Close Window Radical bailout plan has a jawdropping price tag Friday, September 19, 2008 WASHINGTON - Struggling to stave off financial catastrophe, the Bush administration on Friday laid out a radical bailout plan with a jawdropping price tag - a takeover of a half-trillion dollars or more in worthless mortgages and other bad debt held by tottering institutions.
Relieved investors sent stocks soaring on Wall Street and around the globe. The Dow-Jones industrials average rose 368 points after surging 410 points the day before on rumors the federal action was afoot.
A grim-faced President Bush acknowledged risks to taxpayers in what would be the most sweeping government intervention to rescue failing financial institutions since the Great Depression. But he declared, "The risk of not acting would be far higher."
The administration is asking Congress for far-reaching new powers to take over troubled mortgages from banks and other companies, including purchasing sour mortgage-backed securities. Administration officials and congressional leaders are to work out details over the weekend.
Congressional officials said they expected a request for legal authority to buy up the bad loans, at a cost in excess of $500 billion to the government. Democrats were discussing whether to try to attach middle class assistance to the legislation, despite a request from Bush to avoid adding controversial items that could delay action. An expansion of jobless benefits was one possibility.
In other major steps, the Treasury Department and Federal Reserve moved to give money-market mutual funds the same kind of federal protection, at least temporarily, that now applies to savings and checking accounts and certificates of deposit at banks. Money-market accounts sold through retail banks are already FDIC insured.
The spreading global selling panic had started to threaten some money-market funds, usually thought of as rock-solid investments. Administration officials feared a run on these funds, held by millions of Americans.
"Every American should know that the federal government continues to enforce laws and regulations protecting your money," Bush said at the White House. The 75-year-old Federal Deposit Insurance Corporation now insures savings and checking accounts and certificates of deposit up to $100,000.
Separately, the Securities and Exchange Commission acted to block short-selling in financial securities. That is a trading method that bets the value of stocks will go down. It has been blamed for accelerating the plunge in stock prices of banks and other financial institutions.
"This is a pivotal moment for America's economy," Bush said. "In our nation's history, there have been moments that require us to come together across party lines to address major challenges. This is such a moment."
Congressional leaders of both parties welcomed the administration's bold moves, after a series of ad hoc rescues.
The talk on the presidential campaign trail, barely six weeks before the election, was of bipartisanship, too.
Democrat Barack Obama said it was critical that leaders in both parties work in concert. "Truly, we are all in this together," he said.
GOP presidential nominee John McCain said leaders should put aside partisan differences and "any action should be designed to keep people in their homes and safeguard the life savings of all Americans."
The federal government already has pledged more than $600 billion in the past year to bail out, or help bail out, some of the biggest names in American finance. That includes the rescue of investment bank Bear Stearns in March, the takeover of mortgage giants Fannie Mae and Freddie Mac earlier this month and the takeover of the world's largest insurance company, American International Group, just this week.
But the contagion continued to spread, bringing political consensus that drastic and comprehensive federal action was needed.
There are precedents for such a federal takeover.
In the late 1980s, the government created the Resolution Trust Corporation to tackle the savings and loan crisis. It acquired the defaulted mortgages, foreclosed real estate and other assets of nearly a thousand failed S&Ls, restoring order and stability to the system. Resolving that crisis took six years and $125 billion in taxpayer money - roughly equal to $200 billion in today's dollars.
And there was the Reconstruction Finance Corporation, a Depression-era relief program formed in 1932 by President Hoover that tried to revive the market by giving loans to banks and other businesses.
On Friday, Treasury Secretary Henry Paulson gave few details about the structure of the new program. Asked about an overall price tag, he said, "hundreds of billions" of dollars.
Congressional leaders said they were ready to move quickly but still needed details of the administration plan. For instance, there was no indication of what the government would get in return from financial companies for the federal assistance.
Paulson and Federal Reserve Chairman Ben Bernanke briefed lawmakers in both parties on the idea by conference call Friday.
In a session with House Democrats, they described a plan where the government would in essence set up reverse auctions, putting up money for a class of distressed assets - such as loans that are delinquent but not in default - and financial institutions would compete for how little they would accept for the investments, said Rep. Brad Sherman, D-Calif., who participated in the call.
"You give them good cash; they give you the worst of the worst," Sherman said of the plan, which he complained that Bush and his economic advisers were trying to panic lawmakers into rubber-stamping.
Paulson rejected Democrats' calls to include tighter regulations, corporate reforms or limits on executive compensation as part of the measure, Sherman said. "He's doing his best to paint a picture of the sky falling, and then he says, because the sky's falling, you have to do it my way."
Paulson said the new troubled-asset relief program that he wants Congress to enact must be large enough to have the necessary impact while protecting taxpayers as much as possible.
"I am convinced that this bold approach will cost American families far less than the alternative - a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson. "The financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing."
Bush said simply, "We must act now."
"America's economy is facing unprecedented challenges. We're responding with unprecedented measures," Bush declared, standing in the White House Rose Garden with Paulson, Bernanke and Christopher Cox, chairman of the Securities and Exchange Commission.
