*Bailout proposal, as it currently stands*

[jpgray]

First thing to note: this plan bears almost no relation whatsoever to Paulson's initial proposal. The bailout only commits $250 billion initially, gov't can modify mortgages, and there is significant oversight. Further, tax money is decently protected--any profit is shared by gov't (marginally similar to Sweden's successful approach), and in the case of a loss the money shall be recouped from the beneficiaries of the plan.

Thankfully the -only- House GOP concession made is a sort of anemic insurance plan for bad securities with rates set by the gov't; while companies can choose this over the bailout, most economists deride it as an unworkable alternative. While economists panned the Paulson plan, they -really- despised the GOP scheme of suspending capital gains tax and other deregulatory measures.

Problems? CEO pay limitations are not explicitly laid out, and in other cases we're lacking important specifics. The other obvious problem is that this doesn't go anywhere near far enough, and moreover goes in the controversial direction of buying bad debt. While alternative plans are superior in function and design (such as Sanders's or Galbraith's), they have little chance of passing. If you accept that something is to be done, remember that in the House the GOP + the blue dogs makes for 249 seats--a bold New Deal proposal probably won't pass given the divisions and lack of will in the Democratic caucus.

Latest deal between leaders of both parties:

-- $700 billion in a taxpayer rescue of Wall Street, with $250 billion available immediately, another $100 billion upon report to Congress and the final $350 billion available only upon action by Congress.

-- Money will be used to buy mortgage-backed securities and other troubled assets, taking them from investment banks, commercial banks, smaller community banks, pension plans and even local governments.

-- Government can use its power as the owner of the troubled mortgage bonds to facilitate modifications for the mortgages themselves.

-- Bipartisan oversight commission will monitor the program. If after five years there is a net loss to the taxpayers, president will have to submit legislative proposals to recoup funds from beneficiaries.

-- Democrats won new, unspecified restrictions on CEO pay and executive compensations for participating companies.

-- Republicans won language creating a parallel insurance program that companies can choose instead of giving up their bad assets.

-- Creation of warrants, which allows any windfall coming to participating companies to be shared with the government, thus the taxpayers.

-- Actions by Treasury will be posted online in real time.

--Judicial review of Treasury’s actions.

http://www.mcclatchydc.com/227/story/53189.html

[lostnotforgotten]

1. Free Market Solution Right Here - Bailout Not Required!

http://www.youtube.com/watch?v=daOfYmSLW_U&eurl=http://market-ticker.denninger.net/archives/590-FLASH-Fed-Speaking-Out-Both-Sides-Of-Mouth.html

[lostnotforgotten]

2. Naomi Klein "The Shock Doctrine"

http://blip.tv/file/521421

[whistle]

3. How do Paulson and Bush reward cronies under these terms?

...There must be some loopholes for fat cats to bilk the U.S. taxpayers :yoiks:

[barbtries]

4. that sounds better

but much of the language is equivocal imo. too vague. and though it doesn't say it, i gather that the whole enchilada is going to be put in the hands of henry paulson. what power does the oversight commission have? if they're just watching it happen without any power to change or question or stop a bad transaction that's not good enough. i'm happy to see "judicial review" as long as obama's president and the courts aren't owned by bushies.

i don't know - i'm not an economist. i don't know. everything about this whole fucking episode stinks. it reeks of cheney writing the energy policy. i don't trust these people and don't see that changing behind this deal.

when do we get to see the actual piece of legislation? i will check the link to see if it's there.

thank you very much for posting.

[Odin2005]

33. Fortunately Pauson is only going to be there untill January, thank God.

n/t.

[barbtries]

49. days ago

i heard or read that obama would consider keeping him on. and we don't know yet that the republicans will not pull off another theft and put mcsame and pain in there. he should be gone now. i am so frustrated. it's like walking into the house and there's a burglar in there. and so are the police, and they're helping the burglar pack up your shit. and you can't do a goddamn thing about it. you can scream and yell and cry but at the end of the day, you've been cleaned out and there is no recourse.

