The Rescue

rimrocker · Sep 21, 2008

More from Obama...

The bottom line is that we must change the economic policies that led us down this dangerous path in the first place. For the last eight years, we’ve had an "on your own-anything goes" philosophy in Washington and on Wall Street that lavished tax cuts on the wealthy and big corporations; that viewed even common-sense regulation and oversight as unwise and unnecessary; and that shredded consumer protections and loosened the rules of the road. Ordinary Americans are now paying the price. The events of this week have rendered a final verdict on that failed philosophy, and it is a philosophy I will end as President of the United States," said Senator Barack Obama.
http://my.barackobama.com/page/community/post/amandascott/gGg9zm
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bigtexxx · Sep 21, 2008

rimrocker - are you capable of original thought or do you just pump out liberal trash links all day? Care to address my earlier post on Krugman's article? TIA

rimrocker · Sep 21, 2008

bigtexxx said:

rimrocker - are you capable of original thought or do you just pump out liberal trash links all day? Care to address my earlier post on Krugman's article? TIA
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Wow. That original thought insult really stings. While I'm recovering emotionally, why don't you offer us another post on Obama's blackness.

rimrocker · Sep 21, 2008

Different approaches...

Doug Elemendorf, Brookings...
http://www.brookings.edu/opinions/2008/0919_treasury_plan_elmendorf.aspx

Dean Baker, Center for Economic and Policy Research...
http://tpmcafe.talkingpointsmemo.com/2008/09/20/progressive_conditions_for_a_b/

Yves Smith..
http://www.nakedcapitalism.com/2008/09/why-you-should-hate-treasury-bailout.html#Contributors

William Buiter, LSE...
http://blogs.ft.com/maverecon/2008/...ebt-for-equity-swap-for-the-financial-sector/

Luigi Zingales, U of Chicago...
http://faculty.chicagogsb.edu/luigi.zingales/Why_Paulson_is_wrong.pdf

Sebastian Mallaby, WaPo...
http://www.washingtonpost.com/wp-dy.../09/20/AR2008092001059.html?hpid=opinionsbox1

Robert Reich...
http://tpmcafe.talkingpointsmemo.com/2008/09/21/what_wall_street_should_do_to/index.php

rimrocker · Sep 21, 2008

Whheeeee! Good for America! I'm so glad politics have been set aside for this absolutely necessary not to change gift to a bunch of screw-ups.

September 22, 2008
Foreign Banks Hope Bailout Will Be Global
By NELSON D. SCHWARTZ and CARTER DOUGHERTY
http://www.nytimes.com/2008/09/22/business/22global.html?_r=1&hp=&oref=slogin&pagewanted=print

PARIS — The financial crisis that began in the United States spread to many corners of the globe. Now, the American bailout looks as if it is going global, too, a move that could raise its cost and intensify scrutiny by Congress and critics.

Foreign banks, which were initially excluded from the plan, lobbied successfully over the weekend to be able to sell the toxic American mortgage debt owned by their American units to the Treasury, getting the same treatment as United States banks.

On Sunday, the Treasury secretary, Henry M. Paulson Jr., indicated in a series of appearances on morning talk shows that an original proposal introduced on Saturday had been widened. “It’s a distinction without a difference whether it’s a foreign or a U.S. one,” he said in an interview with Fox News.

The prospect of being locked out of the bailout set off alarm bells among chief executives of overseas banks whose American affiliates also hold distressed mortgage-related assets, like Barclays and UBS. The original text provided access to the $700 billion bailout for any financial institution based in the United States.

As the day wore on, some raised their concerns with the Treasury Department, arguing that foreign institutions were both big employers and major players in the American capital markets. By Saturday evening, the language had been changed to allow any financial institution “having significant operations” in the United States.

While Mr. Paulson has agreed with that argument, the Bush administration is also leaning on foreign governments to pitch in with bailout programs of their own as needed. “We have a global financial system and we are talking very aggressively with other countries around the world, and encouraging them to do similar things, and I believe a number of them will,” Mr. Paulson said on Sunday.

The request is expected to be discussed during a conference call among Group of 7 finance ministries scheduled for Sunday evening, a European official said.

Allowing foreign banks to participate in the federal rescue package has not yet drawn widespread scrutiny in Congress, where a number of lawmakers, including Senator Christopher J. Dodd, Democrat of Connecticut, have acknowledged that millions of American citizens do business with UBS, the Royal Bank of Scotland, and many other foreign-based banks in the United States.

