I’m Gonna Pull An Obama Here…
…and say that I can’t say whether I’ll support the bailout plan up for a vote tomorrow because I haven’t seen the language (there is a DRAFT of the plan up here, but I don’t know whether it’s the final language, and it’s awfully long)…but I think I would probably say yes. My biggest gripe about the first plan was that (a) it gave unilateral authority to Paulson with no oversight, and (b) it put a lot of taxpayer money at risk with little chance of reward.
This plan, according to news accounts, has significant oversight, plus only (only!) $250 billion is authorized as a first tranche until certain conditions are met (with the widely quoted $700 million as the upper limit in any case), and there is provision made for taxpayer equity in some cases, at least (Section 113 of the bill, if you’re interested – but again, it’s hard slogging for a weekend! By the time I make heads or tails of it, it will probably have already been voted on). There is also a section of foreclosure mitigation and executive compensation (bad idea, but that was the price of getting the Democrats on board).
UPDATE 9:03 p.m.: Oh-ho! Here we go…the Wall Street Journal to the rescue with a summary that is actually readable…I might be able to wade through at least THAT much on a Sunday…
UPDATE 9:12 p.m.: From the Journal summary linked above:
If after five years the government has a net loss, the president will be required to submit a legislative proposal to seek reimbursement from the financial institutions that participated.
Now THAT I like…
Yeah, this seems reasonably better, insofar as that’s possible. Krugman looks like he’s okay with it too, so at least you two can stay on the same page.
Oh, also, congrats to the Raiders on just not playing. That seems like the wisest choice any ranked team could have made this weekend.
(Says a VERY happy Wolverine!!)
Well, at #7 or #8, depending on the poll, we should be celebrating…until you consider we play in the Big 12 South, home of #1 Oklahoma and #5 Texas…ouch!…
That is after the 2012 election. If whoever is president does not do it?
None of the “improvements” change anything.
The “oversight” is a sham of course, a congress committee with equal representation. Very effective. Another committee made up of other executive branch appointees. It will be a check how?
The second phase of $100B just requires a certification by the President/Treasury. So, that is committed. The final 350B will be released unless both houses pass a resolution with veto proof margins. Unlikely.
The “equity” provisions are for warrants that require more money to exercise.
The pay limits are just populist gloss. That’s fine but it does not save any money for taxpayers.
Me on September 20:
I think that stands up pretty well.
Crap! When I’m wrong I’m wrong. The House voted it down!
The House voted it down, and the stock market had the worst day in over twenty years. Because the stock markets trade on expectations of future economic performance, the verdict is pretty clear, and there is plenty of blame to go around.
John McCain should be ashamed of himself for political grandstanding which prevented a deal from getting done when it had the momentum to pass.
The House Republicans should be equally ashamed. The group who has done as much as anyone to get us into this mess — if not more so — has not come up with any credible alternative and instead is content to watch the economy crash and burn. I am sure that some House members voted against the bill out of principle, but my guess is that most no votes were a combination of lack of courage to vote for an unpopular but necessary piece of legislation and (for the Republicans) an easy way to separate themselves from the Bush administration which they have been rubber stamping for years.
A sad day for everyone.
Oh please, Peter. The stock market reacts just as much to Congressional idiocy as to anything else. If Bush, Paulson, and Pelosi hadn’t spent the last week warning us that the world is going to end without a bailout, the Dow simply wouldn’t have had nearly as bad a day as it did. We’re well into “self-fulfilling prophecy” territory here, and every single government official in a leadership position has failed their country. The blame for this does not fall on House Republicans, except insofar as their opposition was idiotic (Pelosi was too mean? Puh-leeze).
The stock market didn’t fall because Bush, Paulson, and Pelosi warned of economic collapse; it failed because the economy really is collapsing.
Before the vote was taken — when it was expected to pass — the Dow was down over 300 points because the credit markets continued to freeze up. One indication of this is that the rate on three month treasury bills essentially fell to zero, meaning investors would rather make no money at all by parking their money in T-Bills than put capital at risk. Another example is that the spread between LIBOR and treasury paper is at an all-time high. The seizure of the credit markets, if continued, will have long-lasting and devastating effects.
