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Senate passes “sweetened” rescue package
The AP reports:
After one spectacular failure, the $700 billion financial industry bailout found a second life Wednesday, winning lopsided passage in the Senate and gaining ground in the House, where Republicans opposition softened.
Senators loaded the economic rescue bill with tax breaks and other sweeteners before passing it by a wide margin, 74-25, a month before the presidential and congressional elections.
UPDATE (10:59 p.m.): WORLD’s Emily Belz has filed her report from Washington, including news about the overworked House of Representatives website.
Topic: Newsworthy, WorldMagBlog
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back to top48 Comments to “Senate passes “sweetened” rescue package”
I only wish we could always have spending cuts required with all tax cuts.
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Yeah, it’s “sweetened” alright with over $100 billion more dollars putting the cost well over $800 billion.
In classic Washington style it has also been loaded up with all kinds of extra fiscal sweeteners for doubtful constituents out in the country. These include everything from support for research into the woollen industry to an excise tax exemption for children’s toy wooden arrows.
And let’s not forget Puero Rican Rum. The US Congress who got us into this mess can’t stop itself from spending like a drunken sailor even while they are supposedly bailing us out!! They are despicable! Here are other bogus earmarks added to the bill:
- Virgin Island and Puerto Rican Rum (Section 308)
- American Samoa (Section 309)
- Mine Rescue Teams (Section 310)
- Mine Safety Equipment (Section 311)
- Domestic Production Activities in Puerto Rico (Section 312)
- Indian Tribes (Section 314, 315)
- Railroads (Section 316)
- Auto Racing Tracks (Section 317)
- District of Columbia (Section 322)
- Wool Research (Section 325)
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Boy. It’s WAY past time for a line item veto…
I wonder how much of that is Republican pork and how much is Democrat pork. It’d be nice to see who is responsible for each section of this boondoggle.
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From Mindy’s article (highlights mine):
Some in the Senate were still outraged, even with the sweetened offer. Sen. Jim DeMint (R-S.C.) spoke vehemently against the bill.
“It asks the American people to trust people who have consistently misled them,” he said.
Hmmm. I’m going to have to keep my eye on this DeMint fellow. Finally someone in Congress is telling the truth!
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Slashdot had a nice thread on this. I think there were literally 2 individuals who supported the bailout. However, there were well over 300 commentators opposed to it.
Seventy five percent of Americans are opposed to the bailout, but yet seventy five percent of the senate voted for it.
I think that in lieu of the slowing economy, we need to begin layoffs in Washington, starting with our out of touch senate.
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I’m still amazed that there’s no outcry against Sen Chris Dodd. He took vast campaign donations from lobbyists who represented many of the failed banks. Now we see Dodd’s role in this bailout of the industry his committee once oversaw.
Taking campaign funds from organizations you regulate? I don’t know what its called in Connecticut, but in Louisiana it’s called a bribe.
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Allowing Chris Dodd and Barney Frank to oversee this “bailout” is like leaving the cat to guard the milk supply.
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Are we socialists yet?
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Actually the bailout support in the country appears to be about 57%:
http://people-press.org/report/452/public-favors-bailout
(notice the higher support among Republicans polled than Democrats polled.
).
I think it is fair that no one likes the bailout, but those who are considering the alternatives for the economy conclude that it is the best option we have at the moment.
It has passed the senate with clear bipartisan support.
It has a number of tax cuts added, without accompanying spending cuts, to appease some Republicans.
It is apparenlty supported by the majority of the public.
It is supported by a Republican administration.
We can now see whether the house is still sufferring partisan gridlock again and whether an ideological fringe will again vote their ideology or the countries necessity. I suspect that 777 point drop in the Dow and the inability of Missouri, Maine, and massachusetts to float state bonds these last few days may galvanize the attention of certain house members.
And yes, I do suspect that this will show up in the polls (as it already seems to be showing up in the presidential polls) but I suggest that impact will be in some cases counter intuitive to what has so far been the conventional wisdom.
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What we are seeing, I suggest, are deep divisions within the Republican party.
There is the Republican party which has supported the countries basic economy and is evidenced in much of the Republican power structure including it would seem George Bush.
