Bailout: Agreement on Principles
Submitted by
CalculatedRisk on Thu, 09/25/2008 - 12:58pm (192 comments)
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Because sometimes, merely saying "hoocoodanode?" just doesn't seem like enough ...
"Hoocoodanode?"
(to the tune of Whitney Houstons How Will I Know?)
For five years we loaned, faster than we dreamed of
Option ARMs, subprime, 10 times income and above (mm-hmm),
NINJA loans, Alt-A, couldnt write em fast enough,
And were safe, cause really, housing prices just go up
Ooh, sales would slow (dont stop believin) hoocoodanode?
Resets would grow (never in this region) hoocoodanode?
Hoocoodanode house prices could decrease?
The loans were made with easy money,
Securitized and dumped on the Street,
Wed make a bid, but who knows about these things?
Hoocoodanode you couldnt trust Moodys?
"These CDOs? Why, theyre triple-A (risk-free)!"
Blowing a hole in our balance sheet
We say its strong, check back in a week
Dont blame me for chasing a little bit of yield now (uh-huh),
'Cause well soon be taking, another quarter of writedowns
Ooh, tell me, credit would slow (its just a feeling) hoocoodanode?
Defaults would grow (it must be the season) hoocoodanode?
Hoocoodanode our assets were fuzzy?
We leveraged up with easy money,
We passed the buck and raked in the fees,
It modeled great, but who knows about these things?
Hoocoodanode all our counterparties?
"Too big to fail" is our new cry (trés chic)
Lets ask the Fed for more Treasuries
Then take this debt, and play hide-and-seek
Ben Bernanke will you bail us out (mm-hmm),
Hey Henry (ooh) b-b-bail us out,
Fred and Fannie gotta bail em out,
Hey, hoocoodanode? Hoocoodanode? (Who-o-o?)
Hoocoodanode bank failures would increase?
Theres two or three new victims each week,
Call in the troops from FDIC,
We could be next, 'cause who knows about these things?
Hoocoodanode the markets could all freeze?
Can't sell our loans, 'cause theyre too far (off peak)
So here they sit on our balance sheet,
A big black swan, swimming up Shit Creek ...
Hoocoodanode? (We couldnt know) Hoocoodanode?
Hoocoodanode? (It isn't fair) Hoocoodanode?
Hoocoodanode? (The quants were stumped) Hoocoodanode?
Hey, hoocoodanode? ... (fade out)
There is no pla
Requires loan modifications for mortgages owned or controlled by the Federal Government
In other words, guarantees that if the assets are not worthless at the time of purchase, they will be by the time of sale.
First. This was just posted on Marketwatch:
5:00 p.m.
Key Republican Shelby leaves White House, says 'no deal yet'
Keep Calling and Faxing.
Give Shelby your support. Let's filibuster this POS.
They're already talking about future profits?
We should have Wall St blow up more often.
Fun anecdote: I just stopped by the ATMs here at UCSD, and I thought it strange that WaMu's atm didn't have a line.
So I walked up and it was out of order. Sorry!
Whoo hoo?
Now I know this doesn't really mean anything, but I'd like it to mean: "OMG WE DON'T HAVE THE MONEY TO FILL THE ATMS!"
And last week the WaMu lines seemed so long. Perhaps its just my imagination.
Filibuster is no longer a dirty word?
Homeownership Preservation would appear to be a lofty ideal with nothing to back it up.
We are a representative republic not a democracy.
Ken Macleod's very smart and funny response to The Plan:
The Early Days of a Better Nation
That's almost as bad as some of the outlines I wrote I college.
Not much here. We need details on the equity sharing and other provisions.
It sure sounds to me like there will be no details for those provisions. Rather, the bill will suggest that the Treasury Secretary do so, but the amount of any equity stake (or the limits on executive compensation) will be entirely at Paulson's discretion.
No mention whatsoever of review by the courts, so it would appear Section 8 is intact.
what happened to the protest that was supposedly going on today? NO SHOW?
this sucks
The only deal I'm willing to make is to send HP back to GS to clean up this mess and unwind all the crap paper he and his buddies have been pushing on American and foreign investors.
My Bailoutz!!!!
a. Maximize and coordinate efforts to modify mortgages for homeowners at risk of foreclosure
b. Requires loan modifications for mortgages owned or controlled by the Federal Government
c. Directs a percentage of future profits to the Affordable Housing Fund and the Capital Magnet Fund to meet Americas housing needs
Finally I haz bailoutz!!!!
HAPPY HAPPY JOY JOY!!!
Someday this war's gonna end...
After all this crap, this is all they've agreed on??
What a clown act.
Where's Jason? 1,000 clowns.
Mook, nice work!
El Jefe Nemo, "In other words, guarantees that if the assets are not worthless at the time of purchase, they will be by the time of sale."
Exactly. We don't know the details, but it sounds like the banks will pay (with equity) for any losses associated with mortgage modifications (because that will increase the losses on the MBS).
Best to all.
CR, equity sharing is a distraction. The key missing piece, as you alluded to earlier, is pricing.
The acceptability of the entire proposal hinges on this. Everything else is irrelevant by comparison. And we have heard not a peep about this at all...
As a taxpaying owner I am damn well not waiting in any lines at my bank ever.
I wonder how many financial stocks will be moved directly from the Do Not Short list to the Do Not Resuscitate.
We haven't heard about pricing because no one knows how to price this crap.
Please keep in mind. This is simply the pro-bailout clowns who came out to sway public opinion by saying (with bloated chests) that a deal has been made. Hogwash. I just sent a few more faxes to Boxer(who's sitting on the fence) and my other reps to VOTE NO. It's the least we can do. Otherwise, sit back and enjoy the bailout cause they won't know you even care one way or the other.
Remember, they still need to vote on the so called agreement. Nothing has actually been voted by the Senate yet.
"Whereismyretirement writes:
We haven't heard about pricing because no one knows how to price this crap.
Whereismyretirement | 09.25.08 - 5:17 pm | #"
Why not list them on E-Bay? If you can price a baseball card from 1951, surely you can price mortgages.
That Dick Shelby has some balls but what is he doing quoting economists here?