Shortly after his remarks, Bush called congressional leaders with whom the administration will be working on the final plan. He spoke to Senate Majority Leader Harry Reid, D-Nev., House Speaker Nancy Pelosi, D-Calif., Senate Republican leader Mitch McConnell of Kentucky and House GOP leader John Boehner of Ohio.
The administration wants to see a package emerge from the weekend, to lend calm to Monday morning's market openings, said Keith Hennessey, the director of the president's economic council. The goal is to have something passed by Congress by the end of next week, when lawmakers recess for the elections.
Paulson said Fannie Mae and Freddie Mac will step up their purchases of mortgage-backed securities to help provide support to the crippled housing market. He also said the Treasury Department will expand a program, announced earlier this month, to buy mortgage-backed securities, which have been badly hurt by the housing and credit crises.
"As we all know, lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing. This simply put too many families into mortgages they could not afford," Paulson said.
Bush authorized Treasury to tap up to $50 billion from a Depression-era fund to insure the holdings of eligible money-market mutual funds. And the Federal Reserve announced it would expand its emergency lending program to help support the $3.4 trillion in total assets of the funds.
On Wednesday alone, investors had pulled more than $89 billion from money-market funds, according to iMoneyNet, publisher of the newsletter Money Fund Report.
The government's actions could help alleviate the uncertainty that has been sending the markets into tumult over the past week. Lending has come to a virtual standstill in the wake of the bankruptcy of Lehman Brothers Holdings Inc.
European Central Bank, Swiss National Bank and Bank of England also offered up more cash Friday. The three banks put a combined $90 billion into money markets.
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Posts: 6008 | From: phoenix az | Registered: Mar 2005
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posted
sooo if McCain is elected he will keep Bush's tax cuts or make new tax cuts eh? ... I hear a repeat of history of when Bush Sr. said "Read my Lips, no new taxes".
-------------------- Let the world change you... And you can change the world.
Ernesto "Che" Guevara de la Serna Posts: 4669 | Registered: Mar 2004
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posted
GOP presidential nominee John McCain said leaders should put aside partisan differences and "any action should be designed to keep people in their homes and safeguard the life savings of all Americans."
the last time i heard "put aside partisan differences " we ended up in Iraq...
this is not the time to start marching in lockstep.
our country has been looted.
the looters need to be put in jail...
if somebody steals a TV out of a Best Buy during a hurricane everybody says shoot em'. IF they survive that? put 'em in Angola as gator bait.
in this case? the looters are being paid...
it really is time for a lot of Wall St people to go to real prisons for real time for fraud.
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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Wall Street bonuses could slide in 2008: report Tue May 13, 2008 5:10pm EDT
By Steven Bertoni
NEW YORK (Reuters) - Wall Street executives could be diving into a shallow bonus pool in 2008, according to a report from Johnson Associates compensation consultants.
last year was a bad year on the street, yet they still got RECORD bonuses:
Wall Street Plans $38 Billion of Bonuses as Shareholders Lose
Nov. 19 (Bloomberg) -- Shareholders in the securities industry are having their worst year since 2002, losing $74 billion of their equity. That won't prevent Wall Street from paying record bonuses, totaling almost $38 billion.
That money, split among about 186,000 workers at Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc. and Bear Stearns Cos., equates to an average of $201,500 per person, according to data compiled by Bloomberg. The five biggest U.S. securities firms paid $36 billion to employees last year.
The bigger bonus pool derives from a record $9 billion of fees for arranging acquisitions and $5 billion for underwriting initial public offerings and sales of junk bonds, the most lucrative securities, Bloomberg data show. Bankers' record fees help explain why 2007 will prove to be the industry's second- most profitable after the subprime mortgage market collapse led to losses at Merrill and Bear Stearns. The last time bonuses declined was 2002 when the Standard & Poor's 500 Index fell 23 percent, and Enron Corp. and WorldCom Inc. went bankrupt.
In the first nine months of 2007, Goldman, Morgan Stanley, Merrill, Lehman and Bear Stearns told their shareholders that they set aside $52.4 billion for compensation, up 9 percent from a year earlier. For the whole year, the figure rises to $62.5 billion, according to analysts' estimates that combined revenue at the five largest securities firms will climb 1.7 percent to $135 billion
posted
This whole thing is crazy the tax payer is now going to be asked to buy all the bad debt,bad securities,and let some of the biggest crooks in our society leave with golden parachutes in the millions. All this while there fellow members in crime blew the hell out of Dodge be for everything caved in and have there billions hid away somewhere.
Thank God we never let them get there dirty hands on the social security trust fund that was most likley part of the plan to begin with.
Now Bushy and his buddies want to start out with 600 to 700 billion in tax payer money to start buying up these private lable fannie mae and freddie mac securities.
Well American sheep if you ever find the stomach of you forefathers you might do something about this but I believe you will be the sheep that you have proven to be and won't even vote.
Posts: 6008 | From: phoenix az | Registered: Mar 2005
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posted
Close Window Bush asks Congress for $700 billion for bailout Saturday, September 20, 2008 WASHINGTON - The Bush administration is asking Congress to let the government buy $700 billion in bad mortgages as part of the largest financial bailout since the Great Depression.
