it up to him, do you really think it's going to happen?

what are you going to say when they come back in October and say Whoops, we need another $500bn? Oh and whoops yeah the banks are still failing.

it will be Iraq all over again - the only "serious" people will be the people who backed the destined-to-fail plan. so i guess, good for you to get in line now.

Oh and whoops yeah the banks are still failing.
Yes, that will almost certainly happen.

It will be Iraq all over again.
This is Iraq, in effect. The nation has been in denial, and it's coming home to roost. Whether the landing is soft or hard, this is going to hurt badly, and (for those of us who haven't been directly touched by the wars of the day, at least) hurt much more than watching a disaster unfold in 15-minute segments from 6,000 miles away.

Looks like we can't complain this one away, unfortunately. There aren't any attractive alternatives. As someone said here a few days ago, I think, "there are no do-overs".

The bailout solves nothing. We are just kicking the can down the road.

Kevin, I don't say no, I say hell no. There used to be a time in this country when this level of foreseeable incompetence was punished, i.e., the Captain of the Titantic went down with the ship. Today we're being driven to panic by a bunch of Wall Streeters who threaten to hold their breath until their customers turn blue if the taxpayer doesn't bail them out. Hogwash -- there are still trillions of dollars floating around looking for a place to be put to use. Maybe the nameplates on the doors might change, but profitable businesses will still be able to finance their operations after a week or two of petulance if this bum's rush is voted down. There are no aluminum tubes that have to be destroyed tomorrow, and we won't be greeted as liberators if we pass this. Why are you so easily rolled?

Let me amend this - I might grudgingly abstain if executive compensation were really reined in, not cut back like Donald Trump's bankruptcy allowance of $500,000 a month. I like George Will's idea of a GS-15 salary max for anyone at the public trough. I'd also demand an 85% punitive tax on all golden parachutes as well as on all perks and compensation over $1 million a year on all companies, not just the clowns involved in this bailout.

Read this and weep, especially the Marc Faber comment below. He's been right about everything financial for years. This financial collapse affects the whole world and will not be repaired for years to come. Keep you money safe.

September 26 - Bloomberg (Jeremy Naylor and Ben Sills): "Marc Faber, managing director of Marc Faber Ltd. in Hong Kong, said the U.S. government's rescue package for the financial system may require as much as $5 trillion, seven times the amount Treasury Secretary Henry Paulson has requested."

September 24 - Bloomberg (Daniel Kruger and Kyoungwha Kim): "Investors outside the U.S., who own more than half of all Treasuries outstanding, say the government's $700 billion plan to revive the banking system will diminish the appeal of the nation's bonds. Treasury Secretary Henry Paulson's proposal... would drive the country's debt to more than 70% of GDP. The last time taxpayers owed as much was in 1954, when the U.S. was paying down costs from World War II. 'The image of U.S. Treasuries as a safe haven has been tainted by the ongoing financial debacle,' said Kwag Dae Hwan, head of global investment... with South Korea's $220 billion National Pension Fund... 'A big question mark hangs over whether the U.S. can deal with an unprecedented amount of debt. That is unnerving all the investors, including me.'"

September 26 - Dow Jones (Anusha Shrivastava): "The commercial paper market, where companies go for short-term funding needs, is showing renewed signs of serious dysfunction on Friday morning on the stalled government bailout of the financial system... If companies are unable to find financing in this market to meet payrolls and other day-to-day operations, they will have to look at other options like drawing on their bank lines or raising money in the corporate bond market."

September 23 - Wall Street Journal (Elizabeth Williamson): "Automobile-finance companies lead a growing list of liquidity-starved industries trying to get in on the huge government rescue plan targeted originally at cleaning up bad mortgage bets. As Congress crafts a $700 billion federal government plan to buy up financial companies' troubled assets, auto-finance-company lobbyists are pressing for specific language including them in the plan, according to a lobbyist for one of the Big Three auto makers. Other businesses, such as student and credit-card lenders, also could eventually access the program."

September 23 - Wall Street Journal (John Hechinger): "About a quarter of the nation's banks lost a combined $10 billion to $15 billion in the wake of the federal government's takeover of mortgage giants Fannie Mae and Freddie Mac... In the survey, the American Bankers Association reported that 27% of the nation's 8500 banks held preferred shares in Fannie and Freddie in their investment portfolios. The shares are expected to be worthless. The survey found that 85% of the affected institutions were community banks -- those with less than $1 billion in assets... Until recently, the shares were considered rock-solid investments... It says the losses are galling to small bankers because they took pains to avoid the exotic loans and loose underwriting standards that have hobbled Wall Street titans and some huge banks."