The vote today made things worse because it indicated to investors that Congress is unlikely to do anything except for whistle past the graveyard. The markets didn’t plummet because of fear-mongering in Washington: they fell because we really are in a potentially catastrophic situation.
The bailout remains hugely unpopular among the constituents, and Bush, Pelosi, Reid, Paulson, and Bernanke have done a horrific job of arguing (selling if you prefer) the case for it. Thus, many in the political class are concerned about passing this bill without air cover – a judgment they appeared to take into consideration today when 40% of Democrats and 60% of Republicans voted against it. Btw, Barney Frank certainly showed leadership today with a stellar example of political douchebaggery. Right or wrong, a real leader wouldn’t resort to childish name calling, even in response to childishness.
Peter, the votes were never there…but more later when I post on it…but to say McCain blew the plan up is just fantasy. You can’t blow up what was never built….
If the vote was held last Thursday — before McCain parachuted to town — it would have passed. There was an agreement among the leadership on what the bill should be, and there was not enough opposition at to derail it.
It’s momentum stopped abrubtly at the White House meeting which McCain urged the President to convene. While the meeting enabled McCain to insert himself into the spotlight, it also delayed the process and injected Presidential politics into it, both of which contributed to the bill’s ultimate defeat.
Sorry, its momentum
Absolutely false. If the plan could have passed last Thursday, Pelosi would have held a vote then. It NEVER had the votes, and the leadership knew it, and that’s why Bush spoke to the nation, and why he called the White House conference. If there is a lesson here, it’s that the rank and file cannot be bullied by their own congressional leaders OR the White House when their constituents are almost universally opposed…
Wrong on all three counts.
1) The leadership of both parties had an agreement as to how the bill should be written, but Pelosi couldn’t have called for a vote because the bill wasn’t written yet. Go back to the news reports mid-day Thursday: they all show a consensus for a bill up to the point when the White House meeting occured. You can also see it in stock prices, as obviously Wall Street thought there was a deal, and it rallied through Thursday’s close (which was before Shelby spoke and announced that there was no deal, to the surprise of all).
2) Bush spoke to the nation because he had been missing in action. He had to do something. He could not ask for a $700 billion outlay without saying something about it to the nation.
3) Bush called the White House meeting at the instigation of John McCain in a political stunt which failed. McCain theoretically was going to “reach across the aisle” and get a deal done. He didn’t. The people who truly acted in a bipartisan manner were Pelosi and Frank. They vigorously supported the administration’s plan, despite widespread popular opposition. Had they acted in a partisan manner, the bill would never have come up.
If you are so supportive of John McCain’s role here: what exactly did he accomplish?
Sorry, you missed it again. The only consensus was among the Democratic leadership and the Administration. The rank and file were never on board. And the legislation could be hacked out at any point that they thought they could pass it…you seem very convinced that the bill could have passed but for the magical intervention of John McCain, but you can offer no evidence of such a theory.
I’m not supportive of McCain’s role here…I’m just trying to get you to the underlying reality of what has been going on. You were in support of the original Paulson bailout, which was an absolutely horrific bill that appalled almost all observers, including your cherished Paul Krugman…but you have consistently mistaken your own support for that of the nation. Look in the media accounts at what every congressman is saying – their constituents have flooded them with opposition to this bailout. Do you think McCain flying into town could unravel something of this magnitude?
It would pass in a heartbeat if the public was in favor of it…
I’ll repeat to you that 95 Democrats voted AGAINST THE BILL. Did McCain cause that, too, through his magic powers?…
I also recall you pounding everyone over the head about the urgency to hold the debate on Friday – and what words of wisdom did Obama impart in that crucial national moment when pressed for his view of the bailout?