The plan would give the government broad power to buy the bad debt of any U.S. financial institutions for the next two years. It also would raise the statutory limit on the national debt from $10.6 trillion to $11.3 trillion - making room for the massive rescue.
A draft of the proposal obtained Saturday by The Associated Press does not specify what the government would get in return from financial companies for the federal help.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
WASHINGTON (AP) - A half-trillion dollar bailout that the Bush administration and Congress are negotiating this weekend for faltering financial institutions could unload their bad debt on the government, and in turn the taxpayer.
The Treasury Department sent the administration's legislative proposal to Congress late Friday. Treasury Secretary Paulson and his team planned to continue discussions with lawmakers through the weekend. Bush was monitoring Paulson's discussions, but had no meeting scheduled with his Treasury chief as of Saturday morning.
Congressional aides awaited a briefing Saturday from Treasury officials.
The proposal would amount to most sweeping federal intervention to rescue failing financial institutions since the Great Depression. Congressional leaders hoped the developing legislation could pass as early as next week.
The administration is asking Congress for far-reaching new powers to take over troubled mortgages from banks and other companies, including purchasing sour mortgage-backed securities.
"The risk of not acting would be far higher," Bush said Friday.
Democrats are insisting the rescue include mortgage help to let struggling homeowners avoid foreclosures.
They also are also considering attaching additional middle-class assistance to the legislation despite a request from Bush to avoid adding controversial items that could delay action. An expansion of jobless benefits was one possibility.
In a briefing to lawmakers, Paulson and Federal Reserve Chairman Ben Bernanke painted a grave picture of an economy on the edge of a major recession and telling them that action was urgent and imperative.
In a session with House Democrats, they described a plan where the government would in essence set up reverse auctions, putting up money for a class of distressed assets - such as loans that are delinquent but not in default - and financial institutions would compete for how little they would accept for the investments, said Rep. Brad Sherman, D-Calif., who participated in the conference call.
"You give them good cash; they give you the worst of the worst," Sherman said. A critic of the plan, he complained that Bush and his economic advisers were trying to panic lawmakers into rubber-stamping it.
Lawmakers wanted to know what the government would get in return from financial companies for the federal assistance.
Paulson said the new troubled-asset relief program must be large enough to have the necessary impact while protecting taxpayers as much as possible.
"I am convinced that this bold approach will cost American families far less than the alternative - a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson said. "The financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing."
Administration officials hoped the rescue plan could be finalized this weekend, to lend calm to Monday morning's market openings, said Keith Hennessey, the director of the president's economic council. The goal is to have something passed by Congress by the end of next week, when lawmakers recess for the elections.
Posts: 6008 | From: phoenix az | Registered: Mar 2005
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there was a simple way to fix all of this last year without anybody feeling this much pain...
i outlined it here, and it involved making anybody who was in mortgage trouble a 7,10, or even 15 year balloon note at a reasonable (5-6.5%) rate.
it would have removed the profit from people who bought too much house and allowed a 5-10 year breathing space for the economy to recover enough so that people could have possibly sold their house in a couple of years without a loss...
it would have had to been from congress tho, and Congress didn't do a dam thing...
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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quote:Originally posted by glassman: you know what makes me angry?
there was a simple way to fix all of this last year without anybody feeling this much pain...
i outlined it here, and it involved making anybody who was in mortgage trouble a 7,10, or even 15 year balloon note at a reasonable (5-6.5%) rate.
it would have removed the profit from people who bought too much house and allowed a 5-10 year breathing space for the economy to recover enough so that people could have possibly sold their house in a couple of years without a loss...
it would have had to been from congress tho, and Congress didn't do a dam thing...
Sounds like your just putting off the crisis of today until those balloon payments come due. Lets get it over with now. We can't wait for a total collapse of the financial sector then try to pick up the pieces. That might lead to trillions in recovery costs. It's kinda like a band-aid on a hairy arm, just tear it off and get it over with and recover. Oh, it WILL take years to recover from the 700BB bailout, but it has to be done IMO.
-------------------- It is impossible to make anything foolproof because fools are so ingenious. Posts: 3311 | From: St. Louis | Registered: Feb 2005
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posted
well, that was why longer than 5 year ballons would be needed... it would have allowed people to sell or refi to normal loans in an orderly fashion, and the RE market would have had some abiltiy to predict how the future looked in temrs of prices...
yo are correct tho, it would have drawn out along period of recession.
it could have allowed alot of families to avoid the personal crises but not rewarded them financially..
it's too late now anyway...
we are rapidly approaching a national (govt) deficit of one year of GDP... that is unacceptable too...
esp if Tbill yeilds go up alot...
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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quote:Originally posted by glassman: well, that was why longer than 5 year ballons would be needed... it would have allowed people to sell or refi to normal loans in an orderly fashion, and the RE market would have had some abiltiy to predict how the future looked in temrs of prices...
yo are correct tho, it would have drawn out along period of recession.
it could have allowed alot of families to avoid the personal crises but not rewarded them financially..
it's too late now anyway...
we are rapidly approaching a national (govt) devt of one year of GDP... that is unacceptable too...
esp if Tbill yeilds go up alot...