September 22 - Bloomberg (Bei Hu): "Treasury Secretary Henry Paulson's $700 billion plan to buy devalued assets from financial companies is 'a joke' because it doesn't go far enough to calm markets, said Kenichi Ohmae, president of Business Breakthrough Inc. Ohmae, nicknamed 'Mr. Strategy' during his 23 years as a McKinsey & Co. partner, called for a $5 trillion 'international facility' to be made available to financial institutions. The system could be modeled on one used by Sweden during its banking crisis in the early 1990s, he said. 'This is a liquidity crisis. The liquidity has to be so big that people won't get panicky.'"

September 22 - Bloomberg (Haris Anwar): "Banks and companies in emerging markets may struggle to refinance $111 billion of bonds maturing over the next year because of the credit crisis, the Financial Times reported, citing ING Wholesale Banking. 'Many corporates and banks in the emerging markets are highly levered without cash to fall back on,' said David Spegel, global head of emerging markets strategy at ING... 'These will struggle should they need to raise money in the markets.'"

September 26 - Wall Street Journal (Andrea Thomas): "The Wall Street financial crisis will reconfigure the world economy and the U.S. will fade as the world's dominant economic force, German Finance Minister Peer Steinbruck said in German parliament Thursday. 'The U.S. will lose its status as the superpower of the global financial system, not abruptly but it will erode,' Mr. Steinbruck said. 'The global financial system will become more multipolar.'"

September 24 - Bloomberg (Garfield Reynolds): "Treasury Secretary Hank Paulson's $700 billion proposal to bail out the U.S. financial system may send the dollar to record lows by swelling the budget deficit. Paulson's proposal to buy devalued securities from banks would drive government debt above 70% of gross domestic product, the most since 1954. The annual deficit may balloon to as much as $1 trillion..."

September 26 - Bloomberg (Judy Chen and Belinda Cao): "China's banks are limiting foreign- exchange transactions with U.S. and European financial companies on concern tighter global credit markets will cause more failures. Domestic banks are cutting trading with international firms in the interbank market, according to Zhuang Zhiqiang, a trader at Xiamen International Bank Co., which is partially owned by the Asian Development Bank. The move aims to control risks after the bankruptcy of Lehman Brothers Holdings Inc. stunned domestic investors, said Zhao Qingming, an analyst in Beijing at China Construction Bank Corp., the nation's second-largest lender."

September 23 - Bloomberg (Luo Jun): "Chinese banks face worsening asset quality and slower profit growth as the nation's tight monetary environment and a worsening global credit crisis cause more borrowers to default, Fitch Ratings said. The nation's 14 publicly traded banks... have already shown signs of rising borrower defaults and tighter liquidity, the ratings agency said. 'Chinese banks appear to be approaching their first real test of resilience,' ... analysts Charlene Chu and Chunling Wen wrote... 'Increased vigilance is warranted as Chinese banks take on the growing challenges ahead.'"

September 22 - Wall Street Journal (Kelly Greene): "Nancy Davis, a 59-year-old senior marketing manager for a law firm in San Diego, had hoped to ease into her retirement after her son finishes college in two years. But 'I may be 70 before I retire at this point,' she said Friday, after watching the markets take their toll on her 401(k). 'It's very unnerving.' For millions of Americans approaching retirement, events of recent weeks are delivering a clear message: Not so fast. With nest eggs shrinking, housing prices still falling and anxieties about their financial future growing, the oldest members of the baby-boom generation are putting the brakes on plans to leave the office. 'We'll see more and more people postpone' their retirement dates, says Helga Cuthbert, a certified financial planner... 'Their expectations about the future and the kinds of returns they would get were simply unrealistic.'"

September 22 - Wall Street Journal (Vanessa Fuhrmans): "As the credit crunch threatens to throw the economy into a deep slump, Americans are already cutting back on health care, a sector once thought to be invulnerable to recession. Spending on everything from doctors' appointments to preventive tests to prescription drugs is under pressure. The number of prescriptions filled in the U.S. fell 0.5% in the first quarter and a steeper 1.97% in the second, compared with the same periods in 2007 -- the first negative quarters in at least a decade... Despite an aging and growing U.S. population, the number of physician office visits also has been declining since the end of 2006... In a survey by the National Association of Insurance Commissioners last month, 22% of 686 consumers said that economy-related woes were causing them to go to the doctor less often. About 11% said they've scaled back on prescription drugs to save money."

September 23 - Bloomberg (Chris Burritt): "McDonald's Corp... told some U.S. franchisees to seek other ways to finance store improvements after Bank of America Corp. declined to increase lending. Store owners have exhausted financing used to pay for upgrades and equipment to make lattes and espressos, and Bank of America won't provide more money as it works on the planned purchase of Merrill Lynch & Co... Banks have tightened credit after Lehman Brothers... bankruptcy filing and the government takeover of Fannie Mae and Freddie Mac... Bank of America's reluctance to increase the loan may show that even well-known brands such as McDonald's face difficulties financing expansion."