“I haven’t seen the language yet”…ooooh! I get chills thinking about the moment he uttered those timeless, courageous words of leadership!…
Chris Cillizza nails it here:
http://voices.washingtonpost.com/thefix/2008/09/the_failure_of_the_financial.html?nav=rss_blog
The public hates this bill…
1) “The only consensus was among the Democratic leadership and the Administration?” Not according to reporting from last Wedneday and Thursday:
a) http://www.reuters.com/article/marketsNews/idUSSP33558420080925
b) http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3081844/Banking-bailout-gets-backing-from-congress.html
c) http://www.news.com.au/heraldsun/story/0,21985,24405091-5005961,00.html
d) http://www.thestreet.com/story/10439334/1/stocks-ride-bailout-hopes-higher.html?puc=googlen&cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA
Until Thursday afternoon, news reports do not show any incipient rebellion by Republican back benchers, and the bill appeared to be heading towards approval. Wall Street, which follows the bail-out on a minute by minute basis, also seemed convinced there was a deal, and the markets rallied Thursday in anticipation of one. Even the Republican leadership was unaware that there were a significant number of people in their caucus who would vote no — otherwise they wouldn’t have met with the Democrats Thursday morning to write the bill. So the idea that the agreement was only between the White House and the Democrats — at least until McCain parachuted into town — is false.
2) I haven’t “mistaken my own support for that of the nation.” I never argued that it wasn’t an extremely unpopular bill. It was poorly explained and it is poorly understood. It is regrettable and (in Paulson’s word) embarrassing that we need to do this, but it is necessary nonetheless.
3) The 95 Democrats who voted against the bill were wrong.
4) Nobody likes a bill like this, but nobody who opposes it has come up with a better idea. That’s why I am for it.
One more point: you’re quick to condemn McCain’s partisan posturing, and claim sainthood for Pelosi and Reid in rising above partisanship.
Why, then, do I keep reading quotes from Reid and Pelosi hanging the necessity of the bailout on Republican policies, as if they weren’t the MAJORITY in Congress? And why did Pelosi feel the need to bash the Bush administration in her comments leading to today’s vote, comments which apparently sent some Republican waverers over to the Nay side?
Come off it…
Wall Street’s perceptions have nothing to do with the reality of what was happening behind the scenes: a groundswell of public opposition that caused people in unsafe districts to have serious doubts about the wisdom of voting for the bill.
As to why both parties got their vote counts wrong, I can just say they don’t ‘whip’ like they used to, that’s for sure. It’s a serious failure of both sides’ leadership to fail to rally the troops, but that’s hardly the fault of SENATOR (ahem, not Congressman) McCain…
Post 29: Obama acts were far more mature and Presidential than McCain’s acts, and — unlike McCain — they were not counter-productive. There is no imperative for Presidential candidates to inject themselves into an ongoing negotiation which they had no part in. Obama wisely kept out of it and let those who were tasked with fixing the problem do their jobs. There was little likelihood of any good coming from his interference in this process, and — as we saw with McCain — a high probability of bad consequences from interfering.
And stating that the 95 Democrats who voted against the bill were wrong – well, in your opinion! What’s that got to do with the price of tea in China? The point is not who was wrong, the point is to explain why fingerpointing to one side or the other is a shallow and ultimately meaningless game that does absolutely nothing to explain why this bill failed…
I assume you mean post 17 – and that doesn’t even address my point, which was that Obama, who told us, along with you, how URGENT it was that we hear from the candidates at the debate on Friday at this time of grave crisis, didn’t say a damn thing worth listening to about the crisis, and we’d already heard the useless crap he did say already a thousand times before the debate…
1) “Why, then, do I keep reading quotes from Reid and Pelosi hanging the necessity of the bailout on Republican policies, as if they weren’t the MAJORITY in Congress?”
Because they have only been the majority party in the current Congress, and are barely the majority in the Senate. The deregulation occured in prior Congresses and the lack of enforcement of what minimal regulation we do have is a hallmark of the Bush administration.
2) “And why did Pelosi feel the need to bash the Bush administration in her comments leading to today’s vote?” You would have to ask her that, but nothing she said was false. It was all demonstrably true.
3) “comments which apparently sent some Republican waverers over to the Nay side?” The Congressmen voted against it because Pelosi said something mean about Bush? Please.
4) “Wall Street’s perceptions have nothing to do with the reality of what was happening behind the scenes” Their perceptions were driven by reporting on the negotiations and public comments by the negotiators. Like everyone else, they thought there was a deal in place, at least until McCain was a game changer.