Sen. Shelby: No Agreement On Wall Street Bailout
Wall Street Bailout: Bailout Accord Up In Air as Sources Say Deal Dead - CNBC
Pricing is key, but the higher the price paid, the fewer the assets that are actually purchased.
Everyone gets to "benefit" from having higher marks, but nearly everyone still has nearly all of their toxic instruments, each month paying less and less.
If they say it often enough, they believe it will come true.
But, this is NOT a bailout, it's a just a waste of money. The financial system is still DEAD.
Let's send Tanta to do pricing on this stuff, and she takes her Robo bunny slippers;)
80 percent chance Shelby wakes up tomorrow with a horse's head -- or worse -- in his bed.
The Pentagon is watching and learning. Why should they go through hell and do all that lobbying when they could just send in two guys to scream and cry and walk out with more money than then get now?
And why not the environmental people... and colleges... and health care...and, as we know in Minnesota: nothing gets money fast like a bridge falling down.
I know that Dodd, Frank, Pelosi, et al, think they are damn smart and know lots of big important things that ordinary non-royalty people know but here is the deal: what they are doing is being stampeded into doing a really, really, really dumb thing. When they'll realize that is when they see the invites for the victory party at GS.
"c. Requires most profits to be used to reduce the national debt"
That's all well and good, but what about the initial $700B? Where does that go when (assuming it does) come back? Into the General Fund, or toward debt retirement?
I guess that begs the question of where it comes from in the first place.
I'm truly looking forward to next year's taxpayer revolt if McCain gets elected....
c. Requires most profits to be used to reduce the national debt
Who would have thought congress has such a good sense of humor?
equity, oversight, mortgage modifications, limits on exec compensation . . . and money supplied on installment.
Short of firing Paulson, impeaching Bush and Cheney and installing a competent President who could do a Swedish style nationalization, this is the best that could be done.
Plus it sets the stage for continuing anger at Bush and Wall St, and puts a very short fuse on the explosiveness of corruption in use of the cash or loopholes in compensation caps. You think folks are angry now?
This measure won't stop the housing collapse and it won't fix the financial system, but it buys some time (political and financial) and sets political groundwork for something much more comprehensive and smart in 2009.
Pulling McCain's panic string is worth $250B all on its own, and the loss won't be 100%. The cost of McCain freaking out weekly as President would be much greater.
Why would you price these things any differently than you price stocks, commodities, Treasuries, etc. Put them on the market and let bidders bid. Bidding should be anonymous so no one knows if it's from Treasury or a private party. Why is that so difficult?
CR, It is a rather moot point now, but any thoughts on James Galbraith's op-ed in WaPo today, "A Bailout We Don't Need"?
James K. Galbraith - A Bailout We Don't Need - washingtonpost.com
80 percent chance Shelby wakes up tomorrow with a horse's head -- or worse -- in his bed.
I don't doubt he'd deliver one right back.
If anyone is in DC or able to get there by Saturday, the folks at FedUpUSA are planning a protest:
DC protest, THIS SATURDAY the 27th TRILLION DOLLAR MARCH [FedUp] - MarketTicker Forums
UPDATE: Thursday 4:00 pm
OK, we have a verbal go ahead from the Capital Police. They have been most helpful in fast tracking the permit. I will have final approval in the AM, but make plans to be there.
Right now, I need anyone local to DC to get in touch with me to do a little planning.
Most importantly, please get the word out to any and all websites, blogs etc that we will be rallying in DC this Saturday on the West lawn. We have the area from 10:00am to 6:00 pm.
Even if the bill has already been voted up or down, we need to make our voices heard!
Gold Under Your Mattress
"Anyone who's sold houses in the last little while, anyone who's successfully been in and out of the commodity markets, etc, has piles of cash, and keeping it in the bank is a risky business," Merryn Somerset Webb from Money Week said. "We do have the (UK) government's bank, Northern Rock which offers fantastic rates of interest."
"There are a variety of gold funds , there are various gold-related ETFs and you can always buy it physically and keep it under your mattress it would be the safest possible thing you could do," Somerset Webb advised.
"All you can do in a situation like this, as a retail investor, is preserve your capital, and that involves not going near the equity markets not going near the property markets and maybe buying a few Guilts."
"an additional $100 billion released upon [the Treasury Secretary's] certification that funds are needed"
Wow, that's going to be really hard for the Treasury Secretary to do.
What a joke.
You simply cannot make the details 'at Paulson's discretion' for too many reasons to go into here. But this is the best one: Paulson is a temporary face in this role, and you cannot pass undefined powers to a future unknown political appointee that are nearly equal to what Congress itself has, and are less restricted. You cannot do that and have this still be America in any way, shape or form.
The principles seem nice enough. What makes me nervous is that both Congress and Wall Street must realize that this is the only opportunity for a generation to take this much money from taxpayers for such little effort.
"Model Worker writes:
Ken Macleod's very smart and funny response to The Plan:
http://kenmacleod.blogspot.com/2...heres- plan.html"
Why not cut out the middle man and have China buy the assets directly and make a profit.
I like this idea from CNBC.
Two boards, one with the power to overturn the Treasury Secretary, would have oversight.
That's great. Two bosses. Hope Shelby is one of them.
Joint photo op canceled
Rep King trying to spin as good for agreement. I guess they don't want to be seen together because they agree so much.
Another fun weekend and tomorrow should be a parrrrtttty!
Cheer up, it's only money...oops
Life will go on!
I don't like all his politics but Richard Shelby has always taken this administration to task on regulation and and use of tax dollars. He voted against the tax refund checks and wanted greater regulation in the banking sector against the objections of Chris Paper Tiger Cox. God bless him.
What the banks need is some of their largest competitors to go belly-up. This will help their situation.
So the gist is that Treasury has to get rid of $250 billion before Jan 20...if this passes the Treasury's door will be beat down by companies looking to offload. How will they decide which companies get the deal? The arbitrary manner in which the no-shorting list has been handled doesn't make me feel good.
US govt credibility to give financial advice to other countries has been totally destroyed.
Principles.
I feel much better now.
It's probably the least of all these items, but there's still something jaw dropping about the fact that Henry Paulson, former CEO of Goldman Sachs, is in charge of setting standards to prevent excessive or inappropriate executive compensation. How do you satirize this?
Letters to the editor: The bailout is un-American - MarketWatch
Read this and keep the faith - spread it around.