We're basically on the same page glass. It's a necessity at this point as far as the bailout. I just find the numbers staggering.
-------------------- It is impossible to make anything foolproof because fools are so ingenious. Posts: 3311 | From: St. Louis | Registered: Feb 2005
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posted
Someone needs to be pointing out that this came about because of a decades long republican effort that refused to allow consideration of anything that wasn't entirely in sympathy with free market idealism.
Too, when anyone tries to pull that BS that usually starts with "we are all in this" and then continues on with "both parties went along and contributed to this and both are responsible" , they need to be shouted down and forced to learn some history. The democratic party has never advocated that absurdly Utopian free market nonsense and free market ideology is the evil that has brought about this failure in our (and the world") financial system.
This is republican crap we are all forced to eat.
So is the idiotic idea that we can keep on digging ourselves deeper in debt for what-so-ever scheme or designed boondoggle the republicans dream up to move money from the Treasury to the the pockets of huge corporations, while still lowering corporate taxes, and preaching the lie that any increase in taxes is going destroy the Union (and the other absolutely simpleminded lie that those huge corporations will invest that tax break in the American economy).
If we suddenly ended each and every one of the programs the republican toss onto the pile they label "wasteful" or socialistic" or "an entitlement" and so on, that would not be enough money to pay for THEIR enormous gifts to huge corporations. There is only one single part of this Nations budget that amounts to enough money to make up for our budget to deficiencies ...... DEFENSE!
Either lower defense spending drastically or raise taxes and, then, live within our realistic budget, not the one imagined in a document falsely labeled as such.
Posts: 11304 | From: Fort Worth, Texas | Registered: Mar 2005
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posted
Economist's, and most semi-intelligent poeple, saw this coming, but the recession was ignored by the Repubs as Dem propaganda. Wonder what they are saying now?
-------------------- It is impossible to make anything foolproof because fools are so ingenious. Posts: 3311 | From: St. Louis | Registered: Feb 2005
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quote:Originally posted by bdgee: What they are saying now, at least what their candidate for president and his cohearts are claiming is that it is the fault of Barak Obama.
A few of the rest are preaching that the democrats were in on it too, so the republicans are free of blame.
In other words, they are saying a lot of BS.
true, McCains straight talk express has derailed...
i have no idea who can actually beleive McCain today, i kindof have to think that people that do beleive him (for real) or total fools..
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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quote:Originally posted by bdgee: What they are saying now, at least what their candidate for president and his cohearts are claiming is that it is the fault of Barak Obama.
A few of the rest are preaching that the democrats were in on it too, so the republicans are free of blame.
In other words, they are saying a lot of BS.
true, McCains straight talk express has derailed...
i have no idea who can actually beleive McCain today, i kindof have to think that people that do beleive him (for real) or total fools..
You seeem to have captured the essence of the Republican party with that comment. Thank you for putting into words what so many fail to see!
-------------------- It is impossible to make anything foolproof because fools are so ingenious. Posts: 3311 | From: St. Louis | Registered: Feb 2005
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posted
Clinton, Republicans agree to deregulation of US financial system By Martin McLaughlin 1 November 1999 Use this version to print
An agreement between the Clinton administration and congressional Republicans, reached during all-night negotiations which concluded in the early hours of October 22, sets the stage for passage of the most sweeping banking deregulation bill in American history, lifting virtually all restraints on the operation of the giant monopolies which dominate the financial system.
The proposed Financial Services Modernization Act of 1999 would do away with restrictions on the integration of banking, insurance and stock trading imposed by the Glass-Steagall Act of 1933, one of the central pillars of Roosevelt's New Deal. Under the old law, banks, brokerages and insurance companies were effectively barred from entering each others' industries, and investment banking and commercial banking were separated.
The certain result of repeal of Glass-Steagall will be a wave of mergers surpassing even the colossal combinations of the past several years. The Wall Street Journal wrote, "With the stroke of the president's pen, investment firms like Merrill Lynch & Co. and banks like Bank of America Corp., are expected to be on the prowl for acquisitions." The financial press predicted that the most likely mergers would come from big banks acquiring insurance companies, with John Hancock, Prudential and The Hartford all expected to be targeted.
Kenneth Guenther, executive vice president of Independent Community Bankers of America, an association of small rural banks which opposed the bill, warned, "This is going to begin a wave of major mergers and acquisitions in the financial-services industry. We're moving to an oligopolistic situation."
One such merger was already carried out well before the passage of the legislation, the $72 billion deal which brought together Citibank, the biggest New York bank, and Travelers Group Inc., the huge insurance and financial services conglomerate, which owns Salomon Smith Barney, a major brokerage. That merger was negotiated despite the fact that the merged company, Citigroup, was in violation of the Glass-Steagall Act, because billionaire Travelers boss Sanford Weill and Citibank CEO John Reed were confident of bipartisan support for repeal of the 60-year-old law.
Campaign of influence-buying
They had good reason, to be sure. The banking, insurance and brokerage industry lobbyists have combined their forces over the last five years to mount the best-financed campaign of influence-buying ever seen in Washington. In 1997 and 1998 alone, the three industries spent over $300 million on the effort: $58 million in campaign contributions to Democratic and Republican candidates, $87 million in "soft money" contributions to the Democratic and Republican parties, and $163 million on lobbying of elected officials.