But with Congressional switchboards lighting up with calls from angry taxpayers, a number of lawmakers are wary that such an extension may worsen what could ultimately turn out to be a trillion-dollar bailout for Wall Street.

“I’m skeptical of the bailout, the whole bill is only a couple of pages long,” said Representative Scott Garrett, Republican of New Jersey, who is a member of the House Financial Services Committee. As for the participation of foreign banks, Mr. Garrett said: “I have a concern with it, they probably should be treated differently, but Congress is really not getting any say.”

Christopher Whalen, a managing partner at Institutional Risk Analytics, said that Mr. Paulson needed to justify why a wider bailout was in the national interest.

“Can you imagine the Congress floating a bailout for Deutsche Bank or UBS? It is the responsibility of the German or Swiss government,” he said. “We shouldn’t be bailing them out.”

While politicians in the United States may emphasize the benefits for banks based overseas, the definition of what is a European or American bank has blurred in recent years with the growth of global giants like HSBC, Barclays and Deutsche Bank.

Deutsche Bank, for example, became a major player in the United States with its acquisition of Bankers Trust in 2001. It has written down more than $11 billion in investments linked to the subprime crisis.

Barclays, meanwhile, is on course to buy a significant portion of the North American operations of Lehman Brothers, the 158-year-old firm that filed for bankruptcy protection last week, helping to set off the global financial panic that forced Washington to act.

Gaining access to the relief was a top priority for European foreign financial institutions with banking operations in the United States, according to officials in industry and government.

They argued that the reputation of Wall Street and the United States government would suffer immensely if properly licensed foreign banks in the United States were shut out of the system.

“Who would open a bank again in the United States?” asked one executive of a major European bank who has been following the discussions.

At the same time, it was unclear how much European governments would bow to the Treasury Department’s encouragement to set up national programs to deal with their own vast mortgage problems. Real estate markets in Britain, Spain and Ireland have been particularly hard-hit as their own housing market bubbles — which grew in tandem with America’s — have collapsed.

Other governments have struggled to get budget deficits under control in the last few years. The German government, for example, has discouraged talk of a stimulus package, and British officials said Sunday that they were not working on a plan like that of the United States.

Robert Kelly, at the Bank of New York Mellon, said every European central bank would probably be scrutinizing the American bailout proposal. “I would expect every finance minister is looking closely at what is happening in the United States, trying to hypothesize what the impact will be, and is thinking about the tools the Fed and Treasury have used,” he said. “I would not be surprised, and probably expect, some of those tools to be used in Europe as well.”

If the plan is approved in Congress and is signed into law, the benefits would be large for European banks with licensed operations in the United States, which incurred major losses from mortgage-linked securities.

UBS, the Swiss giant, has been among the hardest-hit institutions in the world; both its chairman and chief executive left amid more than $40 billion in write-downs. Even so, it still retains roughly $20 billion more in potential exposure to the troubled American housing market.

If a battle does develop in Congress over foreign participation, UBS, among others, is poised to make just these arguments. Officials at the Zurich-based giant point out the bank employs more than 30,000 Americans, is listed on the New York Stock Exchange, and owns two broker-dealers registered under United States laws, UBS Securities and UBS Financial Services, better known to Americans as the former Paine Webber unit.

“These are Americans who work in New York,” said one executive who requested anonymity because the American plan was still in development. “And they are working for a bank that was incorporated in the United States.” One senior Wall Street executive said he believed that the proposal would apply to other institutions with regulated American entities. Credit Suisse, for example, includes the old First Boston Corporation, though that name was dropped years ago. He said the biggest issue being debated was what securities would be included in the proposal, and how the actual mechanism to buy them would work.

In Asia, the plan to purchase distressed assets drew little reaction over the weekend. Asian banks generally have not invested significant assets in American mortgage-backed securities.

The bigger question in Asia, bankers said, lies in how the American legislation will affect HSBC, the large British-based bank with significant operations in Asia. The bank’s American subsidiary was a large buyer of mortgages over the last decade, and kept many of these mortgages on its books instead of trying to repackage and resell them as mortgage-backed securities.

Richard Lindsay, a spokesman for HSBC, said that senior management was still evaluating the situation and said it was a “positive step forward but it won’t solve the problems of an overleveraged industry.”
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rimrocker · Sep 21, 2008

Email from a Dem Congressman...