I like how they all summarily dismiss Shelby without addressing his concerns or offering a counter-arguement.
Shelby offers the opinions of economists from the Ivy Leagues and business. They counter with "this is for Main Street.
Emotions usually win in politics; not this time, I hope.
Bernanke, Paulson, and Cox. Two will be gone next year. I hope Ben does the honorable thing and steps down as well. I don't know who would replace him; Volker is getting long in the tooth. But there has to be someone who isn't beholden to an idealogy, a political party, or Wall Street. The anti-Greenspan, whoever that is.
The CNBC report gave no hint as to Shelby's objections, except that the paln won't fix all problems (d'uh!)
So what are Shelby's objections?
too much money? too little?
more oversight? Less?
restrictions to price to market? or to price higher?
nationalization?
or does he object to any action?
From what I recall of his statements in hearing, there's not much a clue as to what he wants.
I think this is now mainly about McCain's campaign.
Shelby may be listening to the calls and faxes.
SR
Does anybody have a link to a video clip of the backhand Shelby just gave the President & Congressional leaders?
This may yet get interesting...
joe shmoe, exactly. They are trying to marginalize him. Problem for them is, Shelby is going to get on one of the networks within a day or so.
Please post a link to information on Shelby's comments. The CNBC.com web page doesn't explain.
lama
can you fill me in? what did Shelby say?
How long until Shelby has an "accident"?
Call volume to Congress still very, very heavy. They've tried the "fait accompli" trick, and if we can can drag this out till the weekend, I think we can roll them.
The public is in a rage, and it's going to get madder the more it learns about this.
Thanks to the poster about the BBT chairman that said "only weak banks need the bailout". That was really, really good ammunition.
I'm cross-posting (with attribution, CR) to beat the band.
U.S. Senate
United States House of Representatives, 111th Congress, 1st Session
Operators are standing by to collect any words of encouragement you'd care to offer.
Those of you that have heard congresspeople interrogate Bernanke and Paulson can readily see how they're struggling with issues that many experts don't agree upon. This is tough for them to buck their party leaders and Wall Street. They need bolstering - they want to do what's right, but they can't separate out manipulation from fact.
This is a tug-of-war, plain and simple. If you don't pick up the rope and pull for all you're worth, we lose.
Right now, we're a hairs-breadth away from rolling them on the "done deal" claim.
Pull! Pull! Pull!
I don't know if it's been mentioned here: the complete Dodd draft bill is available at PublicMarkup.com
PublicMarkup.org - Dodd's Legislative Proposal From Treasury Department for Authority to Buy Mortgage-Related Assets
Title I (an ominous bookmark of the forthcoming, high-speed "conference bill") - "Authorizing the Treasury Department to Buy Mortgage-Related Assets" followed by 21 Sections, of which the Oversight Board. It doesn't seem to have in voting rights with respect to approving the secretary's "findings."
But there is Sec. 8 LIMITS ON REVIEW
"a. IN GENERAL. Any determination of the Secretary with regard to any particular troubled asset pursuant to this Act shall be final, and shall not be set aside unless such determination is found to be arbitrary, capricious, an abuse of discretion, or not in accordance with the law.
b. EXCEPTION.Notwithstanding subsection (a), the terms of a residential mortgage loan that is part of any purchase by the Secretary under this Act shall remain subject to all claims and defenses that would otherwise apply notwithstanding the exercise of authority by the Secretary or the Corporation under this Act."
And Sec. 13 affirms Paulson's debt limit, "Section 3101(b) of title 31, United States Code, is amended by striking '$10,615,000,000,000' and inserting '$11,315,000,000,000'."
::
We might want to review the draft for comparison to any editorializing bullet points in MSM. Congress recesses end of business tomorrow until 18 Jan 2009.
The bill has yet to be entered with the Clerk by Dodd or Frank so far as I know.
Financial WMDs
http://i33.tinypic.com/16kdrpv.jpg
Shelby's comments were on CNN live.
The most heartening thing I have herad yet!!
He basically said we don't need to rush. We should examine other alternatives. That the sky is not falling
Comrade Bagholders,
Well, since they're going to churn things, section 3 foreclosure work out ain't got no teeth.
8 AM Treasury buy toxic crap for $.90
8:15 AM Treasury sells toxic crap at market for $.10
Barney Fudd: You were supposed to do workouts.
Hanky: We didn't get the phone list before we sold 'em.
@El Jefe Nemo
"I didn't totally automate, that would be stupid."
Erm but some automation is NOT stupid.
Nostrovia
I still wonder if Bush has a Presidential direrctive waiting in the wings.
All that stuff the bailout is supposed to prevent is already fully operational in South Florida.
Gosh, traffic is still on the streets, we are still limping along, the grocery stores still have stuff.
And the WaMu man is going door to door. See previous thread.
And what about cramdowns? Why not just allow cramdowns, and maybe have a fund that reimburses say, half of the loss of actual cramdowns?
Mkts in Miami-Dade now down 30% year over year. Another 15-20% to go, natural bottom will form. Cramdowns will speed it up.
There seems to be a serious Republican revolt brewing and they seem to be getting more backbone about their opposition.
for Paulson excessive compensation is anything more than the $500 million he got from GS when becoming treasury sec.
Dr Evil (Paulson)
http://i33.tinypic.com/2mctugw.jpg
"But there has to be someone who isn't beholden to an idealogy, a political party, or Wall Street. The anti-Greenspan, whoever that is."
I vote for Jim Sinclair!
Shelby said there is no rush....hmmm.
In terms of good public policy, I think he is right. Even if there were a rush, Congress could kick over, say, $50B now and authority for Paulson to act for a week, and then stay in session to monitor..... but I think the broader political situation won't allow much more time.
In terms of politics, if Shelby says there is no rush then that is calling McCain a drama queen and a panic monger. . . and that makes things really interesting!
Re: We need details on the equity sharing and other provisions.
Chill baby, just having your internet up and going is good, relax
Shelby's a pretty good guy. He's got some balls to stand up against his own party who wants the bail out.
I'm calling Shelby's office to offer my vote of support for this courageous politician. This guy is fighting for us.
Wasn't Shelby the guy who refused to negotiate the deal and was replaced by Sen Bennet?