The chairman of the Senate Banking Committee, Texas Republican Phil Gramm, himself collected more than $1.5 million in cash from the three industries during the last five years: $496,610 from the insurance industry, $760,404 from the securities industry and $407,956 from banks.
During the final hours of negotiations between the House-Senate conference committee and White House and Treasury officials, dozens of well-heeled lobbyists crowded the corridors outside the room where the final deal-making was going on. Edward Yingling, chief lobbyist for the American Bankers Association, told the New York Times, "If I had to guess, I would say it's probably the most heavily lobbied, most expensive issue" in a generation.
While Democratic and Republican congressmen and industry lobbyists claimed that deregulation would spark competition and improve services to consumers, the same claims have proven bogus in the case of telecommunications, airlines and other industries freed from federal regulations. Consumer groups noted that since the passage of a 1994 banking deregulation bill which permitted bank holding companies to operate in more than one state, both checking fees and ATM fees have risen sharply.
Differing versions of financial services deregulation passed the House and Senate earlier this year, and the conference committee was called to work out a consensus bill and avert a White House veto. The principal bone of contention in the last few days before the agreement had nothing to do with the central thrust of the bill, on which there was near-unanimous bipartisan support.
The sticking point was the effort by Gramm to gut the Community Reinvestment Act, a 1977 anti-redlining law which requires that banks make a certain proportion of their loans in minority and poor neighborhoods. Gramm blocked passage of a similar deregulation bill last year over demands to cripple the CRA, and bank lobbyists were in a panic, during the week before the deal was made, that the dispute would once again prevent any bill from being adopted.
Gramm and other extreme-right Republicans saw the opportunity to damage their political opponents among minority businessmen and community groups, who generally support the Democratic Party. Gramm succeeded in inserting two provisions to weaken the CRA, one reducing the frequency of examinations for CRA compliance to once every five years for smaller banks, the other compelling public disclosure of loans made under the program.
The latter provision was particularly offensive to black and other minority business and community groups, who have used the CRA provisions as a lever by threatening to challenge mergers and other bank operations which require government approval. In most such cases, the banks have offered loans to businessmen or outright grants to community groups in return for dropping their legal actions. These petty-bourgeois elements have been able to posture as defenders of the black or Hispanic community, while pocketing what are essentially payoffs from finance capital and concealing from the public the details of this relationship.
The banks and other financial institutions did not themselves oppose continuation of the CRA, which they have treated as nothing more than a cost of doing a highly profitable business in minority areas. Loans tied to the CRA average a 20 percent rate of return. Financial industry lobbyists complained that they were being caught in a crossfire between the Republicans and Democrats which was unrelated to the main purpose of the bill.
The Clinton White House threatened to veto the bill if CRA provisions were substantially weakened, in response to heavy pressure from the Congressional Black Caucus and the Reverend Jesse Jackson, whose Operation PUSH has made extensive use of CRA in its campaigns to pressure corporations and banks for more opportunities for black businessmen. But eventually the White House caved in to Gramm, accepting his amendments so long as the program remained formally in place.
The White House similarly retreated on pledges that consumer privacy would be protected in the legislation. Consumer groups pointed to the potential for abuse of financial information once giant conglomerates were created which would handle loans, investments and insurance at the same time. For example: a bank could refuse to give a 30-year mortgage to a customer whose medical records, filed with the bank's insurance subsidiary, revealed a fatal disease.
The final draft of the bill contains a consumer privacy protection clause, but it is extremely weak, applying only to the transfer of information outside of a financial conglomerate, not within it. Thus Citigroup will be able to pass on financial information about its bank depositors to Travelers Insurance, but not to an outside company like Prudential. Even that limitation would be breached if there was a contractual relationship with the outside company, as in the case of a telemarketer which did work for Citigroup and was given private information about Citigroup depositors to aid in its telephone solicitations.
Threat to financial stability
The proposed deregulation will increase the degree of monopolization in finance and worsen the position of consumers in relation to creditors. Even more significant is its impact on the overall stability of US and world capitalism. The bill ties the banking system and the insurance industry even more directly to the volatile US stock market, virtually guaranteeing that any significant plunge on Wall Street will have an immediate and catastrophic impact throughout the US financial system.
The Glass-Steagall Act of 1933, which the deregulation bill would repeal, was not adopted to protect consumers, although one of its most celebrated provisions was the establishment of the Federal Deposit Insurance Corporation, which guarantees bank deposits of up to $100,000. The law was enacted during the first 100 days of the Roosevelt administration to rescue a banking system which had collapsed, wiping out the life savings of millions of working people, and threatening to bring the profit system to a complete standstill.
As a recent history of that era notes: "The more than five thousand bank failures between the Crash and the New Deal's rescue operation in March 1933 wiped out some $7 billion in depositors' money. Accelerating foreclosures on defaulted home mortgages—150,000 homeowners lost their property in 1930, 200,000 in 1931, 250,000 in 1932—stripped millions of people of both shelter and life savings at a single stroke and menaced the balance sheets of thousands of surviving banks" (David Kennedy, Freedom from Fear, Oxford University Press, 1999, pp. 162-63).
