Bush, describing his bailout, avoids the "b" word

The President this morning described his plan -- if it comes from his Treasury Secretary, it's his -- for what will likely be the biggest bailout in United States history.

Funny, though, he couldn't summon the courage, or the honesty, to use the "b" word. What else is it when government scoops up hundreds of billions of dollars worth of financial trash that no smart person in the world wants to buy? It is a bailout.

The president called it "essential intervention," "decisive action," an "unprecedented step" that would entail "putting taxpayer dollars on the line."

Right. So what is it? He says it's ".. the federal government's purchase of illiquid assets, such as troubled mortgages, from banks and other financial institutions."

Right, a bailout.

We know he is capable of using the word -- he used it in this press conference in February when he warned Congress not to "bail out lenders and speculators." That was then.

The president also said, "This is no time for partisanship," and on that I agree. This mess was created and is owned by both political parties, and they purchased it on an installment plan that entailed years of unflinchingly loyal service to the financial services industry.

Those searching for misery this morning can read the entire Bush statement below, as filed by the A.P.

    BUSH: Good morning.
    I thank the treasury secretary, Hank Paulson, Federal Reserve Chairman Ben Bernanke and SEC Chairman Chris Cox for joining me today.
    This is a pivotal moment for America's economy. Problems that originated in the credit markets and first showed up in the area of subprime mortgages have spread throughout our financial system. This has led to an erosion of confidence that has frozen many financial transactions, including loans to consumers and to businesses seeking to expand and create jobs.
    As a result we must act now to protect our nation's economic health from serious risk. There will be ample opportunity to debate the origins of this problem. Now is the time to solve it.
    In our nation's history there have been moments that require us to come together across party lines to address major challenges. This is such a moment.
    Last night, Secretary Paulson and Chairman Bernanke and Chairman Cox met with congressional leaders of both parties and they had a very good meeting. I appreciate the willingness of congressional leaders to confront this situation head-on.
    Our system of free enterprise rests on the conviction that the federal government should interfere in the marketplace only when necessary. Given the precarious state of today's financial markets, and their vital importance to the daily lives of the American people, government intervention is not only warranted, it is essential.
    In recent weeks, the federal government has taken a series of measures to help promote stability in the overall economy.
    To avoid severe disruptions in the financial markets and support home financing, we took action to address the situation in Fannie Mae and Freddie Mac. The Federal Reserve also acted to prevent the disorderly liquidation of the insurance company AIG. And in coordination with central banks around the world, the Fed has injected much-needed liquidity into our financial system.
    These were targeted measures designed primarily to stop the problems of individual firms from spreading even more broadly. But more action is needed.
    We must address the root cause behind much of the instability in our markets: mortgage assets that have lost value during the housing decline and are now restricting the flow of credit.
    America's economy is facing unprecedented challenges, and we are responding with unprecedented action.
    Secretary Paulson, Chairman Bernanke and Chairman Cox have briefed leaders on Capitol Hill on the urgent need for Congress to pass legislation approving the federal government's purchase of illiquid assets, such as troubled mortgages, from banks and other financial institutions.
    This is a decisive step that will address underlying problems in our financial system. It will help take pressure off the balance sheets of banks and other financial institutions. It will allow them to resume lending and get our financial system moving again.
    Additionally the federal government is taking several other steps to address the trouble of our financial markets.
    The Department of Treasury is acting to restore confidence in a key element of America's financial system: money market mutual funds. In the past, government insurance was not available for these funds, and the recent stresses on the markets have caused some to question whether these investments are safe and accessible.
    The Treasury Department's actions address that concern by offering government insurance for money market mutual funds. For every dollar invested in an insured fund, you'll be able to (get) a dollar out.
    The Federal Reserve is also taking steps to provide additional liquidity to money market mutual funds, which will help ease pressure on our financial markets.
    These measures will act as grease for the gears of our financial system, which were at risk of grinding to a halt. They will support the flow of credit to households and businesses.
    The Securities and Exchange Commission has issued new rules temporarily suspending the practice of short selling on the stocks of financial institutions. This is intended to prevent investors from intentionally driving down particular stocks for their own personal gain.
    The SEC is also requiring certain investors to disclose their short selling and has launched rigorous enforcement actions to detect fraud and manipulation in the market. Anyone engaging in illegal financial transactions will be caught and persecuted.
    Finally, when we get past the immediate challenges, my administration looks forward to working with Congress on measures to bring greater long-term transparency and reliability to the financial system, including those in the regulatory blueprint submitted by Secretary Paulson earlier this year.
    Many of the regulations governing the functioning of America's markets were written in a different era. It is vital that we update them to meet the realities of today's global financial system.
    The actions I just outlined reflect the considered judgment of Secretary Paulson, Chairman Bernanke and Chairman Cox. We believe that this decisive government action is needed to preserve America's financial system and sustain America's overall economy.
    These measures will require us to put a significant amount of taxpayer dollars on the line. This action does entail risk, but we expect that this money will eventually be paid back.
    The vast majority of assets the government is planning to purchase have good value over time because the vast majority of homeowners continue to pay their mortgages.
    The risk is — of not acting would be far higher. Further stress on our financial markets would cause massive job losses, devastate retirement accounts and further erode housing values, as well as dry up loans for new homes and cars and college tuitions. These are risks that America cannot afford to take.
    In this difficult time, I know many Americans are wondering about the security of their finances. Every American should know that the federal government continues to enforce laws and regulations protecting your money.
    Through the FDIC every savings account, checking account and certificate of deposit is insured by the federal government for up to $100,000. The FDIC has been in existence for 75 years, and no one has ever lost a penny on an insured deposit, and this will not change.
    America's financial system is intricate and complex, but behind all the technical terminology and statistics is a critical human factor: confidence. Confidence in our financial system and in its institutions is essential to the smooth operation of our economy, and recently that confidence has been shaken.
    Investors should know that the United States government is taking action to restore confidence in America's financial markets so they can thrive again.
    In the long run Americans have good reason to be confident in our economic strength. America has the most talented, productive and entrepreneurial workers in the world. This country is the best place in the world to invest and do business. Consumers around the world continue to seek out American products, as evidenced by record high exports.
    We have a flexible and resilient system that absorbs challenges and makes corrections and bounces back. We've seen that resilience over the past eight years. Since 2001 our economy has faced a recession, the bursting of the dot-com bubble, major corporate scandals, an unprecedented attack on our homeland, a global war on terror, a series of devastating natural disasters.
    Our economy has weathered every one of these challenges and still managed to grow. We will weather this challenge, too, and we must do so together. This is no time for partisanship. We must join to move urgently needed legislation as quickly as possible without adding controversial provisions that could delay action. I'll work with Democrats and Republicans alike to steer our economy through these difficult times and get back to the path of long-term growth.
    Thank you very much.

