And On the Eighth Day, Congress Created a Bailout...

From USA Today:

"We hope sometime tomorrow evening we can announce that there has been some sort of agreement in principle so that the only thing that will have to be done is to write the legislation," said Sen. Harry Reid, D-Nev. "It is still a long way from completing it but we've made significant progress."

Aides worked late into the night, he said, and there are "probably 15 issues still left outstanding that senators are going to have to get together and resolve."

Here's hoping the free-market-oriented House Republicans stick to their guns.

Many House conservatives say they are against such heavy federal intervention. Under the House GOP plan, the government would insure the distressed securities rather than buy them. Tax breaks would provide additional incentives to invest.

House Minority Leader John Boehner on Friday released a letter to House Speaker Nancy Pelosi demanding that "serious consideration" be given to the radically different proposal. "If such consideration is not given, a large majority of Republicans cannot - and will not - support" the administration's plan, Boehner wrote....

We don't have to rush in with the greatest advance of socialism in the Western world," said Rep. Louis Gohmert, R-Texas and a backer of the House Republican proposal. "The only thing we have to fear is fear-mongering from the secretary of the Treasury."

Whole thing here.

Comments

Gene Berkman | September 27, 2008, 5:54pm | #

The House Republicans have given opponents of the bail-out some time to marshal opposition. But the House Republicans themselves propose to offer government backed insurance to the financial institutions with bad mortgage backed securities, and thereby put the taxpayers on the hook when the banks try to collect the insurance.

Also, Rep. Eric Cantor told the L.A. Times that some of the mortgage backed securities are so weak, the government will have to buy them anyway. So the House Republicans will probably end up selling us out too.

Don the libertarian Democrat | September 27, 2008, 6:00pm | #

They're not guns, they're pea shooters. Look,if you want government to stay completely out of it, fine. However, if government has to be involved, then I'd rather the government get an asset for this bailout. It is true that, as in Sweden, we'll have to eventually sell these assets and get the government out of this business altogether, but a deal without equity seems awful. As Robert Reich says:

http://robertreich.blogspot.com/

"Congress knows the public is furious. That's why it's insisting on the above-mentioned provisions. But Congress and the Administration, and Wall Street, also know that the public -- and the media -- can easily be hoodwinked into believing that certain limits and protections have been built into the deal when, on closer inspection, they haven't. Wall Street is masterful at creating the appearances of value when there's no value there, and many of our representatives in Congress are well-versed in the art of creating the appearances of public gains when the gains are mostly private. So the media has to dig hard and look at the details of this deal."

Again, if you like Randazzo's plan, I understand, because I at least understand it, and agree with it. However, this hybrid plan, without any equity for the bailout, is a prescription for a huge mess and a huge loss.

I'm no expert in economics, but as a taxpayer I am an expert in getting fleeced.

By the way, what's with the auto loan bailout?

James Ard | September 27, 2008, 6:06pm | #

Considering the public is hugely against the bailout, rightly or wrongly, the Republicans in the house have an opportunity to pick up support with a vote that won't mean anything anyway. Unless 40 GOP senators grow a spine, the bill passes Monday. All of you ACORN lovers can start celebrating, at least until America smells the rat and the Democrats pay a huge political price.

Theresa K | September 27, 2008, 6:08pm | #

I sure hope that the Republicans stick to their guns. I draw hope from the fact that it's Harry Reid who is making these claims of progress.

At the very least, let the Democrats pass this one alone if they must. Not with Republican support.

John McCain said something about short-term loans to banks that are being adversly affected through not fault of their own. They should hammer on that idea some more.

DannyK | September 27, 2008, 6:36pm | #

I like some things about the RSC plan, but how can they seriously be advocating that the Federal government write massive insurance policies on these shady financial dealings without taking any control? Isn't that exactly what killed AIG, like, one week ago?

Also, didn't anybody notice that McCain said in the debate TWICE that, sure, he'd sign off on the Paulson plan? Check the transcript. I think it's getting to the point that people are ignoring what he actually says and substituting something that makes sense, but as it stands he's endorsing the Paulson plan and keeping mum on the RSC plan.

I think we should arrange a leveraged buyout of the American economy by the Germans -- good beer, techno music, good bankers, and hey, they owe us one for supporting reunification. And the way things are going, it's either them or the Chinese.

Colonel_Angus | September 27, 2008, 6:45pm | #

"Tax breaks would provide additional incentives to invest."

Here we go fucking around with taxes again as a form of economic manipulation.

JMR | September 27, 2008, 6:56pm | #

No, no, not a "bailout." Fox News is trying to call it a "rescue," and they're "fair and balanced" so they MUST be right! Sigh...

Kolohe | September 27, 2008, 6:57pm | #

Many House conservatives say they are against such heavy federal intervention. Under the House GOP plan, the government would insure the distressed securities rather than buy them. Tax breaks would provide additional incentives to invest.

This is singularly dumb. I wouldn't mind if they took a stand that *nothing* would be done - it would be principled and perhaps even work. But adding more 'insurance' to the mix is the exact wrong thing. This stuff already has insurance; it's the questionable ability to pay off claims that's the whole problem.