Paulsen and congressional Republicans, or the few that will actually vote for this (most will be unwilling to take responsibility for the consequences of their policies), have said that there can't be any "add ons," or addition provisions. F*** that. I don't really want to trigger a world wide depression (that's not hyperbole, that's a distinct possibility), but I'm not voting for a blank check for $700 billion for those mother f***ers.

Nancy said she wanted to include the second "stimulus" package that the Bush Administration and congressional Republicans have blocked. I don't want to trade a $700 billion dollar giveaway to the most unsympathetic human beings on the planet for a few f***ing bridges. I want reforms of the industry, and I want it to be as punitive as possible.

Henry Waxman has suggested corporate government reforms, including CEO compensation, as the price for this. Some members have publicly suggested allowing modification of mortgages in bankruptcy, and the House Judiciary Committee staff is also very interested in that. That's a real possibility.

We may strip out all the gives to industry in the predatory mortgage lending bill that the House passed last November, which hasn't budged in the Senate, and include that in the bill. There are other ideas on the table but they are going to be tough to work out before next week.

I also find myself drawn to provisions that would serve no useful purpose except to insult the industry, like requiring the CEOs, CFOs and the chair of the board of any entity that sells mortgage related securities to the Treasury Department to certify that they have completed an approved course in credit counseling. That is now required of consumers filing bankruptcy to make sure they feel properly humiliated for being head over heels in debt, although most lost control of their finances because of a serious illness in the family. That would just be petty and childish, and completely in character for me.

I'm open to other ideas, and I am looking for volunteers who want to hold the sons of b****es so I can beat the crap out of them.
http://www.openleft.com/showDiary.do?diaryId=8374
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(I *** the bad words.)

This brings up a point, though several won't see it because they think this whole thing is above politics and in the best interest of the country... the Repubs aren't going to vote for this in any significant numbers. They will let the Dems pass it and then run against the great Wall Street giveaway under the guise of the average everyman.

Invisible Fan · Sep 21, 2008

If the Dems are stupid enough to pass this without added regulation, discounted value for these toxic securities, and reform for all the bailed out parties, then they're fools who need to be gutted and fished.

rimrocker · Sep 21, 2008

Invisible Fan said:

gutted and fished.
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gutted and fried?

Invisible Fan · Sep 21, 2008

^Yeah...

Obama saved himself a bit in my eyes. The Devil is in the details, and I hope he'll outlast the ensuing media blitz from his adversaries should he make his concerns a strong issue.

I understand the risks of delaying action, but there are more jackals salivating bailout than those who want to wake up from this nightmare and change (interest rates are still historically low). I think they can hold out a week or two, unless the parties that can't are really insolvent rather than their claims of being illiquid.

A definite bailout in the works will calm fears of a panic, and should there be a greater crisis as a result of a 1-2 week delay, then there's no guarantee this bailout would've stomped the fire in the first place.

It's plain ol' ploy of ratcheting up fear to prevent sound thinking. Paulson did his part by calming the markets on Friday with promise of solid action, now Congress has to perform their responsibilities and hash out a deal while knowing the real stakes at line.

danny317 · Sep 22, 2008

700B to bail out wall street...

man this administration has no qualms about living large on the credit card...

although i dont think the us taxpayer should be stuck w/ the check, it has to be done to avert a bigger disaster...

for all those repubs talking about dont raise my taxes, i dont know how tax cuts will stimulate the economy into higher tax revenues for the gov now. we had 8 yrs of tax cuts and the debt has actually increased from 6T to 9T...

the day when foreign investors finally decide "hey the us will never be able to repay their debts, lets just cut our losses..." may be coming soon.

rimrocker · Sep 22, 2008

Major said:

For those of you against the bailout, what is your proposed solution
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Dodd has one...

Dodd Proposes Giving U.S. Equity Stake for Bad Debt (Update2)

By Dawn Kopecki and James Rowley
Enlarge Image/Details
http://bloomberg.com/apps/news?pid=20601087&sid=aHeROL9EmlRg&refer=home

Sept. 22 (Bloomberg) -- Senate Banking Committee Chairman Chris Dodd offered an alternative today to the Bush administration's financial rescue plan aimed at giving the U.S. Treasury an equity stake when it helps companies burdened by debt.

Dodd, a Connecticut Democrat, is circulating a draft of his bill as Congress seeks to deal with a financial crisis that has been called the U.S.'s worst since the Great Depression.

The Bush administration is proposing a $700 billion plan to buy devalued assets from investment firms to keep the financial system from coming to a halt. Democrats have pledged to act quickly on the measure, even as they seek to create an oversight structure, limit the compensation of executives at the companies benefiting from the rescue and provide mortgage relief for struggling borrowers.

