Slog News & Arts

Line Out

Music & Nightlife

« Re: Worry | No, Really—Worry »

Thursday, September 25, 2008

Bailout Deal Imminent

posted by on September 25 at 14:15 PM

Via the New York Times, Wall Street Journal, Bloomberg and the Washington Post:

House and Senate negotiators emerged from a closed-door meeting today and said they have reached agreement on basic principles governing a massive financial rescue plan that they hope to pass soon but that is running into stiff resistance from some House Republicans…. Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, told reporters after the three-hour meeting, “We’ve reached fundamental agreement on a set of principles” to guide the financial rescue plan, and he said Congress could pass a bill within days. He said the principles include protection for taxpayers, effective oversight, help for homeowners facing foreclosure and limits on the compensation of executives whose firms take bailout money….

The agreement also includes a strong oversight board for the bailout program, a ban on golden parachutes and other excessive compensation for executives at participating firms and protections for taxpayers, including a provision that would require participating companies to give taxpayers equity in their firms. In addition, the package would provide relief for community banks that own now worthless stock in mortgage finance giants Fannie Mae and Freddie Mac, which were taken over by the government.

The main point of contention between Democrats and Republicans, Frank said, is a proposal to give bankruptcy judges new power to modify mortgages for homeowners, an idea that is widely viewed as a bargaining chip. Democratic presidential candidate Barack Obama (D-Ill.) has said the measure, which is fiercely opposed by the banking industry, should not be in the bill.

Why Obama would be siding with congressional Republicans, against helping mortgage holders in bankruptcy court attempting to pull themselves above water, is beyond me.

You know my thoughts on what’s missing from this bailout. This plan is costly, and does little to address the fundamental underlying problems that got us to this place.

When I say fundamental underlying problems, I’m not talking about the desperate need to reregulate the financial markets—starting with the provisions of the Glass-Steagall act and nationalizing debt rating agencies.

We need to generate new technologies and industries worth investing in, or we’ll be right back to this dark place.

This bailout might delay things for a few months, or a few years. But, the problem remains and will remain even if this plan is enacted.

RSS icon Comments


golob, baby steps. if you aren't going to allow a crisis to happen, you're only going to get baby steps.

Posted by Bellevue Ave | September 25, 2008 2:22 PM

and you really don't want the alteration of mortgages for a two reasons;

1. You place a floor on home prices which keeps new entrants out of the market(And a lot of people that knew better than to believe in the bubble). Should we really support home prices 4-6x median income because a lot of people bought the myth?
2. You aren't saving people from inevitable collapse of their financial position. If people can't afford their payments before the rate went up how is it a salvageable situation.
3. It will require an overhaul of how credit is extended to people based on their history which might be good, but can also be bad.

Posted by Bellevue Ave | September 25, 2008 2:36 PM

Why should people who were fiscally irresponsible get bailed out by the government? Worse yet..why am I ...a fiscally responsible citizen going to pay the tab?

Posted by Bubba The Love Sponge | September 25, 2008 2:44 PM

Judges are not experts at mortgage law or really want judges making bankers' decisions? I sure as hell don't want a banker running a court room...

Posted by Jubilation T. Cornball | September 25, 2008 2:49 PM

Your idea has legs, Mr. G. Harper's did a nice cover story back in February suggesting that once this bubble collapsed our panic would keep us from any structural work on the economy that could avoid relying on future bubbles. (The "bailout" seems a long step toward that panic-driven future.) Instead, claimed the author, our economy would take the path of least resistance and seek out the next bubble to pump in speculative private and taxpayer capital and get us irrationally exuberant again. The author predicted it would be a combination of energy and infrastructure. Your idea will complement that really well, adapted of course to the "realities" of the market as it emerges at that time.

Posted by tomasyalba | September 25, 2008 2:50 PM

@5, Cheap money does that.

You can trace every national boom and every bust to credit expansion and then either a crisis of quality of credit or a crisis of there simply not being enough returns from the credit.

Some have said, without the cheap money in 2001, this wouldnt have sploded as much as it did. The entire sub prime fiasco is a culmination of 8-10 different mini fiascos.

Posted by Bellevue Ave | September 25, 2008 2:55 PM

We are giving away 3/4 of a trillion dollars. You can say good bye to universal health care even if Obama wins in a landslide, and Social Security? Forget it if you are under 60 years old.

This is game over people.

Posted by Andrew | September 25, 2008 3:02 PM

@7 so when conservatives lose they win.

Posted by Bellevue Ave | September 25, 2008 3:08 PM

@8, AMEN! Ain't that the truth. Republicans and corporate America ALWAYS get what they want. And fuck you if you make less that $100K a year!!

Posted by Andrew | September 25, 2008 3:17 PM

Oo, and now Dodd told Marketwatch the White House meeting was a "disaster" featuring a last-minute Republican/McCain core mortgage plan unveiled the Dems thought was silly. Dodd said he'd pretend the meeting never happened. Funnier and funnier.{F849F192-D0CD-4456-BC50-751A5259D7F4}

Posted by tomasyalba | September 25, 2008 3:32 PM

"Why Obama would be siding with congressional Republicans, against helping mortgage holders in bankruptcy court attempting to pull themselves above water, is beyond me."

Maybe because he realizes how much McCain has totally alienated Wall Street by acting like a moron during this crisis? The social conservatives, absent their alliance with corporate America, can't win anything in the Northeast or Midwest.

Not saying Obama should tack to the right. But he does seem pretty skillful at it. He doesn't give McCain anything to attack him with.

Posted by Trevor | September 25, 2008 4:13 PM

deal's dead.

bush/mccain/house republicans blindsided the dems at the WH mtg. with a new plan.

frank & dodd are fucking pissed.

WaMu will die tomorrow. so will your 401K

Posted by max solomon | September 25, 2008 4:20 PM

WaMu bought by JPM according to marketplace.

Posted by Bellevue Ave | September 25, 2008 4:51 PM

Comments Closed

Comments are closed on this post.