Kolohe | September 27, 2008, 7:01pm | #

I see DannyK already beat me to it, despite his deeply flawed assessment of german techno music. (I've seen those ATT ads)

zoltan | September 27, 2008, 7:05pm | #

Should banks be allowed to be responsible for more money than they can pay back in the first place?

Oldtimer | September 27, 2008, 8:06pm | #

I don't understand how this bad paper becomes good when the government (the taxpayer)ends up with it. Hearing that there might be some profit in it perked up my capitalistic ears. why wouldn't an investor buy it, if a profit might be made? The whole shooting match stinks and the smell test has failed miserably. As an old fart, with some investments in the scam, I would lose without a bailout, but I read the prospectus. Past performance does not indicate any future profits. As a father and grandfather, I don't think it's for the children, any more than SS, Medicare and Prescription drugs are for the children, except to pay for us old duffers. The future is bleak, for those we will leave behind. Don't sell your guns.

joe | September 27, 2008, 9:03pm | #

Under the House GOP plan, the government would insure the distressed securities rather than buy them.

Does anyone know what that means? Insure them for what? How?

The Bearded Hobbit | September 27, 2008, 9:26pm | #

.. I am fully and unequivocally sincere in my belief that Congress will somehow, in some way, fuck this up ..

.. Skeptical Hobbit

Lfiti | September 27, 2008, 10:48pm | #

Here's hoping the free-market-oriented House Republicans stick to their guns.

Yeah, I mean fuck! Market discpline, man. When things go wrong, the market corrects, and if everybody gets fucked over in the process, that's the way it works. Let them fucking eat cake. Fucking whiners.

R C Dean | September 27, 2008, 10:56pm | #

The shocking mendacity of the Dems on this one, trying to siphon off 20% of the "profits" (which could be billions of dollars) for "affordable housing" groups (read: Dem surrogates and auxiliaries) has only confirmed my visceral distrust and distaste of them.

At least a few Repubs are trying to stand athwart the Treasury, shouting stop. The Dems seem wholly consumed with creating as big a slush fund as they can.

Really, really shameful. I wouldn't be surprised if, in the very long run, the verdict of history is that this "bailout" package, by so utterly distorting the financial markets for generations to come and embedding the federal government as an equity owner and market maker in the financial and housing sectors, was more damaging to the US than the Iraq war.

D.A. Ridgely | September 27, 2008, 11:25pm | #

Should banks be allowed to be responsible for more money than they can pay back in the first place?

Certainly not. Only governments are allowed to do that.

Minister of Treasury Paulson | September 27, 2008, 11:33pm | #

Your Urgent Help Needed

Dear American:

I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude. I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.

I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.

This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.

Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to [e-mail] so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.

Yours Faithfully
Minister of Treasury Paulson

economist | September 28, 2008, 12:10am | #

Dear Minister of Treasury Paulson,
I regret that I'm busy investing all my money in Iraqi securities.

JMR | September 28, 2008, 4:50am | #

Poptech, is that you???

Max | September 28, 2008, 5:49am | #

The vast bipartisan conspiracy rolls on. We are all French socialists now.

Some Guy | September 28, 2008, 7:44am | #

I would give House Republicans more credit if they weren't proposing the same plan with different language. The difference between the plans is like handing our money directly to compulsive gamblers vs. building a casino for them where the house always loses.

But here's to hoping that all of Congress would rather blame the other party for nothing getting done than working together. Partisan hackery is good for something I guess.

VM | September 28, 2008, 9:04am | #

Max - and look who's in charge when that happened!

ed | September 28, 2008, 10:20am | #

I blame Main Street.

GG | September 28, 2008, 11:22am | #

Can someone please explain to me what these craven criminals are smiling about?

Isaac Bartram | September 28, 2008, 11:27am | #

Hey wouldn't you be smiling if you'd just managed to pull of the biggest heist in history.

GG | September 28, 2008, 11:31am | #

The NYT changed the photo! Bastards! This is the one they had up before.

JMR | September 28, 2008, 11:54am | #

Not just a great heist, they bailed out their buddies. And the "AIG bailout" actually ALSO bailed out Goldman but most financial "journalists" have spent the past week cluelessly claiming how supposedly strong Goldman's books are, as if these guys are actually more fiscally responsible than the other weirdos or something. Yeah, right Goldman-worshippers, as long as your guy keeps being Treasury Secretary, that might seem to be so...

JP | September 28, 2008, 12:00pm | #

Somewhat OT: Arnold Kling over at EconLog has been writing some great stuff on the "crisis" and the "bailout." Something I loved from today's post:

"the bailout is a transfer from ordinary Americans to the holders of mortgage securities. That is like giving rich people priority access to lifeboats on the Titanic. At some point, ordinary Americans are going to figure that out, and there will be hell to pay.

If we implement the Paulson plan, we will make the wealth shock more painful for ordinary Americans. The Democrats' approach for offsetting that is to try socialism (government taking equity in financial firms, etc.) Socialism will destroy even more wealth."