This is what I've sent to my Senators and Shelby - any thoughts. Based on this agreement I see nothing about limits on foreign banks transferring assets into the program.
Based on my familiarity with and experience in the capital markets, I am supportive of a more systematic and coherent approach to resolving the current credit market dislocations by the Treasury. However, I have SIGNIFICANT CONCERNS with the proposal as presented by the Treasury. My current concerns and recommendations for your review of the proposal are as follows:
Other suggestions outside of Treasury proposal that DO NOT REQUIRE TAXPAYER FUNDS:
In summary, I believe we need to act quickly to maintain liquidity in our crucial capital markets and financial system. I would recommend supporting a smaller version of the Treasury proposal ($150-$200bn) by this SUNDAY. However, the U.S. only has so many "bullets" left, and the Treasury proposal is NOT a "silver bullet." In my view, housing values will continue to decline to more normalized (and affordable levels) independent of this or any alternative proposal. To the extent this program is successful in offsetting credit market turmoil, the U.S. consumer will face rising oil prices as the dollar further falls and further our ongoing recession. Please use your voice to limit taxpayers expenditures on this program, while ensuring a limited version injects some liquidity into the credit system. The U.S. will need more "bullets" for coming problems; please do not allow all of our debt-funded "bullets" to be used on a hastily designed proposal that does not solve our problems.
CR: Regarding the costs of the bailout, nothing restricts the Treasury Secretary from investing in derivatives, so you can't assume that losses on a purchase won't exceed the purchase price. See Steve Waldman: Interfluidity :: Paulson's vacuum cleaner?.
I'm calling Shelby's office to offer my vote of support for this courageous politician. This guy is fighting for us.
Thanks for doing this!
... calling McCain a drama queen and a panic monger
Hadn't thought of it that way, but now that you mention it ... I'm liking this Shelby guy more and more
so now does McCain flip and say he didn't mean no debate until there is a bailout bill done. No, he meant no debate until any prospect of a bailout bill is killed.
And then he'll go back to saying the fundamentals of the economy are strong. (by the way, anyone reading CR think the fundamentals are strong? didn't think so)
It's worse in Europe...see this at Roubini...
"AIGs last annual report reveals that it had written coverage for more than $300bn of credit insurance for European banks. The comment by AIG itself on these positions was that they were for the purpose of providing them with regulatory capital relief rather than risk mitigation in exchange for a minimum guaranteed fee. Thus, a formal default by AIG would have exposed European banks to large increases in regulatory capital requirements, with possibly devastating effects on their ratings and market confidence. Thus, the US Treasury has saved, inter alia, the European banking system....The crucial problem on this side of the Atlantic is that the largest European banks have become not only too big to fail, but also too big to be saved. For example, the total liabilities of Deutsche Bank (leverage ratio over 50!) amount to about 2,000bn (more than Fannie Mae) or more than 80 per cent of the gross domestic product of Germany. This is simply too much for the Bundesbank or even the German state, given that the German budget is bound by the rules of the European Unions stability pact and the German government cannot order (unlike the US Treasury) its central bank to issue more currency. Similarly, the total liabilities of Barclays of around £1,300bn (leverage ratio 60!) are roughly equivalent to the GDP of the UK. Fortis bank has a leverage ratio of only 33, but its liabilities are three times the GDP of its home country of Belgium."
Yikes...Euro banks have liabilities the same size as their home countries' GDP...that is insane.
BofA CEO Says Half the Banks Will be Gone in 5-Years
Mr. Mortgage’s Guide to the TRUTH! » BofA CEO Says ‘Half the Banks Will be Gone’ in 5-Years
Bastards and Bitches all of them!
Just sent this to Senator Kerry:
Senator Kerry:
I maxed for you in your 2004 presidential campaign.
I haven't generally been involved in politics, this is the first letter of this kind that I've written in quite some time.
I write to urge that you vote against the bailout, and work to stop it. I am profoundly troubled by the obvious unfairness and lack of efficacy.
What is to stop the next industry from screaming fire to demand a government bailout?
What is to ensure that the bill will actually restore a "normal" credit market? The "normal" credit market as we know it is gone.
This is just another way to pretend to solve a problem with smoke and mirrors. Don't you think we've had enough of that?
Thanks,
[Name Withheld]
What about the clause that gives the gov a portion of future appreciation on mortgages where they cut the principal? Nobody on either side of these mortgages should profit on the taxpayers' $$.
Why is Shelby courageous when public opinion is overwhelmingly against it? What was his vote on Iraq AUMF?
or does McCain go into a closet with Shelby and bring him out in favor of the bill? or do the same thing by negotiating some minor or middling change that Frank/Dodd would have always accepted (or always wanted) and then take credit for it?
Barney frank compared McCain to andy kaufman lip-synching the Mighty Mouse song.
Deutsche bank has a leverage of FIFTY? Geez, that makes the Wall Street banks look conservative!
wally: The Pentagon is watching and learning
I'm more concerned that Ahmadinejad is watching and learning. "Hmmm, pretty weak-kneed those Americans. All we have to do is threaten them with the possibility of hard times and they're putty in my hands."
marketwatch.com
An Open Letter to Sen. Chris Dodd
Someone is writing letters....
Ahmadinejad is watching and learning.
He'd be correct in that conclusion. In fact, Bernanke's threat was simply 'recession' and 'lack of growth'.
Did McCain agree to this? He's the new decider.
"BofA CEO Says Half the Banks Will be Gone in 5-Years"
Hopefully these greedy no short list pricks are one of them.
Kung Fu Panda | Homepage | 09.25.08 - 5:44 pm | #
Kung Fu,
Interesting article,thanks.
Chris
I don't think anyone in congress considered stopping the bailout. All they wanted is it restructured, regardless of the email/phone calls/faxes and public backlash.
I say they all must go.
The system will crash anyway. Why allow the looting too?
Marketwatch: "A revolt among House Republicans appears to have emerged as the key stumbling block."
Well, yeah, when you don't have support for a piece of legislation, that's often a stumbling block.
As other posters have indicated, if the Congress goes home over the weekend without passing this, and they face their districts' mood, the game may not be the same on Monday.
Drip, drip, drip...
"The principles seem nice enough."