“fingerpointing to one side or the other is a shallow and ultimately meaningless game that does absolutely nothing to explain why this bill failed…”
It failed because most Republicans voted against it, despite the fact the most Democrats voted for it. For which we will all suffer the consequences.
Oh, Peter, my eyes are open now. Thank you for your persuasive arguments and excellent debate.
I see now the problem in its entirety: Republicans bad, Democrats good…
I have nothing to add because you have nothing to say.
I’ll take that back: one more thing to add, since the ONLY source you will listen to is the NY Times, except when Paul Krugman disagrees with you about the bailout. From an article dated September 30, 1999, and for all of you who think this is a REPUBLICAN-CAUSED PROBLEM:
http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&pagewanted=1
Sorry to stomp on your worldview – but it was the CLINTON ADMINISTRATION that pushed Fannie and Freddie to get deeper into subprime territory -and now we’re all paying the consequences, to paraphrase Peter…
In this case, yes. Except for the fact that Paulson is a Republican, as are the 65 Republicans who voted for the bill.
I’m less concerned with who is Democratic and who is Republican than who got it right and who got it wrong. However, the bottom line is that the bill failed because a majority of Republicans got it wrong while a majority of Democrats — including their leadership — got it right.
Post 28: this argument doesn’t hold water. The mortgages which are being foreclosed are mostly of a much more recent vintage, having been written mostly in 2005 and 2006 when lenders did dumb things like offer negative amortization mortgages (and a lot of other products which were not compliant with Fannie’s underwriting standards). My understanding is that most of the really bad mortgages never went through Fannie and Freddie, and instead were underwritten by companies like Lehman and UBS.
The mortgages which originated during the Clinton administration are mostly OK, both because they had higher loan to value ratios and because real estate values are up from 2000, so the mortages are above water. So while the Clinton administration encouraged the GSE’s to write more loans to subprime borrowers, those mortgages are not the cause of the problem we have today.
You’re the only person I know who thinks more useless partisan finger-pointing is an effective response to the charge of useless partisan finger-pointing. Get to the part that shows any real analysis beyond your antipathy towards Republicans…In fact, explain to me WHY the Republicans got it wrong.
If you think about it, and put down your partisan bludgeon for a moment, the answer will be clear to you: they are in close elections, Republicans love the free market, and their constituents hate this bill.
Now, go a step further and ask why 95 Democrats opposed the bill: because they are in close elections, they hate Wall Street, and their constituents hate this bill.
What’s the common denominator?
Let me spell it out very s-l-o-w-l-y for you: close elections, constituents hate the bill.
Notice how John McCain and George W. Bush didn’t even enter into the above analysis – and if your only response is to repeat your 87 prior denunciations of Republicans, than I really am through with trying to debate this with you…
re: #30. So the Clinton administration’s encouragement of more lending from the two biggest lenders to more subprime borrowers had absolutely no subsequent effect on the weakening of credit standards across the board?
Remarkable…
Say, I hate to be the skunk at the garden party, but I notice you’ve been awfully light on links lately – care to back that assertion up with any, you know, like, facts and stuff?…
Let me repeat one paragraph from the Times article that pretty much directly contradicts your entire argument against it:
This is a direct refutation of your attempt to excuse Clinton’s change in policy because it worked during good times…
1) Why did the Republicans (and 95 Democrats) get it wrong? Because the risk of allowing the credit markets to continue to freeze is far greater than the risk that the Fed will have to take write-offs if future revenue is less than what they spend now. If the Fed doesn’t receive a nickel in future revenue, the cost of the bailout would be 6% of GDP. However, they will receive most, all, or more than the $700 billion at some point in the future. The cost of the bail-out, even with the most pessimistic assumptions, is much less than the decline in GDP which will come from a continuation of the credit freeze.
2) I understand that constituents hate the bill. Very few of them understand it. If nothing is done and the economy enters a nuclear winter, then public opinion will change. My view is that this bill may be unpopular and difficult to vote for, but is absolutely necessary.
3) The American Enterprise Institute – hardly a liberal organization – recognizes that the toxic mortgages came long after the Clinton’s left Washington.
