The Stalled Bailout. Robert Reich Prediction

[chill_wind]

( See intro )

"Prediction: A scaled-down bill will be enacted by the end of the week. It will provide the Treasury with a first installment of $150 billion. Treasury can use it to back Wall Street’s bad debts with lend no-interest loans of up to two years, until the housing market rebounds. Or to invest in Wall Street houses directly, in exchange for stocks and stock warrants. There will be strict oversight. Congressional leaders will promise further installments, but with conditions calling for limits on salaries and relief to distressed homeowners."

http://robertreich.blogspot.com/2008/09/stalled-deal.html

[JuniperLea]

1. Maverick Bush already jumped that shark...

http://www.bloomberg.com/apps/news?pid=20601087&sid=a9MTZEgukPLY&refer=home

[RUMMYisFROSTED]

2. I have Zero doubt another bill is coming down the pike.

I'll hold my opinion of that bill in abeyance.

[Mme. Defarge]

3. Mesdames et messieurs faites vos jeux ..

[RUMMYisFROSTED]

5. "Guys and Gals..."

[chill_wind]

9. place your bets." (or something like that?}

[avaistheone1]

4. The new bill has to be tougher on Wall Street, provide more protection for taxpayer dollars,

and hopefully get rid of Paulsen.

[FarCenter]

6. After 9/30, it will be too late

Just like the laws enacted after 9/11, there is a lot of garbage in the bailout bill. After 9/11, the effective measure would have been to reinforce cockpit doors, lock them, and issue sidearms to the pilots. Instead, we got a lot of addition measures implemented at great cost to ensure that grandmother didn't carry a nail clipper onto the plane.

In the bailout bill, the crucial section is the short one that enables the SEC to terminate the "mark to market" pricing of mortgage securities. Removing it would allow banks to value them on some more reasonable basis, such as discounted expected cash flow.

If the banks have to use the mark to market rule, observe that there is no market for mortgages. Therefore, mortgages held by banks are worth $0.00.

Lots of banks, who may have reasonably sound mortgages on their books, are going to have to mark them to $0, or at least to a very small number.

Lots of banks are going to look insolvent when their 3Q reports come out, and they are going to fail.

Maybe they can find another way to do away with mark to market, by a SEC or Treasury or IRS ruling. But if it stays, the consequences are very likely dire.

[Warpy]

7. I hope he's right about this one

The real work needs to begin with the next Congress. All that is necessary right now is a stopgap measure.

That bailout as written would never have worked. We all know that.

I'm beginning to think the speech Pelosi made was calculated to throw the GOP into a major hissy fit so that the defeat could be blamed on them.

In any case, I don't want this Congress to try to fix the economy.

[lonestarnot]

8. I don't think it will happen until after the election.

[chill_wind]

10. am kick.