There is the Republican party based on social conservatism and an ideologically driven form of economics.
And these two appear right now to be in major diagreement.
The social conservative and ideologically driven economics wing would appear, based on a number of factors, to be out of touch with the American public as a whole.
The result would seem to be an on coming set of predictable losses.
It will be interesting to see how the Republican party reassembles itself after things settle down.
I am placing my money on a fission and the rise of a third party. A bit of a long shot, but increasingly I suggest, not much of a long shot.
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As long as we keep Dem. Barney Frank as House Financial Services Committee Chairman, we will deserve every loss and injustice that comes our way as Americans living in a moral coma.
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There is of course the contrary Times/Bloomberg poll on the bailout:
Times/Bloomberg poll
But as the LA times notes the questions are different:
LA times analysis
I think virtually eveyrone has an emotional distate for the bailout.
It would appear, however, that a majority of the population and our senators understand that some form of action is necessary, no matter how unpallatable at the moment.
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Jole Mark post 11,
which is as sensible as saying so long as Republican dominate administration and congress and hold the House Financial Services Committee, as they did from 200 – 2006, then the U.S. will have the gournd work set continuing economic crisis.
I love the emotional responses.
I am see precious little thoughtful consnideration of what is going on.
I have posted a link to a lecture which explores this issue in detail. Based on the comments so far, it would seem that few have watched it or done any other serious look into the mechanics of the crisis which is unfolding.
I believe that also says much about the nature and depth of the discussion.
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Joel Mark post 8,
there is no one in the U.S., with the possible exception of some finge groups, who are not in part socialist.
In fact there is pretty much no government in the world which is not at least partially socialist.
So the question is silly as stated.
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I’m waiting for McCain to “name names” of those packing the bill with pork, as he promised to do if elected.
This would be a really good time to show us how that would work…THAT would be leadership.
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Momof5,
I’d like to see that too, but it doesn’t do a whole lot of good when McCain voted for it, even with all of the earmarks
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MomOf5 and Graceland, I thought the same thing. Who is going around taking names? Where are the speeches and TV ads exposing Congressional mismanagement? Where are the media watchdogs?
We are patching the system with a $700 billion dollar piece of bubble gum, but not one word about fixing the system. Not one word about a Congressional investigation.
Where is the leadership from the current President or any future presidents? (… sound of crickets …)
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#14,
I made a point with a simple question and Musing either missed the point or disagrees, so he ridicules the question. Please enlarge your mind or show some good faith in the conversation, whether you agree or not.
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Are we Americans moving towards more liberty or more government control over our lives?
Walter Williams pointed out that congress spends trillions of dollars on “farm subsidies, business bailouts, education subsidies, Social Security, Medicare and prescription drugs…”
Williams sees these (and many other federal and state expenditures) as elements of “a welfare state.” And all that spending justifies the governments controling “nanny” role over our lives and decisions. If we cannot pay the price for liberty, we will not keep it.
We have long been a highly subsidized. That is probalby the biggest reason we now have become a bailed out people. And this is just the beginning. Many more bail outs will be needed.
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Can’t we once, just once, have a vote on a bill that only contains ONE ITEM?! I despise the fact that all this other crap is routinely put into bills. They sneak stuff in that should never be passed. Stuff we never hear about. And then it taints the bill in question, making people vote for or against a bill they otherwise wouldn’t. Let each item stand on its own merits. If it can’t pass without being hidden inside another bill, it probably shouldn’t pass at all. Can we make a law?
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Joel mark post 18,
but of course as phrased your question is not properly structured: we can’t be concerned about becoming socialist yet if we are already at least partly socialized and have been since pretty much the beginning of the 20th century.
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Joel Mark post 19,
this one is easy:
with the government impositon of various security measures and the some of the recent supreme court decision, we are moving to more intrusion of the government in our lives.
The final protection against government intervention becomes the right to privacy. The present administration and the conservative members of the supreme court are working hard to undermine this right to privacy.
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Designergirl post 20,
the house voted this “relatively clean bill” down on Monday BUT there is near universal agreement in government that this bill in some form must be passed.
Hence the logrolling.