``We cannot just turn over $700 billion in taxpayer money and not insist that that taxpayer is going to be protected in this,'' Dodd told reporters yesterday.

Treasury Secretary Henry Paulson has urged Congress to pass legislation without delay and without linking it to new programs.

``We need this to be clean and quick, and we need to get it in place,'' Paulson said yesterday in an interview with ABC News.

Equity Stake

The legislation requires Treasury to take an equity stake equal to the purchase price of the assets being bought. If the company isn't publicly traded, the government would take senior debt instead, placing it in the front of the line of debt holders for repayment in the event of a bankruptcy.

Dodd's proposal also would create a five-member oversight board to supervise the Treasury secretary's purchase and sale of distressed mortgage debt.

It would consist of the chairmen of the Federal Reserve, Federal Deposit Insurance Corp. and the Securities and Exchange Commission as well as two members from the financial industry designated by congressional leaders.

The board would be authorized to set up a so-called credit review company consisting of Treasury employees to study the soundness of the purchases. Under the plan, the government would be required to obtain an equity stake equal to the value of the debt that is purchased from the companies, including those whose shares are not publicly traded. The Treasury secretary would also be required to issue weekly public reports on the amount of assets bought and sold by the U.S.

Penalize Executives

Dodd is proposing to penalize executives who take ``inappropriate or excessive'' risks. The executive compensation and severance packages could be reduced if that is ``in the public interest,'' the proposal says. It would also force executives to give back profits they earned that were based on company accounting measures that are later found to be inaccurate.

Republican presidential candidate John McCain, who has supported giving shareholders a bigger say in executive compensation in the past, said today that taxpayers shouldn't foot the bill for ``golden parachutes'' for officers of companies that have crumbled in upheaval on Wall Street.

``The senior executives of any firm that is bailed out by Treasury should not be making more than the highest paid government official,'' McCain said at a campaign event in Scranton, Pennsylvania.

The president is the highest paid federal official, with a salary of $400,000 a year.

U.S. Representative John Campbell, a California Republican and a member of the House Financial Services Committee, said that while he supports the Treasury proposal, he's willing to consider the creation of an oversight board and executive-pay limitations.

Committee Republicans plan to meet later today to discuss the issue, Campbell said.

``I don't think we have a lot of choice,'' Campbell said. ``And the consequences of doing nothing are unconscionable.''
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No free ride... good.

JeffB · Sep 22, 2008

rimrocker said:

Dodd has one...

No free ride... good.
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If you do not want to see your economy collapse then you must give me . . .

ONE TRILLION DOLLARS!!!

JeffB · Sep 23, 2008

Here is some commentary and suggestions from a fund manager. He outlines why he thinks the initial proposal is to bail out corporate bond holders and what he thinks should be done instead. Follow the link for the whole thing.

http://hussmanfunds.com/wmc/wmc080922.htm

...In summary, the Treasury proposal to address current financial difficulties places corporate bondholders ahead of the public, rewards irresponsible risk-taking, and sets a precedent for future bailouts. Moreover, we know from a long history of economic experience across countries that a major expansion of government liabilities is invariably followed by multi-year periods of extremely high inflation, particularly when it is not matched by a similar expansion of economic production. Such inflation would initially be modest because of the current weakness in the economy, but could pose unusual challenges to the United States in the coming years.

Congress can benefit the American public by maintaining a focus on responsibly assisting homeowners in distress rather than defending the stockholders and bondholders of overleveraged financial companies. It is essential to recognize that the failure of these companies need not result in “financial meltdown” provided that the “good bank” representing the vast majority of assets and liabilities is cut away, protecting customers and counterparties, so that the losses are properly borne out of the capital base of the companies that incurred them.
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rimrocker · Sep 23, 2008

The White House dispatched Vice President Dick Cheney to Capitol Hill Tuesday morning to help shore up support for the financial bailout of Wall Street.

. . . House conservatives are seething about the "big government" approach that they say President Bush is taking in the financial crisis. They don't like how much power it cedes to the Treasury or the price tag.

"[Cheney] is going to walk into a firing squad. I hope he brought his hunting rifle," an aide to one House conservative told FOX News.
http://tpmmuckraker.talkingpointsmemo.com/2008/09/cheney_heads_to_hill_to_quell.php
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Well, this changes everything. If Cheney's in favor and willing to put pressure on Repubs, then it must be a good plan, right?

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