The separation of banking and the stock exchange was ordered in response to revelations of the gross corruption and manipulation of the market by giant banking houses, above all the House of Morgan, which organized huge corporate mergers for its own profit and awarded preferential access to share issues to favored politicians and businessmen. Such insider trading played a major role in the speculative boom which preceded the 1929 crash.
Over the past 20 years the restrictions imposed by Glass-Steagall have been gradually relaxed under pressure from the banks, which sought more profitable outlets for their capital, especially in the booming stock market, and which complained that foreign competitors suffered no such limitations to their financial operations. In 1990 the Federal Reserve Board first permitted a bank (J.P. Morgan) to sell stock through a subsidiary, although stock market operations were limited to 10 percent of the company's total revenue. In 1996 this ceiling was lifted to 25 percent. Now it will be abolished.
The Wall Street Journal celebrated the agreement to end such restrictions with an editorial declaring that the banks had been unfairly scapegoated for the Great Depression. The headline of one Journal article detailing the impact of the proposed law declared, "Finally, 1929 Begins to Fade."
This comment underscores the greatest irony in the banking deregulation bill. Legislation first adopted to save American capitalism from the consequences of the 1929 Wall Street Crash is being abolished just at the point where the conditions are emerging for an even greater speculative financial collapse. The enormous volatility in the stock exchange in recent months has been accompanied by repeated warnings that stocks are grossly overvalued, with some computer and Internet stocks selling at prices 100 times earnings or even greater.
And there is a much more recent experience than 1929 to serve as a cautionary tale. A financial deregulation bill was passed in the early 1980s under the Reagan administration, lifting many restrictions on the activities of savings and loan associations, which had previously been limited primarily to the home-loan market. The result was an orgy of speculation, profiteering and outright plundering of assets, culminating in collapse and the biggest financial bailout in US history, costing the federal government more than $500 billion. The repetition of such events in the much larger banking and securities markets would be beyond the scope of any federal bailout.
S
Posts: 6008 | From: phoenix az | Registered: Mar 2005
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posted
And you synopsis and comment on that article is what bond006?
-------------------- It is impossible to make anything foolproof because fools are so ingenious. Posts: 3311 | From: St. Louis | Registered: Feb 2005
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posted
If Congress can do a bail out now, they could've done something last year. Now the folks who deserve to have kept their homes will help bail out the crooks...meanwhile the engineers have pocketed millions and millions.
posted
You seeem to have captured the essence of the Republican party with that comment. Thank you for putting into words what so many fail to see!
Pagan, you may have noted that i have an overall bad attitude about politicians..
we've only been here (at allstocks) under Bush so i have moslty critisized him...
i was raised in the political boiler room, and do actually mean that in the sense of a stock boiler room thingy...
i know for fact that most of the pundits on BOTH sides really do sit around and discuss issues like how people will be willing to accept blatant lies and how to word the lies in such specific ways as to make them palatable...
in other words? i have no illusions that most political participants know they are lying to each other and US and that alot of US choose to participate in the lies either by simply agreeing or activley exhanging them with each other...
that said? it sure seemed like things might be different this year.. Obama SEEMS to me to be trying to be better (not perfect) and McCaain WAS being better until the convention...
and yes, i do think some people are dumb enough to beleive them but i always hope its very few... myabe that makes me an optimist?
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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posted
here's a really good example of McCain's balatant lying:
he's been saying that Obama is closley tied to FNMA and Freddie... he has raised money from some of them
BUT?
Obama isn't as closely tied to them as John is:
More than Mr. Obama, Mr. McCain’s circle of advisers and contributors includes current and former lobbyists or directors for the companies, although since July he has called for a ban on any lobbying by the two firms.
Among the companies’ past advocates are Mr. McCain’s campaign manager, Rick Davis, a longtime lobbyist; Mr. McCain’s confidant and adviser Charlie Black, whose firm worked for Freddie Mac for several years ending in 2005, and the deputy campaign finance chairman, Wayne L. Berman, a vice president for Ogilvy Worldwide and a former Fannie Mae lobbyist.
Mr. Davis previously was head of the Homeownership Alliance, a coalition of banks and housing industry interests led by Fannie and Freddie to stave off regulations.
The group was formed to counter another organization, FM Watch, an alliance of financial institutions and lobbying associations that wanted to even the playing field against Fannie Mae and Freddie Mac, by challenging the implicit government guarantee that allowed the two firms to borrow funds at lower interest rates.
Six members of the Republican lobbying firm Fierce Isakowitz & Blalock, all Fannie Mae lobbyists, have given Mr. McCain $13,250, records show.
The New York investor Geoffrey T. Boisi, a member of Freddie Mac’s board, contributed more than $70,000 to Mr. McCain and Republican Party committees working for his election. Both he and Richard F. Hohlt, a Fannie Mae lobbyist, are among the McCain “bundlers” who have raised $100,000 to $250,000 from others, according to the campaign Web site.
posted
Well, ya hafta cut the guy a little slack now and then.