September 22 - Bloomberg (Abigail Moses): "Collateralized debt obligations backed by mortgages will have to be unwound to qualify for the Federal Reserve-backed plan to accept troubled assets from banks, according to Royal Bank of Scotland Group Plc analysts. 'The only way that CDO investors can take advantage is to unwind the entire structure and put the underlying assets to the Fed,' ...analysts led by Gregorios Venizelos wrote... 'The Fed plan makes liquidation potentially the best option.'"

September 24 - Bloomberg (Chris Peterson): "U.S. billionaire T. Boone Pickens' hedge funds lost about $1 billion so far this year, with the investor admitting the slump in energy had blindsided him, the Wall Street Journal reported. One of his funds that focused on energy stocks lost almost 30% in value in August, while a smaller fund based on commodities was down 84%..."

September 23 - Bloomberg (Matthew Benjamin): "Treasury Secretary Henry Paulson's $700 billion proposal to stabilize the banking system may push the national debt to the highest level since 1954, threatening an erosion of foreign appetite for U.S. bonds. The plan, which asks Congress for funds to buy devalued securities from financial institutions, would drive the debt above 70% of gross domestic product and the annual budget gap to an all-time high, possibly exceeding $1 trillion next year, economists estimated. 'This is sobering, absolutely sobering, even to someone who doesn't drink,' said Stan Collender, a former analyst for the House and Senate budget committees..."

September 23 - Bloomberg (Henry Goldman): "New York City agencies must cut budgets by 2.5% for the remainder of the fiscal year and 5% in the 12-month period beginning July 1, the budget office said. The directive... aims to save $500 million through June 30, 2009, and $1 billion in the following fiscal year. The city, dependent upon Wall Street for as much as 9% of its revenue, projected a $2.3 billion budget gap in the 2010 fiscal year... 'It has become increasingly clear that our forecast future deficits will not be cured, as has been the case for the last few years, by an improvement in that forecast and higher than expected revenues.'"

September 25 - Bloomberg (Dan Levy): "California home prices tumbled a record 41% in August from a year earlier as foreclosure sales pushed down values in the most populous U.S. state. The median price... fell to $350,140, the lowest since March 2003... More than 101,000 California households received a default notice, were warned of a pending auction or foreclosed on last month, RealtyTrac... said..."

This sounds good

No. This does NOT sound good. It's a stop-gap "solution" to the crisis created by the very same people who caused the crisis. Something has to be done to prevent the crisis from getting worse, but once that is done, it is time to rebuild the economy and focus it on workers and families instead of bankers and executives.

Something has to be done to prevent the worst results of three decades of the Reagan Revolution. But it is time to be angry that we have to clean up the mess created by the exponents of the Reagan Revolution. It is NOT GOOD that the conservative movement and the application of the clearly unworkable unregulated financial economy and the replacement of real workers with bankers and financial lawyers has brought the inevitable financial collapse that the economists of the 1930's would have predicted.

My father was born in 1904, and he repeatedly warned me of the dangers of "trickle down economics." He was right, and the idiot Wall Street Bankers (like Henry Paulson) have once again brought our economy to the point where is has frozen up because the bankers themselves don't trust the other bankers to pay back loans made to them.

Last week I got another credit card solicitation from WaMu. The bankers will still loan ME money. But they won't loan EACH OTHER money! They don't trust the other bankers.

Every "solution" to the current problems has to include a recognition that the problem grew out of the application of the idiocies of the Reagan Revolution. Paulson/Bush's solution is to throw vast sums of money at the problem, make some bankers even richer, and do damned little to change the focus of our economy from bankers and rich "investors" to workers and their families.

The disaster that the Reagan Revolution has delivered to the American economy has to be dealt with, but nothing about this disaster or the stopgap measures to deal with it are "good." So far the House Republicans still don't understand that they are the source of much of the problem, at least the political aspects. But the Paulson Proposal and its changes aren't much better.

g. polwell is exactly right. this bill is total crap, but something has to be done right now to stave off the worst results of the crisis the conservative movement has inflicted on America. But until the economic crap spewed by the conservatives is rooted out of America's political and economic system, we are going to continue to lurch from one disaster to the next.

Something has to be done right now to stave off disaster, but that is not a "good" thing. The disaster should not have been visited on America in the first place.

It is time to get angry and to banish the conservatives and the Libertarians from government, to properly regulate banking and to begin to rebuild the real economy with engineers, trained and well-paid American-born technicians, and to support the recreation of a middle class of productive workers that the overpaid executives dislike working with.

Maybe by the end of this bailout (and this won't end the current problems) we can have a simple constitutional amendment:

"A company, corporation, or any other business or contractual vehicle is not a person. Never was, never will be. They do not have rights as persons under this Constitution."

George Bush: "Apres moi, le deluge."

If these guys are not listening to Roubini and Galbraith they better have plans b, c etc. ready, 'cause they're gonna need them.

Something's rotten in the state of Denmark. What are the real motives? Self-serving, no doubt, but at least global markets will be reassured that our investment banks are backed by the full faith and credit of the drunken sailors and wastrels in Washington.