[Captiosus]

5. Much better, but I can already hear the media spin.

Some examples:
"The democrats' bill."
"The Bush/Pelosi/Reid solution."

And most importantly:
"It's still a bailout of up to $700 billion."

That's what the low info folks who don't care about C-Span or informed discussion on legislation is going to hear. While polls are all over the place depending on which media outlet you believe, all I have to do is look at protests going all over the place to show that a lot of people are still opposed to any bailout using tax money. I still think this will hurt democrats more than republicans because that's how it's going to be spun. Call me pessimistic, I guess.

[coalition_unwilling]

35. This is NOT a bailout. This is an Economic Stabilization measure.

The people who knee-jerk oppose any government intervention to safeguard the orderly functions of markets would probably also be the first to whine if this measure were not passed and their ATM cards subsequently stopped working at the gas stations and supermarkets or they lost their jobs because their company could not make payroll or other unspecified horrors that would be unleasehd in a complete unraveling of the global financial markets.

The proposal now agreed upon means that Paulson's original proposal is dead and that Bush and his cronies have been firmly and decisively rebuked.

On edit: were FDR alive today and a member of Congress or candidate for President, i am convinced he would support this measure for the same reasons he supported creating the SEC and giving it regulatory powers. That is, the orderly functioning of markets clearly falls under the clause in the Constitution to "promote the general welfare."

[liberalmuse]

6. That sounds a like like a combination of Dodd's and Sanders plans.

It's not as heinous as Paulsen's, and I'm glad to see that only 250 Billion is committed right now, instead of the whole enchilada.

[dana_b]

8. yeah, me too.

give them time to prove that they can do something positive with this money.

[sandnsea]

7. I'd like tighter language

and some sense of a timeframe to get new banking regulations, but this isn't too terrible. I don't object to the insurance alternative either, although without regulation it will just extend the bad behavior of some banks. I don't think this will keep us from a recession, although maybe a depresssion.

[jpgray]

21. I think most of us would. A lot of this is dependent on the actual language of the bill

If the best parts are vague and ephemeral while the worst parts are all too specific, then this is not going to fly with a lot of people.

[crispini]

9. Better, I guess.

But I'm still suspicious.

[JimWis]

10. I caught the tale end of a conversation by an economist on the

local PBS station, and I couldn't catch his name, and he said even if you have rules in place so that the CEO's can't take these big salaries or golden parachutes, the would just find some other sneaky and creative way to get their money. Probably can't stop it as of now, but make damn sure going forward that this kind of BS doesn't happen again. Thanks for the informational post.

[barbtries]

17. i guess they'll never believe

it's NOT "their" money!

edit typo

[HCE SuiGeneris]

11. is there anything relating to HOW they are to value the "assets"?

[galileoreloaded]

34. Sure, 100% of what they paid!!!!!!!! We are such suckers..........n/t

[PFunk]

12. I may be crazy but right now I don't think the repugs wont put up much of a fuss abot this proposal.

Or the bailout bill in general. Any attempt in doing so will only put more attention to the ecconomy (and to many their actions in wreaking it). Which is the thing that is hurting them and McClain in the upcomming elections. And that's the last thing the repugs want. Which means we will probally see a bill pass. And see the repugs (with help from the corporate media) try to sweep it under the rug so they can turn the campaign back to BS character/slander issues.

[barbtries]

16. they'll go with the numbers.

they'll have their cake and eat it too. it seems obvious to me but either i'm cynical beyond my (considerable) years and just wrong, or the republicans will use their minority status to make sure that the bill passes as a democratic bill as stated above, and then they'll go politicking about how they tried to do the people's will but the dems wouldn't let them. all their secret meetings were probably just looking at political maps to see who would be allowed to vote for it and who would be allowed to vote against, because the no votes are going to be worth votes come election time.

i mean really - we have been threatened with the next great depression. ONLY republicans would put something that serious second to politics, and OF COURSE they would. that's my take on it. stinks.