If ya gonna insist he tell the truth all the time, he'll be stuck wearin his republican clothes and traped in the heat of the realities of his own policies, like voting more than once to privatize social security, using as reasoning, "How could people's retirement money be safer than in the American stock market" and bragging forever (it seems) that deregulation of everything is his main interest.
McCain is more than willing to have people sayin he's a liar, 'cause otherwise they might have time to look at what he normally and naturally does outta habit.
Posts: 11304 | From: Fort Worth, Texas | Registered: Mar 2005
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i just can't get over how John is blaiming everybody else in Washington and Wall st and saying he's different. i mean he really is blaming everybody but himself.
Obama has less experience, that's true, but that also means he isn't to blame for where we are right?
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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posted
Not without doing some work, I'm sure, and I'm not feeling like doing that now.
But, I do recall seeing him, on a TV news broadcast, as I recall addressing Congress back in the 90s or early 00s, , both hands holding firmly to the lectern, scrolling his gaze about his audience and arguing that to suggest that privatizing social security was bad because it assumed the stock market might not always be reliable was near, if not completely, unpatriotic.
I also recall about that same time seeing him on one of the Sunday morning TV new shows making fun of the idea that there was ever going to be any danger of the stock market ever being seriously in danger, touting no oversight, the free market, and privatizing social security.
McCain is blaming everyone else for everything now because so much right now is not just bad, but terrible, and he is playing the usual candidate blame game any candidate plays , when he and his platform can't provide any actual hope of change to correct things. He's jumping so far into it he is saying stuff so far out of character it is laughable.
So far as his screams for bipartisanship, I note that he never seems to join the democrats and only brags about his bipartisanship when some democrat is added to his effort. That is the standard definition of bipartisanship from any of them, no matter which party.
Blame a lot of the failure of actual bipartisanship on easy fast air travel home so congressmen never have to spend holidays or weekends in Washington and might, while there, get to know one another and work out compromises that benefit the nation rather than storing up fodder for the next campaign. But blame most of it on the likes of such as Carl Rove and Tom DeLay and a concerted effort of the republican party (championed by Ronald Reagan) to restrict even the terminology of political discourse to nothing more than hate speech and labeling. (Once you can get people thinking the other guys are demonic, you can get people to sanction evil and hate for the purpose of evil and hate. It is all powerful in political campaigns, because no one wants to be cast out and become one of the defiled and hated others.)
Posts: 11304 | From: Fort Worth, Texas | Registered: Mar 2005
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posted
So does this mean that the government will own most of the homes in the US?
Also, if the taxpayer, (you and I) are the government's pocketbook, and the government is using our money to buy up all the mortgage debt, doesn't that mean that we now owe all the debt to ourselves, thus we owe nothing?
Or, are we just borrowing from China and now they own all our homes?
-------------------- One is never completely useless. One can always serve as a bad example. Posts: 2430 | From: CA | Registered: Jun 2005
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posted
Pretty sad. The real pricetag of this "bailout", IMO, will be much more than 700 billion. The goverment is just saying that to "coushin the blow" to the already broken American Taxpayer. I'm thinking it will cost more like 5 to 6 trillion, if you look at it in purely monetary terms.
The TRUE costs, however, will be much, much higher.
-------------------- One is never completely useless. One can always serve as a bad example. Posts: 2430 | From: CA | Registered: Jun 2005
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posted
Advertise on NYTimes.com Text of Draft Proposal for Bailout Plan Sign In to E-Mail or Save This Print Reprints Share Linkedin Digg Facebook Mixx Yahoo! Buzz Permalink
Published: September 20, 2008 LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY
TO PURCHASE MORTGAGE-RELATED ASSETS
Section 1. Short Title.
This Act may be cited as ____________________.
Sec. 2. Purchases of Mortgage-Related Assets.
(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.
(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:
(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;
(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;
(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;
(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and
(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.
Sec. 3. Considerations.
In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--
(1) providing stability or preventing disruption to the financial markets or banking system; and
(2) protecting the taxpayer.
Sec. 4. Reports to Congress.
Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.
Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.
(a) Exercise of Rights.--The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.
(b) Management of Mortgage-Related Assets.--The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.
(c) Sale of Mortgage-Related Assets.--The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.
(d) Application of Sunset to Mortgage-Related Assets.--The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.
Sec. 6. Maximum Amount of Authorized Purchases.
The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time
Sec. 7. Funding.
For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.
Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
Sec. 9. Termination of Authority.
The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.
Sec. 10. Increase in Statutory Limit on the Public Debt.
Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.
Sec. 11. Credit Reform.
The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.
Sec. 12. Definitions.
For purposes of this section, the following definitions shall apply:
(1) Mortgage-Related Assets.--The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.
(2) Secretary.--The term “Secretary” means the Secretary of the Treasury.
(3) United States.--The term “United States” means the States, territories, and possessions of the United States and the District of Columbia.
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Have you ever heard shuch crazy nonsense this bill that Bush is trying to shove down congresses throat gives Bush and his cronies complete control over the funds all they want from congress is the right to have the money
Posts: 6008 | From: phoenix az | Registered: Mar 2005
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quote:Originally posted by NaturalResources: So does this mean that the government will own most of the homes in the US?