“How did we get here? Let’s review: In order to curry congressional support after their accounting scandals in 2003 and 2004, Fannie Mae and Freddie Mac committed to increased financing of “affordable housing.” They became the largest buyers of subprime and Alt-A mortgages between 2004 and 2007, with total GSE exposure eventually exceeding $1 trillion. In doing so, they stimulated the growth of the subpar mortgage market and substantially magnified the costs of its collapse.”
http://www.aei.org/publications/filter.,pubID.28664/pub_detail.asp
4) FWIW, I bought more stock today than I ever have before in a single day. I think a deal gets done.
This concludes tonight’s blogging, at least for me. Time to watch Bloomberg to see the collapse of world financial markets. (Although US futures are up — maybe a better day tomorrow?)
Also from further down in the AEI report:
“Beginning in 2004, (the GSE’s) portfolios of subprime and Alt-A loans and securities began to grow. Subprime and Alt-A originations in the U.S. rose from less than 8% of all mortgages in 2003 to over 20% in 2006. During this period the quality of subprime loans also declined, going from fixed rate, long-term amortizing loans to loans with low down payments and low (but adjustable) initial rates, indicating that originators were scraping the bottom of the barrel to find product for buyers like the GSEs.”
Alright, well we got some links out of you! That’s better…listen, I don’t dispute the problems got WORSE during the Bush years…my point is that the absolution of Democrats from all blame is a silly game that only the most naive partisans would ever buy.
I said it before, and I’ll say it again: success has a thousand fathers and failure is an orphan…
You misunderstood my point, though – I’m not asking why YOU think the Republicans got the bill wrong, but what were the motivating factors behind them getting it wrong (again, in your view). Clearly, the public opposition is the dominant one.
And if the public doesn’t understand the crisis, that’s their fault? Part of leadership is explaining…and that’s why, in retrospect, Bush’s primetime address has to be seen as an abysmal failure, and Obama and McCain both get pretty close to a goose egg for their extremely facile and unimpressive performances on this issue during Friday’s debate…
And Peter: ah, how shall I put this? You’ve spent half this thread talking about how we’ll have to reap what the Republicans have sowed and suffer the consequences, then you let the cat of the bag that you don’t even believe that, but are strictly once again being a partisan, because you think a bill will pass and you bought more stock today than you ever have…not a very confidence-inspiring juxtaposition…
1) The motivating factors for Republicans who voted against the bill were a genuine philosophical problem with the bail-out and/or public opposition to it (or, more precisely, the fear of losing one’s seat because of public opposition).
2) I agree that the public doesn’t understand it because it was not well explained. As I said in a different thread, if Clinton or Reagan were President, they would have found a simple way to explain a complicated situation.
3) Reread what I wrote: I said that we will reap what the Republicans have sowed only if the credit freeze continues (e.g., post nine: a “potentially catastrophic situation”). I don’t think it does: I think that a second bill will pass. That doesn’t excuse those who voted against the bill, Democrat or Republican. If I am wrong and Congress leaves town without doing anything, then I will lose money. Right or wrong, that’s how I’m betting.
You could also make the case that economic disaster is already reflected in yesterday’s stock prices. Panic selling is usually a great time to buy. My investing philosophy is simple: when everyone gets on one side of the boat, get on the other side. Stocks were just too cheap to pass up.
Re “constituents hate the bill:” Not so fast.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3XLLng0bFbY&refer=home
There’s no dichotomy…middle class people who work paycheck to paycheck opposed the bill, rich people who lost their shirts on Monday got angry:
http://www.nytimes.com/2008/10/01/business/01bailout.html?_r=1&hp&oref=slogin
But there are more middle class than rich, as we all know…
I simplify, of course, and I hate class warfare…but there’s some truth to it…
I don’t think it’s just the rich who got angry — also anyone with a broker, a 401(k) account, or who is a senior who depends on his stocks –
Well, here’s the difference – I also am down about 20% year to date on my 457 deferred compensation plan at work – meaning I’m down about $500.
The poor and working class may have money in the markets, but they don’t lose thousands in a day’s trading because they don’t have that big of a balance to begin with…