[YellowRubberDuckie]

13. The Wall Street Journal said that the executive pay limits would be there.

It also said that any bonuses would have to be returned if the outcomes of projected profits turned out to be worse than expected. And there would be no golden parachutes. Of couse the article I read kept refering to pelosi as a senator too, so it could be wrong.
Duckie

[barbtries]

14. the comments are toxic:

12:09:33pm 09/28/2008
kwillis


Walk through an airport and look at the fine men and women providing security and remember that if they had Barack Hussein Obama's background they would not be qualified to perform that job. What a scumbag.
12:09:57pm 09/28/2008
kwillis


Incredible. And McCain is having fun poked at him for saying the economy is fundamentaly sound. Looks like it's sound enough for the taxpayers to bail out Hussien Obama's fatcat buddies on wall street and preserve his high known source of campaign funds.


guess we know who will take the hit politically for bush's failure.

[Captiosus]

15. Two posts by the same guy who is obviously a closet freeper

(which is evident by the fact that he constantly ensures to say "Hussein") equals Obama taking all the hits for the bill? I don't think so.

However, I agree that democrats are going to lose the spin on this one.
The question is, how bad is that going to hurt the democratic PRESIDENTIAL candidate?

[barbtries]

18. that's definitely the question in my mind

enough perhaps so the planned theft will work?

i want to say this right now. if they try to steal this election, obama better be ready to fight to the finish. i'll be ready to fight with him.

[sandnsea]

24. You take that seriously?

Honestly, says as much about you as it does about them.

[wildflowergardener]

19. Renegotiating mortgages

I'm very glad that hopefully they got in there the ability for people to renegotiate their mortgages so that they can hopefully keep their homes.

It seems that if the companies would have been willing to do that before we might not be in this mess. I know my friend (who happens to be a republican) was having trouble with their house payments, due to a business that went under was trying to work out something with her mortgage company, Wells Fargo, and was actually told by the customer service person on the phone that she had talked to her too long, that the calls were timed and if she spoke to a customer longer than a certain amount of time she'd be in trouble. What kind of business with that that a customer can't speak with you to try to work something out and your time with a customer is timed and you are penalized for talking to them too long - if you have a customer that can pay something, isn't it better than nothing? They ended up having to be foreclosed on.

It doesn't make me feel sorry for the bank at all.

Meg

[jpgray]

20. The frustrating thing is that failed banks don't hurt the executives that cause them to fail

These rich folks come out of the rubble more or less as well-off as they were when they came in. Those who are less liquid in their assets, who are dependent on credit, money market funds and bonds, have the potential to be hurt savagely by the failing bank. This is the fundamental problem with our system--the rich have little risk in failing a major bank, whereas those who don't share significantly in the profits and are lower class hurt the worst when such institutions fail.

[DaLittle Kitty]

30. That's WHY WE MUST ELECT JOHN RUSSELL TO CONGRESS WHO WILL GO AFTER THESE CROOKS!

Check John's Press Release on DU!

[coalition_unwilling]

38. This is truly a sweeping over-generalization. While i do not feel much

pity for these parasites, the CEO of AIG lost a lot of money as AIG's stock went into the crapper. According to the NY Times, he may have lost a personal fortune estimated at $5 billion (!) as the AIG stock price declined.

[jpgray]

42. Are you talking about ex-CEO Greenberg or recently dropped Willumstad?

But in any case, AIG is on a slightly different order than investment/commercial banks.

[coalition_unwilling]

43. Greenberg, acc to NY Times, has taken a huge hit to his

personal fortune. While he's not yet pushing a shopping cart down 5th Avenue, his fall has been spectacularly HUGE, enough to satisfy all but the most bitter of DUers for a measure of economic payback.

[jpgray]

44. Greenberg has been out for what, 3 years? And he was what left? $800 million?

I think he'll be okay.