Also, if the taxpayer, (you and I) are the government's pocketbook, and the government is using our money to buy up all the mortgage debt, doesn't that mean that we now owe all the debt to ourselves, thus we owe nothing?
Or, are we just borrowing from China and now they own all our homes?
we don't know yet IF China will buy the notes...
they ares imply preparing them for sale right now...
early last year? China showed a tendency to stop buying US mortgages and Paulson went to China in July to beg them to buy more...
there were several articles written about it and they DISAPPEARED..
the mortgage meltdown started while he was on that trip...
it is very unlikely that there will be alotof interest in buying US debt at current values...
and we are choking the marketplace with it...
there is no quick fix.
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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quote:Originally posted by Pagan: And you synopsis and comment on that article is what bond006?
That is what I always (well not always anymore) ask him whenever he posts a full article that most of us have probably already read somewhere lol he didn't like my comment about him posting full articles with no opinion and such...
-------------------- Let the world change you... And you can change the world.
Ernesto "Che" Guevara de la Serna Posts: 4669 | Registered: Mar 2004
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quote:Originally posted by glassman: we don't know yet IF China will buy the notes...
they ares imply preparing them for sale right now...
early last year? China showed a tendency to stop buying US mortgages and Paulson went to China in July to beg them to buy more...
there were several articles written about it and they DISAPPEARED..
the mortgage meltdown started while he was on that trip...
it is very unlikely that there will be alotof interest in buying US debt at current values...
and we are choking the marketplace with it...
there is no quick fix.
I wouldn't call beg... I would call it calling in a favor. As I already stated in a different thread, Paulson has had connections both business and political in China for years going back to when he was in Goldman Sachs. I think this is why Bush picked him for his position and it is the reason why the Chinese own so many U.S. Notes. China will buy these new notes. That i believe. And Paulson will make it happen. Our deficit will be bigger then before as well as our taxes due to this.
-------------------- Let the world change you... And you can change the world.
Ernesto "Che" Guevara de la Serna Posts: 4669 | Registered: Mar 2004
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quote:Originally posted by glassman: I wouldn't call beg... I would call it calling in a favor
beg? or favors? i don't care what you call it, they REFUSED and triggered the collapse we are in now...
before you say i'm blaming them? forget misquoting me...
we did it to ourselves by being dumb enough to allow this freetrade BS to begin with.
it's a series of stupid decisions that are not and were not inevitable...
i actually pointed this stuff out as it was happening. i beleive we are at war and we are losing this one.
I don't blame the Freetrade at all. The only problem with Freetrade is that it seemed to be a oneway street. From them to us only. Had it been more two way it would of made us stronger. I do blame the banks, brokerages etc. with their greed though Mike Bloomberg doesn't:
MIKE SLAMS 'NOW' SOCIETY Comments: 3Read Comments Leave a Comment By DAVID SEIFMAN Posted: 3:55 am September 17, 2008
An "I want it now" society that refuses to live within its means is partly responsible for the subprime-mortgage crisis, Mayor Bloomberg said yesterday.
"I think you just can't blame the banks," he said, taking borrowers to task.
"They say, 'I want the great American dream. I want it now and I'm not going to wait until I put some money in the bank.' . . That's where we lost the moral compass of saying no to people who did not have the earning capacity to support a mortgage."
Long before the collapse of Lehman Brothers and Merrill Lynch, Bloomberg had been warning that "nothing keeps going up forever."
The one thing I do agree with him is the Nothing keeps going up forever. This is the one lesson everyone forgets in good times such as the stock market, real estate market etc. We keep repeating history and never put safeguards or we put safeguards that aren't strong enough to stop messes like this and we only put them in as a reaction. That is the problem with this country with any issue. It's always REACTIVE.
-------------------- Let the world change you... And you can change the world.
Ernesto "Che" Guevara de la Serna Posts: 4669 | Registered: Mar 2004
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quote:Originally posted by glassman: it's a series of stupid decisions that are not and were not inevitable...
i actually pointed this stuff out as it was happening. i beleive we are at war and we are losing this one.
Yes, it was inevitable and I don't mean the "freetrade BS". The collapse of our economy due to oil and mortgages was inevitable for many decisions other and not because of "freetrade".
The oil crisis i solely blame on our involvement in Iraq. To me all roads lead to the Iraq War. Everything else is reactive to it.
And our mortgage crisis that led to our financial crisis is inhouse/domestic. People took on mortgages they couldn't afford but I don't blame them. If someone gave you a Maserati and said don't worry about paying for it till later. Go enjoy and drive the car, show off etc. I think most of us would take that car. We already do this with credit cards since they were invented. We buy stuff we can't afford and that is above our means but yet we still do it and yet the Credit Card companies much like the Mortgage co's and banks still lend us the money due to one thing: Greed.
Anyways both these crisis are why we are in financial trouble and neither one imo has to do with the "freetrade BS".
-------------------- Let the world change you... And you can change the world.
Ernesto "Che" Guevara de la Serna Posts: 4669 | Registered: Mar 2004
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