I do not think so. They are going to inflate MY dollars and taxes, to bail out those who loaned too much to those who borrowed more than they could afford.
details? we don't need no stinkin' details...
Shelby has consistently taken Chris Cox to task for his lack of regulatory enforcement.
OT If you are a RIMM shareholder don't look at the AH trading...
CNBC Fast Money has a poll...
Is the bailout enough to make you a buyer of stocks?
So far YES 28% NO 72%
Fast Money - Trade School Poll - CNBC.com
"a. IN GENERAL. Any determination of the Secretary with regard to any particular troubled asset pursuant to this Act shall be final, and shall not be set aside unless such determination is found to be arbitrary, capricious, an abuse of discretion, or not in accordance with the law."
Found to be abritrary, etc., by whom?
All that's been accomplished so far is that Bush, Pelosi, Reid, McCain, Obama, and [two other dudes] got a photo opportunity
sitting at a nice shiny table, and smiling, just like the guys who used to sit behind an even bigger table at the Politburo.
You should be more concerned that July 29th the Russians issued a report in which they stated that they expect the U.S. to collapse first economically then politically sometime in the near future.. That their were positioning themselves.
Those sentences don't seem to be principals to me. They seem vague aspirations.
Fair Economist...the article made me choke...I thought things were worse in Europe but not that much worse. By comparison, US GDP for 2007 was about $13.7 trillion. Certainly there is no single institution in the US with that much in liabilities.
Dodd is saying a new plan was suddenly proposed at the meeting, suggesting that McCain was behind it and everybody was pissed because there was no notice that any other plan was even being considered.
Comrade Bagholders,
Wow, I just had a flash back. A few weeks back, someone called this the fall of Rome or something.
And I wrote, well at least if they allow the Huns to sack DC iI'm for it.
But the last barbarian assault on Rome, think it was the Vandals...They didn't have to sack it. The Emperor or Pope met them at the city gates and gave them a large chunk of what was left in the treasury. And then the barbarians left.
Eerie huh?
Nostrovia,
El Cliffo, 'by whom'?
Answer, by a court. 'Arbitrary and capricious', and 'abuse of discretion' are specific legal standards. The good news is that this signals court oversight, unlike the original proposal. The bad news is that these standards give a lot of room to the agency to make bad decisions without being overturned. It's not quite as bad as the business judgement rule, but close.
Bubble vision viewers are starting to see the reality!! rapture time??
"CNBC Fast Money has a poll...
Is the bailout enough to make you a buyer of stocks?
So far YES 28% NO 72%"
I don't think anyone in congress considered stopping the bailout. All they wanted is it restructured, regardless of the email/phone calls/faxes and public backlash.
Well, yeah. Once I tuned into C-SPAN and saw that the tenor of the discussions was all about "how" instead of "whether", I knew this thing was signed, sealed, and delivered.
I mean, whoodya think does more filling up of these guys' re-election coffers? GS and JPM, or Citizens Against Government Waste? Hee-hee! Something about paying the piper and calling the tune comes to mind.
Or maybe it's just the 'paying the piper' bit that stuck out ...
Calculated Risk writes:
Mook, nice work!
Aw, shucks. I'm blushing.
CR - There's no such thing as a break for you, is there? Thank you for being right there for all of us. You are doing a real service for our country.
As talk is cheap, I invite everyone to join me at CR's tip jar after work.
whether it was incompetence or a sudden streak of machiavellian genius, the appalling nature of the original Paulson plan worked to poison (or further poison) the public well against "The Bailout."
However different the current plan on the table is from the Paulson original (oversight, installments, equity, pay caps, mortgage workouts, etc), the general contours of public debate are still set by the original Paulson plan.
It's a little bit like trying to explain that Saddam or Al Qaeda are dangerous but not quite as dangerous as many think, after Bush has been on TV calling them omnipotent evil with WMD. Once that image gets out into discourse it is hard to bring it down to realistic proportions.
Very interesting.
Part of was hoping that those CNBC poll #s were the other way around so the Cramerains would pump the dow another day or two
before I get out .
Panda, the only excuse I can think of for that is if investment bank activity in Europe is structured as trust bank operations, with the banks not liable for losses. It would be unbelievable if the Europeans had no reserve requirements for investment banks. Really (here and anywhere) reserve requirements should be higher for investment banks because their money is hotter.
The servant of multiple masters serves none.
The profits go to debt except those that go to subsidized housing.
"Establishes strong oversight board with cease and desist authority" and "Establishes an independent Inspector General to monitor the use of the Treasury Secretarys authority."
"Maximize and coordinate efforts to modify mortgages for homeowners at risk of foreclosure." Seeing what mischief has been promulgated within the commerce clause imagine what this loophole will spawn. It doen't even limit this to mortgages that the Treasury buys fergawdsake.
They won't even tell us who ordered or why they must pass by Sunday. We don't even have single digit accountability. $100b for x, $200b for y. How tough can it be to get it right to the nearest one hundred billion dollars? No deal.
I have a feeling that BoA will be one of them.. the 'too big to fail' meme is a construct of the human imagination..
Comrade Anonymous writes:
BofA CEO Says Half the Banks Will be Gone in 5-Years
http://mrmortgage.ml-implode.com...n-next-5-years/
3a STINKS... as i wrote to my congress folk: how do you know you are bailing out a "victim" home-owner? if they went in thinking it was free $$$, that is not acceptable for bailout. if they were bullied and lied to, ok, you have my attention. too many of these folks who may be out of houses (THEY COULDNT AFFORD!!!!) are unknowns... too much of an effort to deal with this in a case by base basis.
why not agree to help those of us who HAVE been paying on time? that would free us up to SPEND SPEND SPEND just like they want...
The danger here is that Paulson gets some directives on what he should do, but that he still gets to decide the details.
The law must be 100% watertight on pricing, equity and executive compensation, with complete details about what is allowed and disallowed.
The land, and especially the bailout, should be ruled by law and not by men making up their own interpretations of the law.
McCain - NO DEAL!
Obama, take your lumps.
Republican shill on CNN right now is blaming DEMOCRATS for proposing to spend 700 billion $$$. "Oh, it's easy for Democrats to spend $700 billion, Republicans have principles."