[coalition_unwilling]

46. A $100 million here and a $100 million there and pretty soon you're

talking real money :)

Look, those at DU and elsewhere who wish the pauperization of these parasites should ask themselves if said pauperization would really serve any useful social goal, other than a reflexive emotional gratification. It seems a far more effective expenditure of energy to organize to raise marginal tax rates on the incomes of the hyper-wealthy. Those who benefit inordinately from capitalism should have to pay for it, imho.

I also think it's way past time to revive McGovern's 1972 proposal for a 'negative income tax'. We are a wealthy enough country to do it.

Finally, it is amazing to me that not once has the topic of cutting the defense budget even been raised during this entire imbroglio. Oh sure, McBush made the obligatory noise about going after 'cost overruns' in the debate on Friday. But neither McBush nor Obama dare touch the true third rail of American politics, the defense budget.

[jpgray]

48. I think you'll find widespread agreement on that from all of DU

It's sort of an uncomfortable fact of history that fifty years ago our tax code was -hugely- progressive (91% for top brackets), and yet there were still fantastically rich and ambitious people! Imagine. :)

[jazzjunkysue]

45. Serves the mortgagers right for not allowing people to re-negociate.

[bemildred]

22. Leave it for the next Congress, everything will be clearer by then ... nt

[jpgray]

25. The risk is, if we don't pass -any- bailout and matters get much worse, it's at our feet

It will be seen as "Democratic inaction" since we control Congress. We have illusory majorities that are in effect very tiny (47 blue dogs in a 16-seat majority), but nonetheless we are the de facto majority party.

[pinto]

23. kick

:kick:

[Rabrrrrrr]

26. NO BAILOUT! Let 'em fall!! It'll self-correct, and the fat cats won't get fatter.

"Limits on executive bonuses" - what fucking nonsense is that?!?!?! THe same executives that fucked everything up!

They shouldn't be getting "limits" on their bonuses - they should be fired and investigated, for fuck's sake! And if found guilty, send 'em to jail and confiscate all their assets.

Anyone who wants a bailout is a blind, short-term thinking nincompoop.

[jpgray]

27. Do you believe self-correction will include arrest and confiscation?

Or do you envision such measures passing this Congress? What about the effect of inaction on credit? Money markets? Bond holders?

Just curious.

[Rabrrrrrr]

28. No, self-correction and investigating are quite separate.

The latter will take some actual initiative by the feds.

The former takes no action.

I don't think socializing risk is a good economic policy when the gain is entirely privatized.

[jpgray]

29. Would the gain in this case be entirely privatized?

This comes back to whether or not we're getting realistic prices on the bad debt, and moreover how much the gov't "shares" in the profits. These are aspects of the plan that need more specific analysis from experts before I can fully understand them.

[Rabrrrrrr]

32. I think some gain (assuming a bailout) would be given back to government coffers.

My reference to gain is to the past - the companies have taken all their gain for the last many years and kept it; they did not share it with taxpayers (other than the small amount they actually paid in taxes).

But now, after years of criminal - or at least highly unethically dangerous and risky - activity, they want to socialize the risk; that is, they aren't willing to just let their companies (and their own paychecks) die because of their failure.

Let 'em die - someone else will pick them up.

Our country is full of creative, wonderful, entrepreneurial people who could make wonderful things happen if they had the chance to buy a bunch of stuff at firesale prices.

If we don't truly let the market deal with itself, all we're doing is duct-taping, and it will eventually fall down even worse.

Let the companies die, re-enact the regulations we had before that were helpful, add some new ones, and reconsider how the financial world should be regulated. But don't bail any companies out.

Companies die all the time in this country, and it's never really fucked us over before - something else comes in to fill the void.

Consider how many companies that were in the original DOW even exist any more.