Welcome to Democracy, particularly when a small minority refuses to take the actions required for the good of the whole.
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Those who make the laws hide the pork in the bills. Is there a true man of integrity left on Capitol Hill? Probably not. It would take a majority of men (and women) of integrity to pass a bill the contains only one item and to pass a law (like a line item veto) to ensure that it happens. It’s looking pretty warm for the smowballs these days.
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Some economists are arguing that Paulson’s bailout plan is actually too weak to effectively deal with this grave financial crisis. One of them, Nouriel Roubini, a prof. of finance at NYU, has writtten a bone chilling article in Forbes, Next: The Mother Of All Bank Runs? including
It’s plain that the current financial crisis is worsening in spite of–or perhaps because of–the Treasury rescue plan.
The strains in financial markets are becoming more, rather than less, severe in spite of the nuclear option of a $700 billion package: Interbank spreads are widening and are at a level never seen before; credit spreads are widening to new peaks; short-term Treasury yields are going back to near-zero levels as there is flight to safety; credit default swap (CDS) spreads for financial institutions are rising to extreme levels as the ban on shorting of financial stock has moved the pressures on financial firms to the CDS market; and stock markets around the world have reacted very negatively to this rescue package
The next step of this panic could be the mother of all bank runs, i.e. a run on the trillion dollar-plus of the cross-border short-term interbank liabilities of the U.S. banking and financial system, as foreign banks start to worry about the safety of their liquid exposures to U.S. financial institutions. A silent cross-border bank run has already started, as foreign banks are worried about the solvency of U.S. banks and are starting to reduce their exposure. And if this run accelerates–as it may now–a total meltdown of the U.S. financial system could occur.
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The “package” should protect those that, through no fault of their own, are damaged by the corruption of the government and Wall Street. That would be those people, expecting to retire within the next few years, who’s 401Ks just took a huge hit (why did they select high risk options if they were close to retirement?). The other part of the package should be stripping out all the bogus legislation that is counter to free market principles (not easy, because as someone previously stated, the government has had their fingers in the pie for a long time).
After fixing the fundamentals, let the chips fall where they may.
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Here’s a commentary on the bailout written by Vice President of Market Analysis, Dirk Hofschire of Fidelity Investments.
I’ve read about 2/3 of it so far, but figured that y’all might want to read something by a person in the financial field about the subject.
It seems the devil is in the details, or lack of details, as the case may be. There’s a lot about what the government may do, but precious little detail on how it’s going to be implemented. We should watch closely how the “experts” suggest we do so, and which ones suggest we do so (Barney Frank and Chris Dodd to name two).
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Peter Leavitt post 25,
you may very well be right. My sense is the real challenge is perhaps at least $1.1T but could in principle be as high as $10T.
Which makes the “dole it out in pieces” proposal potentially problematic.
I suspect the issue will be the cost and timing of the transactions.
Are you aware of anyone with good models on how much of the problem must be fixed how fast to avoid difficulties here?
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Make It Man post 27,
thanks for the link.
The first thing that hits me is:
“The first lesson learned throughout the history of financial crises is that when financial markets simply stop working on their own, the government may be the only backstop available to prevent a systemic financial collapse that jeopardizes the entire economy.”
which is to say that the government intervention will apparently be required.
I will read the entire document over the next bit.
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And the following is why the govedrnment must buy the securities rather then allow the securities to be kept on the books:
“However, for a financial system to sow the seeds of recovery, it must purge itself of the bad loans or assets that caused the crisis in the first place, so that surviving institutions can recapitalize and be unencumbered in future lending. There are historical examples of governments that prolonged financial crises into decade-long economic catastrophes (e.g. Japan in the 1990s) by allowing bad debts to fester on the balance sheets of financial institutions.”
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Make It man post 27,
excellent article.
It sounds guardedly positive regarding the present bill.
This combined with the Princeton lecture I have posted would suggest that the bulk of thre economics community is indeed supportive of the broad outline of the proposed bill.
Thanks for the link.
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One issue brought out in the Princeton lecture and which is hinted at in the Fidelity document is that the purchase price must be adequate to effectviely recaptialize the financial institutions.