Now another one saying the same thing. "Democrats LOVE to spend money." I am furious at these WEASELS.
"The Emperor or Pope met them at the city gates and gave them a large chunk of what was left in the treasury. And then the barbarians left."
Good thing Rome was on a Gold Standard. I don't think the barbarians would have settled for worthless paper.
THE PLAN IS BLOWING UP:
"Dodd says will ignore White House meeting altogether"
"Dodd: Meeting amounted to 'rescue plan for John McCain'"
FE...not sure about the reserve requirements but overall transparency requirements for entities are lower in Europe than in the US. Before this credit storm hit last year, there was a controversy over whether Sarbox meant that US financial markets would weaken because companies would take their finance business to Europe because of less disclosure required. So IMO they levered up more because no-one could see what they were up to.
They can be as weaselly as they want as long as they vote no.
Somebody posted--on previous thread--that the Chinese aren't buying our debt anymore. Any further comment?
Probably asked before, sorry---but--once the first bundle of crap is purchased, there is a basis to mark to market similar pieces of shit. If the price is only slightly above what it should be, it will be way below how it is now listed on many balance sheets. Now some might claim each tranch is different, but auditors are going to want to use best valuation available. No matter what, accountants and lawyers are part of a growth industry.
Deal is dead!!!!!!!!!!
I don't have a tv; is there a web feed to the latest? IS C-SPAN covering the blow-up of the deal?
The law must be 100% watertight on pricing, equity and executive compensation, with complete details about what is allowed and disallowed.
Yes, yes, yes, and yes. And the dirty little secret is Congressional leadership DOES NOT WANT TO DO THAT. Because then they are equally culpable at the results.
This is the Iraqi war resolution all over again. Dems (and many GOPers) want to say they passed a deal with fuzzy language, so they get the benefit of claiming they did "the right thing" while simulateously being able to say "hey, that's not what I meant!" when it all goes to shit.
"But, this is NOT a bailout, it's a just a waste of money. The financial system is still DEAD."
Agreed. But a quick, relatively painless death, or a long drawn out torturous one?
Just tried calling Boxer, mail box is full. Shelby's line is busy, can't even get through! Keep calling baby, enough is enough!!
Done deal. Tomorrow.
Shortly, you'll see the Wall St.'s Three Best Friends Forever -- Obama, McCain and Bush -- standing shoulder to shoulder in solidarity for a bailout photo-op.
Be sure to wobble your bobble on November 4 for your personal flavor of oligarchy:
YouTube - Three Way Presidential Debate - Obama, McCain, and Nader
"Dodd: House Republicans offered new plan he had not seen"
I admit I listened to some Rush Limbaugh today. Barney Frank is to blame because he advocated on behalf of Freddie and Fannie making more loans to poor people.
He was playing the clips of Frank from the first day of the session. He explained how this was the Dems baby all along... fallout from their misguided pandering.
Please do not pitchfork me. I do not agree.
Why are there posts saying deal is broken/dead? Links?
Shelby on bailout -
Video - CNBC.com
"Somebody posted--on previous thread--that the Chinese aren't buying our debt anymore. Any further comment?"
Reuters piece was later denied by PRC govt. Don't have a link.
Well, is it dead or done?
Comrade Misean, yep. history rhymes.
from one of my email signatures for a number of years -
"The national budget must be balanced. The public debt must be reduced; the arrogance of the authorities must be moderated and controlled. Payments to foreign governments must be reduced, if the nation doesn't want to go bankrupt."
Cicero (106 BC - 43 BC), 55 BC
Headlines I quoted are from marketwatch.com
Sounds like Dodd and the Dem's just got blindsided by the Repub
NO BAILOUT. McCain camp confirms that there is NO DEAL. Obama camp still figuring out where they stand.
Good. I hope Buffett takes a beating.
just heard clip of shelby on the radio. he speaks negatively of "The Paulson Plan."
But the plan on the table is not the Paulson plan....
Shelby did not call it the Dem's plan, but the Paulson plan.
The only person in favor of the Paulson plan besides Paulson is Bush.
So this looks very squiggly to me.
Any details on the repub Plan that Dodd seems to have mentioned? First anyone has heard of it?
"The Paulson Deal is dead"
"Wasted 3-4 hours at the WH today for a photo op"
Dodd on MSNBC right now!!!!!
Things just got interesting!
Any loan written down by Treasury needs a lien allowing govt to recoup any write down + portion of appreciation on sale of said home...
First time poster but long-time lurker. First, thanks to many for insightful posts and helpful links over the past year. But I am amused by those here who are looking to the Republicans to stop this bailout when it was George Bush and the Republican Congress who catapulted deregulation to the stratosphere. Does anyone else find it ironic that many now seem to now be pinning their hopes of stopping this bailout on the same people whose earlier votes (or get- the-god-damn-government-off-my-back philosophy) set the stage for this disaster in the first place? Think, people, think.
WASHINGTON (MarketWatch) -- President Bush was unable to seal a deal between Republicans and Democrats on his $700 billion mortgage rescue plan, officials said. "It was not a negotiating session," said House Democratic Leader Steny Hoyer. The two presidential candidates, Sen. John McCain and Sen. Barak Obama, attended the meeting but left the White House without talking to reporters. A revolt among House Republicans appears to have emerged as the key stumbling block. Hoyer said that some plans have recently been put on the table that even Treasury Secretary Henry Paulson hasn't seen. "On our side, there is a consensus on how to go forward, we'll have to see if that consensus can grow," Hoyer said. It was up to Bush to talk to Republicans, he added.
If we are lucky, the Republicans have finally thrown Compassionate Conservatism under the bus.
DODD IS PISSED!!!! Love it!
MSNBC
He also called it all "political theater" yet he's been giving on-cam interviews for what, two hours straight now?
Thanks for the updates, c&c, bearly, joe schmoe, etc. I guess having CNBC is useful for once.
Roman Republic died, but empire lasted for another 500 years.
Conservatives could have made the Roman Republic the first United States, but
too vested in narrow interests to do so.
This too shall pass. Looks like the checks and balances are working. Must drive to Merritt Island. don't let the Republic end while I'm on the road.