Kling is generally in favor of taking it slow.

http://econlog.econlib.org/

economist | September 28, 2008, 1:48pm | #

"What are these craven criminals smiling about?"
Maybe they all got drunk beforehand.

Oh yeah, and they're sociopaths, so they enjoy it.

economist | September 28, 2008, 1:48pm | #

Being goddamn crooks, that is.

Episiarch | September 28, 2008, 2:00pm | #

Hey wouldn't you be smiling if you'd just managed to pull of the biggest heist in history.

And we thought Ocean's Eleven and opening the vault at the Nakatomi building were audacious.

Just Plain Brian | September 28, 2008, 2:29pm | #

And we thought Ocean's Eleven and opening the vault at the Nakatomi building were audacious.

At least the Nakatomi heist was thwarted by John McClane. It's like Matt Welch says - the real "maverick" is fictional.

Episiarch | September 28, 2008, 3:21pm | #

the real "maverick" is fictional

Yippee ki yay, mother fucker!

Paul | September 28, 2008, 3:30pm | #

Nick, this is not a bailout, it's a rescue.

Conjure image of bank execs, tied to the railroad tracks while the "free market" twirls its moustache and looks on from behind a nearby rock.

P Brooks | September 28, 2008, 3:31pm | #

Why does my ass hurt every time I hear the phrase "bipartisan consensus"?

J sub D | September 28, 2008, 3:46pm | #

Why does my ass hurt every time I hear the phrase "bipartisan consensus"?

It's your sphincter exhibiting a classic Pavlovian response.

CharlesWT | September 28, 2008, 5:05pm | #

"The really big-time crooks don't break laws. They make them." —James P. Hogan

Mad Max | September 28, 2008, 5:24pm | #

(With apologies to the Geto Boys, and to this guy)

Damn it feels good to be a banker
Lending dough to folks that are broke
And when it comes time for repayment
All the money goes up in smoke

But everything’s cool in the world of a banker
The U.S. Treasury will bail us out
We’ll get a bill passed in Congress
Because bankers have lots of clout

And all I gotta say to you taxpayers and bondholders
Is you gotta go along with us, see
‘Cause if you don’t give us what we want
We’ll crash the whole economy

thoreau | September 28, 2008, 5:56pm | #

"From each according to how carefully he saved.
To each accordingly to how recklessly he borrowed or loaned."

-Hank Paulson, The Wall Street Manifesto

DDP | September 28, 2008, 9:30pm | #

I'm not sure what is the descriptor for what we have here right now. But one thing is for sure, it is far worse than socialism. This needs to be fought against, vigilantly.

brotherben | September 28, 2008, 11:02pm | #

This is a letter published in "The Idaho Statesman" newspaper today.

These points should help explain GOP economics

For those who are having a hard time understanding Republican economics, here's a primer:

If you're a farmer and take money from the government for NOT farming, that's capitalism.

If you lose your job, can't find another job and exhaust your unemployment benefits, that's unfortunate. But we can't give you money for not doing anything. That's socialism.

If you're the CEO of an investment bank and take a government bailout, that's capitalism.

If you're in danger of losing your home and would like the government to help you, that's socialism.

If you nearly bankrupt a company, you deserve to get a $42 million golden parachute and be a presidential adviser. That's capitalism.

If you invest in a company and your 401(k) plummets because the CEO nearly bankrupted it, helping you would be socialism.

If you're a congressman, you have the best medical insurance - for free. That's capitalism.

If your employer doesn't offer medical insurance and you have medical problems, you'll just have to suffer. If the government provided insurance, that would be socialized medicine.

That should clarify everything. If it doesn't, just remember this: If rich people get money from the government, that's capitalism. If workers get money from the government, that's socialism.

JACK BONAWITZ, Meridian

Ebeneezer Scrooge | September 29, 2008, 1:38am | #

The proposition of government buying "assets" that nobody knows how to price, makes no sense in the first place.

The voters don't want it.

By and large the market doesn't really believe it's going to save the day.

Why do I have a feeling that we aren't being told the real story as to why they're jamming this down our throats, when doing it is so obviously swimming against the current?

You can write all the letters you want to your congress animals. Whatever is really going on, they're going to do it come what may.


I'm normally not a conspiracy type, but this one just reeks. And it's the come what may part that bothers me.

Ebeneezer Scrooge | September 29, 2008, 1:49am | #

And more --

It got sprang on us out of nowhere, like a tidal wave that nobody saw coming.

It's being pushed by Bush. Public approval rating: 18%? Does anybody trust his judgement at this point?

It's being agreed to by congress. Public approval rating: 10%? Pelosi may be one of the few people who's judgment I trust less than Bush.


Really, I'm not the conspiracy theory type. But this REEKS of hidden agendas.

Paul | September 29, 2008, 2:23am | #

US Out of Economy NOW

Isaac Bartram | September 29, 2008, 10:11am | #

Why does my ass hurt every time I hear the phrase "bipartisan consensus"?

Probably from the strain of pumping out that huge bipartisanSHIT.

Metamucil ain't gonna help either.