But this al most certainly means buying the securities at above the present market prices (which are effectively zero).
But if the government is capitalizing the institution it would seem appropriate that the government should also be given an equity stake.
The warrant provision in the present bill seems to be the beginning of addressing this aspect of the situation.
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I believe when we combine Make It man’s material, the Princeton lecture, and the recent behaviors of the credit markets (failure of a number of states to float bonds for example) I believe we are moving into the following situation:
- based on present knowledge, failure to act on the bailout bill increasingly appears to be a case of governmental malfeasance
and those who vote against the bill should be held accountable for the cascading damage to the American economy.
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Musing, I have no idea of what it will take in the long run to effectively deal with this parlous crisis. No one really knows. I do regard the credit market meltdown as very grave and favor the Paulson plan, however ornamented with expensive baubles. Whether this plan will do enough, I am rather doubtful.
IBD today has an excellent article, Time To Step Up, that discusses the consequences of not dealing effetively with this crisis:
And no, it’s not a “bailout for Wall Street,” as popularly repeated. Average Americans have yet to feel the full force of what a credit crisis means. Once they do, they won’t like it a bit. A credit crisis doesn’t just mean banks stop lending to one another, or call in loans from Wall Street “fat cats.” It means you might not get the credit you need to pay for a car, a home or a child’s education.
It means many medium to large companies will not be able to go into the money market to finance their daily operations. Those that can’t will be forced to pull back on expansion, slash investments across the board, reduce their purchases, maybe shut down marginal businesses and lay off workers.
All this could cascade into a deep economic downturn that will last years. The victims, however, won’t be gazillionaires on Wall Street. It’ll be you. That’s why, despite IBD’s impeccable free-market credentials, we support the rescue plan. Time for taking effective action is running short
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Peter Leavitt post 34,
you and I are pretty much exactly the same page here.
Thanks!
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I’d have a lot more confidence in this “fix” if we could see evidence that the solutions weren’t relying on the rascals like Barney Frank and Chris Dodd to “help”.
They’ve shown that they couldn’t see the problem, even when Then-Sec. Snow pointed it out. They resisted taking steps when Bush called for it.
Now we’re supposed to take their word for it that they know what they’re doing???!!!! I just shudder.
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momof5 post 36,
you mean you would prefer to depend on the rascals ij the bush administraion who have overseen the entire exercise which brought us to this situation?
Remmeber Democrats have only held congress since 2006. This problem has been sriously cooking since perhpas 2001 or so.
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The problem has been seriously cooking since 1976.
Designer Girl, Congress makes it’s own rules. It will not vote to restrict itself.
“A democracy can last until people discover they can vote themselves benefits from the public treasury.”
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Chas post 38,
well at one level possibly that is true.
but there was a lovely graph in the Princeton lecture which shows the take off of the housing bubble in the early 21st century. boefore that it was amazingly stable in general.
So since the proxmiate cuase is the buble, I suspect you are left with how 1976 cause a bubble to start in say 2000.
so what happened in 1976 which started this buble then?
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Musing, Congress passed “Fair Housing” legislation that provided loans to people who couldn’t repay them.
I see in the October American Spectator that some Republicans objected to the appointment of Henry Paulson as Sec Treas. Seems he and his wife have strong ties to the Democratic party. Spectator reports that inside sources say that Paulson briefed Obama on Fannie and Freddie before offering to brief McCain. Democrats tried to tie the problem to Republicans, but “As it stands, Obama was the leading receiver of lobbyins/fundraiser dollars from both quasi-governmental agencies….”
“You look at Obama’s economic advisers, the guys he has counted on from day one and who have raised him a ton of money: Franklin Raines and Jim Johnson, both of them are waist-to neck- deep in the mortgage debacle.”
Both of these guys have served as CEO of Fannie Mae.
Another close political advisor to Obama, Rahm Emanuel served on the board of directors of Freddie Mac. “Emanuel during his time on the board opposed every reform proposed by the Bush administration that would hae impacted Freddie and Fannie Mae.”
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Chas post 41,
no congress passed fair housing regulaton so that you couldn’t discriminate.
they did not reaquire you to give loans to those who were unqualified, and if we are to believe your model this law was on the books for 24 years before the present bubble began.