"Sounds like Dodd and the Dem's just got blindsided by the Repub"
If it comes to that (and this is probably all just halftime entertainment) I imagine they would say that they mislead by the Sect of the Treasury and the former Bush CEA member Fed Chairman, and thankfully saw through it in time.
whose gonna bail out the RIMM buyers who went long into this rally at 100 bucks?
if you bot today at 100 bucks, they are shredding shares at 79 bucks after hours...
you've been warned.
What's wrong with a little deflation?
Central banks have strived mightily to fight inflation for decades and along comes a situation that will do the job for them in spades and they are 'worried'.
Armies of unemployed can be put to work building/repairing our infrastructure. Such work can never be done so cheaply as during a deep recession. What did Hoover dam cost?
This is an opportunity to transform America. I say we take it.
PCA: Bloomberg.com has a stream and they are covering the issue. No CNBC needed.
Comrade Bagholder Alan Greenspend,
""The national budget must be balanced. The public debt must be reduced; the arrogance of the authorities must be moderated and controlled. Payments to foreign governments must be reduced, if the nation doesn't want to go bankrupt."
Cicero (106 BC - 43 BC), 55 BC"
/Mr. Burns on
Excellent.
Yeah that sorta popped into my head. Really friggin' eerie.
Nostrovia,
"Deutsche bank has a leverage of FIFTY? Geez, that makes the Wall Street banks look conservative!"
Fair Economist | 09.25.08 - 5:47 pm
The phone call I recieved yesterday now makes sense. A freinds wife who is a realtor in SW Florida said DB is the only bank really slashing prices on REO's. The latest deal.
4 EA, 2/2/1 old style Florida homes for,get this 73k. 18k ea. And its getting worse around here...
Chris
P.S.- All 4 homes had loans between 175 and 200k at the peak...WOOT!!!
How much of an impasse do you guys figure this latest "no deal" dispute will be? Is it just more theater - because I'm about 99% sure some huge-ass bill will be signed by next week.
Lawyerliz=
drive safe. no guarantees on republic.
"If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered."
Thomas Jefferson
The Debate Over the Recharter of the Bank Bill, 1809
CSC,
Thanks. I turned to Bloomberg. They have better money honeys anyway.
Basically, there must be an auction mechanism to establish pricing.
uevo threado
Persecuted Comrade Anonymouse writes:
nuevo threado
That's Russian for "Move Along, Comrades"
"Is it just more theater"
In my opinion, probably, as well as posturing for position just in case it doesn't come together.
But what it is doing is making it increasingly unlikely by the minute that the thing can be crafted, debated, and passed before tomorrow night.
They might not go home, and do it over the weekend, but the "stand together and save the nation" formation is going to be hard to put back together in 36 hours.
Don't be so congratulatory of Shelby: killing this thing by getting paleo-Republicans fired-up is all-to-easy, but not being left with the blowback, both economic and political, is another matter.
Having a Republican president light this fuse, then a Republican minority in Congress hug the issue close until it detonated, was not the plan! So far, the Democrats have been playing this really, really, smart.
But I am amused by those here who are looking to the Republicans to stop this bailout when it was George Bush and the Republican Congress who catapulted deregulation to the stratosphere.
I carry no brief for either ass cheek of the duopoly, but this mess predates the reign of King George.
The Reagan deregulatory project received able assistance from its faithful lapdog Clinton, whose svengali Rubin is now at Obama's elbow.
Market fundamentalism is the creed of both parties and has been for a quarter century. For a good read pick up Thomas Frank's One Market Under God.
I have posted my sacred message on the prior FDIC thread.
So far, the Democrats have been playing this really, really, smart.
Could not disagree more.
On the prez side, McCain is looking like someone who is at least trying, while Obama looks like a balloon adrift in the heavens waiting for a favorable wind.
On the house side, the Dems are coming across as not believing in this plan because they won't pass it even though they have enough non-GOP votes. And that section 3 - OMG - that is the STUPIDEST thing they could have possible put in there - Paulson must have been laughing his ass off when they "forced" him to add an m'f'ing ENTITLEMENT to housing.
"REQUIRES?"
While the 90% of Americans who are paying the mortgages on time get stuck with the bill? My God, this is one of the worst bits of politicking the Dems have ever done.
Meanwhile Main Street is asking itself how it can trust a Dem leadership on its knees sucking the Bad Boy of a President with worse approval ratings than Nixon.
And no - I'm not a GOPer - I'm a freakin' Liberal.
I'm telling you now - not only have the Dems lost what should have been an automatic term in the White House, they are now is serious danger of losing control of the House. Maybe late for this go-round, but watch out 2 years from now, when every GOPer running against a Dem incumbent is going to plaster Section 3 in 480 point type across every district in America.
This is a major major political cock-up on the Dems part - this will wreck the party for years to come.
sad the so called dems/reps are posturing over blame etc... they both mucjed up over long periods of time. the taxpayers taking sides is not productive. we are getting kicked in the nutz by BOTH "sides" in this matter.
How much of an impasse do you guys figure this latest "no deal" dispute will be?
Congress = addicts
Wall St. campaign funds = meth
Do the impasse math.
End of an Era --> agree. i see no reason to bail out other home owners at this time. its foolish to attempt as it continues the REWARDS FOR FAILURE program...
I've a feeling that this bill was in the works since countrywide-BOFA deal. i.e. some time last year.
If BS had not failed and other hiccups in between (fannie, LEhmans etc) , this "fire, Fire" cry would have come much earlier.
I've suspicion that it was countrywide that was too big to fail and BOFA was guaranteed that this life line -- treasury buying the MBS (SH*T) was promised.
In this age of electronics/email, there has got be some one knowing some thing about this deal.
Remember the statements from BOFA(widely covered here in CR) during year that they will default on countrywide debt (not guarantee in other words).
The proof will come soon if the process of buying the MBS is transparent and BOFA figures in a major way on the list. However, if the MBSs have been traded in between with this promise to some one else, it could be some one else's name against the MBS.
We can prove it if ownership if the MBS can be traced...
Call it a conspiracy theroy or what, it is my guess that
"Investment, commercial banks borrow $218 bln from Fed"
Needless to say, that total doesn't include the $750 billion.
Conjure says, "If you folks can't see what's going on here, you're fools."
Investment, commercial banks borrow $218 bln from Fed - MarketWatch
I agree with End of an Era. They've blown it.