[jpgray]

37. I think on that basis there's no way to feel about this other than outraged

I'm in full agreement there. On the question of "where do we go from here?" I think simply buffing out the FDIC (as in the Galbraith plan) and encouraging federal agencies to do exhaustive investigations are the best place to start. Unfortunately I don't see either measure passing Congress, and I don't see it being the political band-aid that most reps are seeking--the idea is to stave off bleeding until after Novemeber, in many cases. With the GOP it's just positioning themselves against any taxpayer-funded action, chanting free market mantras and blaming any result on the Democratic Congress.

[coalition_unwilling]

39. Do you like being able to pay for your gas with a debit card? Do you

like being able to keep your money in a government-insured bank account? Do like having a job? The reality is that this is far from being a 'bailout.' It is actually an economic stabilization measure. FDR would have approved, I am convinced, were he alive today.

[Odin2005]

31. Looks fairly OK to me. I like these 3 things:

-- Democrats won new, unspecified restrictions on CEO pay and executive compensations for participating companies.

-- Creation of warrants, which allows any windfall coming to participating companies to be shared with the government, thus the taxpayers. (Isn't this similar to Senator Bernie's idea?)

--Judicial review of Treasury’s actions.

Could be better though. Oh well, we'll be able to give this a thorough revamp in a few months when we have President Obama leading a more progressive Congress.

[mzmolly]

36. The first thing Democrats have to do is say "we rejected Bush's bail out plan" and implemented a

"buy out" where taxpayers can get their money back. We can not keep calling it a "bail out" and expect to get public support regardless of the changes we made.

Thanks for the info JP.

:kick: and R.

[coalition_unwilling]

40. Ding, ding, ding!!! Bush is a defeated man, as his televised begging

on Thursday suggested. He's the Boy Who Cried Wolf once too often and now no one credits his words. The Bush-Paulson plan is and was DOA.

[bvar22]

41. $250Billion is a HUGE amount of money.

The ONLY reason it sounds OK is that they originally asked for $750Billion!
(A Machiavellian manipulation, and a tactic of the Shock Doctrine)

I can't believe that some are sighing with relief because its only $250Billion.

$250Billion = more than 2 years in Iraq!

Injecting $250 Billion of borrowed money into the American Economy effectively:
1) Cuts wages for ALL Working Americans (inflation)

2) Raises taxes ON OUR CHILDREN!
We won't pay for the Democratic Bailout. They're putting it on the credit card.
Your children will be forced to pay for the "Bailout".
But the Wall St CEOS and the Investor Class will take their cut of your children's money TODAY.
How nice!

You have been played.


Thanks Nancy.
Thanks Harry.

Hey STUPID,
Fix the sinking boat BEFORE bailing it out!

[jpgray]

50. True enough, but with installments and oversight it is superior to the Paulson plan

Is it still bad? Many say yes. So while this is progress, is it enough progress? How many more significant changes can we expect from this Congress? Obviously we should push for more, but I fear that the Democrats lack the unity and political will to see through a contentious, controversial bill.

[HCE SuiGeneris]

51. Question for you.

The preposterous nature of the original Paulson proposal makes almost anything look reasonable in comparison. What do you think the odds are that this was taken into consideration at the original "brainstorming" session months ago when this was drawn up?

[bvar22]

47. $250 Billion is a HUGE amount of money.....

...especially for a country that is Broke, and in debt!

The ONLY reason it sounds OK is that they originally asked for $750Billion!
(A Machiavellian manipulation, and a tactic of the Shock Doctrine)

I can't believe that some are sighing with relief because its only $250Billion.

$250Billion = more than 2 years in Iraq!

Injecting $250 Billion of borrowed money into the American Economy effectively:
1) Cuts wages for ALL Working Americans (inflation)

2) Raises taxes ON OUR CHILDREN!
We won't pay for the Democratic Bailout. They're putting it on the credit card.
Your children will be forced to pay for the "Bailout".
But the Wall St CEOS and the Investor Class will take their cut of your children's money TODAY.
How nice!

You have been played.


Thanks Nancy.
Thanks Harry.

Hey STUPID,
Fix the sinking boat BEFORE bailing it out!