I suggest that you are having a causality problem with your analysis.
And for the record even McCain finally admitted that Frank Raines is not an economic advisor to Obama.
Good try though AND it perhaps provides an insight into the foundations of your perspectives here.
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I think the foundations of my perspectives are well known.
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Chas post 43,
yes but basing a problem whcih first arises in aobut 2000 on a law past in 1976 is more than a bit of a stretch.
I have had conversations regarding whether the repeal of the Glass-Steagll act in 1999 impacted this problem. I believe they did peripherallly but not centrally.
if you look at the Princeton lecture which I posted, they aregue that what really happened is that a set of credit instruments and business practices were adopted after the dot com bust for which the reulations were totally inadeqaute. it is arguable that no one knew enough to create good regulations, but there were no regulations to protect us form the risks of short money funding long securities, over leveraging, and imporper rating.
And the result is the perhaps as much as $10T by my count of toxic paper.
The actual default rate based on llama’s comments is about 2.5%. It might be as high as 20% but I suspect that in these times 10% is more likley.
Without these economic inventions, we wuold have foreclosed on these houoses (perhaos $200B to $1t) and gotten it over with.
With these inventions, our entire financial system is now at risk.
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#37
My biggest problem with Pres. Bush is that he didn’t veto more (or maybe any). He tried to work in a bipartisan way, and he signed off on a lot of garbage in the process, and still doesn’t have any clout to show for it.
He hasn’t been a fiscal conservative, that is true. I’m incredibly disappointed about that. Rather than leading the charge against socialism, he helped it along.
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Charles is quite right. An excellent discussion of the role of Congress and Fan/Fred Fan and Fed in the lowering of credit market standards is in an IBD article, Saddest Thing About This Mess: Congress Had Chance To Stop It: Could the crisis at Fannie Mae-Freddie Mac and the subprime meltdown have been avoided? The answer is yes. including:
In November 2000, Clinton’s HUD hailed “new regulations to provide $2.4 trillion in mortgages for affordable housing for 28.1 million families.” It made Fannie and Freddie take part in the biggest federal expansion of housing aid ever.
Soon after taking office, Bush had his hands full with the Clinton recession and 9/11. But by 2003, he proposed what the New York Times called “the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.”
The plan included a new regulator for Fannie and Freddie, one that could boost capital mandates and look at how they managed risk.
Even after regulators in 2003 uncovered a scheme by Fannie and Freddie executives to overstate earnings by $10.6 billion to boost bonuses, Democrats killed reform.
“Fannie Mae and Freddie Mac are not facing any kind of financial crisis,” said Rep. Frank, then-ranking Democrat on the Financial Services Committee.
North Carolina Democrat Melvin Watt accused the White House of “weakening the bargaining power of poorer families and their ability to get affordable housing.”
In 2005, then-Fed Chairman Alan Greenspan told Congress: “We are placing the total financial system of the future at substantial risk.”
That year, Sen. John McCain, one of three sponsors of a Fannie-Freddie reform bill, said: “If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole.”
Sen. Harry Reid — now Majority Leader — accused the GOP of trying to “cripple the ability of Fannie Mae and Freddie Mac to carry out their mission of expanding homeownership.”
The bill went nowhere.
I wouldn’t bring this up, as what is necessary just now is bi-partisanship; however, Musing’s trying to pin the blame for the crisis mainly on some unspecified allegations of Republican regulatory looseness needs to be countered with the main truth of the matter.
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Peter leavitt post 46,
excellnet compendium of the various actions. Nice research.
NOte the last proposed action from the administraion was apparently 2005.
the bush administration has been in power from 2000 – present
The Republican totally controlled congress from 2000 – 2006 with a brief period of loss of control i the Senate during the Jeffords change to independent between 2001 and 2002.
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Peter Leavitt post 46,
Peter my version of the statement is that the Republican party is trying to duck its accountability as the party in leadership roles during the critical period.
You have yet to show that Republicans did not control the congress from 2000 – 2006 and the administration from 2000 – present.
(all right if you like we can switch form the election years to the inaugral years,but it does not change the story).
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