The habits of genuflection and surrender in the Democratic Party, taught it by the DLC, have rendered it inert.
Putzes!
You forgot to add: "Pick one from each group" at the top...
I am calling China for a Trustee in Bankruptcy,
deal or no deal or schmeal or whatever these slimesters want to call it.
Anyone read Roubini's 10-point plan?
On Shelby, the GOP and courage... all is not what it appears:
GOP minority isn't any more 'opposed' to this bailout than Dems are - they just don't want to vote for it.
They would LOVE to see it passed with 100% Dem votes and NO GOP votes... then they can crow when the pain comes because EVERYONE KNOWS there will be pain if its passed and pain if it does not. GOP can't lose if the bill passes with ONLY Dem votes & the pain rolls in.
Is it BS? Sure but it makes GREAT politics especially as deficits soar & taxes have to be raised...
The only way Dems win in this situation is if everything works out fine (no pain - bailout makes money, etc.) pretty quickly AFTER passing - what is the chance of that? Not good.
Dems rank and file on the other hand will secretly be hoping the bailout DOESN'T pass and all the obstruction comes from GOP... then when the pain comes ('cause there will be pain either way) Dems can say to joe laid off worker - "You lost your job & home & retirement account because of incompetent Bush policies, evil bankers and the GOP minority in congress obstructed the only fix available to us at the time... We tried but they stopped us, sorry..."
Is it BS - sure but it also makes great campaign fodder as unemployment & foreclosures rise...
The GOP only wins in this situation if nothing bad happens in the wake of the failed bailout... TED spread improves foreclosures decline, lay offs don't materialize, etc. What is the chance of that?
This is a classic political 'hot potato' where the other side 'winning' ensures your side wins later in the ballot box. Everyone - Shelby included - is aware of the stakes.
But I am amused by those here who are looking to the Republicans to stop this bailout when it was George Bush and the Republican Congress who catapulted deregulation to the stratosphere.
When you're talking something that strikes to the heart of the principles of a Republic - like a deal passing over nearly unanimous opposition from the people - you're going to find strange bedfellows trying to stop it. It's like 9/11 that way.
"The national budget must be balanced. The public debt must be reduced; the arrogance of the authorities must be moderated and controlled. Payments to foreign governments must be reduced, if the nation doesn't want to go bankrupt."
Cicero (106 BC - 43 BC), 55 BC
I've forgotten all my Latin, but I remember how unbelievably good stuff like that sounded in the original. Latin was a fantastic language for oratory.
Does anyone have a link to the letter from the economists that Shelby was referring to?
The GOP only wins in this situation if nothing bad happens in the wake of the failed bailout...>/I>
GOP won't obstruct. They will offer alternatives, but they will not block voting or try to close debate or anything that can be construed as obstructionist. I wouldn't be the least bit surprised if it's the GOP that first tries to get the existing plan to a vote (which of course they won't vote for).
Even today's mess turned out to be the presentation of an alternative plan - which the electorate is clamoring for - and Dodd obliges his GOP counterparts by coming across as completely dismissive of it.
Dems have a majority - the backblast from this clusterfuck will land directly on them whether they pass or don't pass - that's the price of being in power. It doesn't help they're getting outsmarted at every turn...
PS In case it's not obvious, yes, I agree Shelby et al are (mostly) posturing.
End of an Era -- I hear ya -- and agree with you about the policy of the issues -- but it's the politics I think the Democrats are still far ahead on, in what has turned out to be a dangerous pre-election game.
However, the game is still underway, with plenty of time for lots of different votes and outcomes in the next few days. I'd still say that for whatever problems it's caused on the Democratic side, the fissures on the Republican side are ugly: between the rank-and-file and the leadership; splits AMONG the leadership (Shelby vs. Bennett); and splits between the administration and Republicans in Congress, as shown by Cheney's icy reception earlier.
No-one in Congress is better off having been led into this dead-end alley brawl with the voters; but if the Democrats have chipped a tooth, the Republicans are breaking bones: unfortunately, their own.
End of an Era writes: GOP won't obstruct. They will offer alternatives...
From The NYTimes: A group of Republicans, led by Representative Eric Cantor, a Republican leader in the House, were circulating an alternative plan that would rely on mortgage insurance, provided by the government, rather than taxpayer purchase of frozen mortgage assets.
There will be alternative plans talked about, all right... but no votes until the leadership(s) know how each person will vote.
Shelby was sending Bennett a strong message that there weren't enough Republicans willing to hold all the short straws that would be needed to have a successful vote.
What? He can't be "arbitrary and capricious?" Why not?
So if Uncle Sam buys my neighbors loan, and not mine, does my neighbor get all the breaks?
Will homeowners who lied on their loan apps get a break on their rate or balance?
Should I stop making payments now, so I can get in line for a discount on my home loan?
What will be the value of the purchased securities if the Fed starts tinkering with the terms to the homeowners?
A chicken in every pot! The current generation should be ashamed. Glad I don't have any kids to pass this bill on to.
Lee in Santa Rosa
How are they going to figure out which mortgages are "owned or controlled by the Federal Government"?
Cicero (106 BC - 43 BC), 55 BC
I've forgotten all my Latin, but I remember how unbelievably good stuff like that sounded in the original. Latin was a fantastic language for oratory.
Fair Economist | 09.25.08 - 6:41 pm | #
His final words were "There is nothing proper about what you are doing, soldier, but do try to kill me properly." How does that sound in Latin?
This rough outline is what they have after over a year to prepare? And it does nothing to address the underlying problems.
END
Executive compensation is not enough - compensation across the board in wall street firms dealing with the bailout needs to be controlled - last yr GS employees got $20 bn in bonus, of which the CEO took home $67 mn - so we need to address all employees. Will Wall St pay back all the bonuses generated by selling the toxic waste - they should be put in an escrow a/c which can be used to pay institutions/ individuals that bought the waste and see if the people who are being forced to foreclose might be willing to manage smaller sized loans. In GS's case they are complicit in this case since they shorted these bonds with their internal funds, all the while continuing to sell more of the toxic waste.
Look at the math - they are ripping us off big time!
11,666,666 Home Owners Could be Rescued from Foreclosure « Your Mortgage or Your Life…