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--Peter Viles

Photo Credit: Getty Images

Comments

[annoyed]

Pete,

I think bailout is too nice a word for this!

[sunsetbeachguy]

We are doomed.

I am fresh out of outrage.

[Michael Snyder]

The only "b" word Bush avoided was bull***t! If there ever was proof positive of the inherent corruption and cronyism rampant in our government; this would be it. This is a taxpayer bailout for Sovereign funds in the middle east and the Pacific rim. This will only exacerbate the existing financial woes on Main Street but you can be sure there'll be a party on Wall St. tonight.

[MyLessThanPrimeBeef]

Here is a genuine quote (meaning I didn't make it up):

A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largess of the public treasury. From that time on the majority always votes for the candidates promising the most benefits from the public treasury, with the results that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.

- Sir Alex Fraser Tytler

[Todd]

Peter, if this mess was created and is owned by both political parties, then why am I having to pay for it? So much for being a prudent saver/investor.

[puckhead]

It’s truly an amazing feat what this republican president has accomplished (sarc) in eight years.

• We have gone back to the nation building business with the invasion of Iraq.
• We have nationalized Fannie and Freddie.
• We now own the largest insurance company in the world
• Govt has expanded beyond anyone’s imagination.
• And the final act is the biggest govt intervention in the private markets since the great D.

All of this would make Ronald Reagan and other R’s spin in their graves. Truly amazing feats by a man that accomplished so little prior to becoming the big P.

[CompaJD]

Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica! Attica!

Oh forget it nobody is listening.

[Nelcisco]

Puckhead,

What do you expect from an Iraqi president?

he's the best president the Iraqi's ever had, you got to give him that!!!! LOL

[eternal summer]

i am so angry!

luckily, my family has zero debt, but that is only because we opted to live within our means and try to save our money. what do we teach our children? that it is okay to break laws, spend beyond your means, and be greedy because someone will give you amnesty, bail you out, or cover your losses?

instead of giving our money to corporate welfare why didn't they just give all taxpaying US citizens a million dollars each? we could spend that money on homes, cars, college tuition, debt, etc....but that would be ridiculous.........right? ;)

[mark g]

just what Laura Richardson needed!

[Pete]

He should be afraid to say the word. He let this happen under his supposed leadership for the past 8 years .

Start calling Congressmen and Senators and the offices of Pelosi, Dodd, and Paulson .

Sign theis petition -

http://financialpetition.org/petition-nobail.shtml

[LA-renter]

Bush:

"We must address the root cause... MORTGAGE ASSETS that have LOST VALUE during THE HOUSING DECLINE..."

No responsibility... just an act of God... Mortgage assets lost value.

The only ill will is for evil short sellers... Check the speech..

The crisis is a natural disaster?!?!?!?!?!?!?!?!

Housing has declined?!?!?!?!?!?!

(Is there a doctor? I need medication.)

[Rachel]

I'm really angry. We have worked hard and saved our money, and we've been priced out of the housing market for years. Yeah, we could have bought a mini-mansion with an ARM in 2005, but we crunched the numbers and realized it was not a wise move.

So now, not only am I priced out, but I also have to pay for all those other people's granite countertops? Why can't we go after all those crooked mortgage brokers, flippers, and hedge fund managers? I'm sure many of them have stashed all the money they made off these crooked deals in offshore bank accounts somewhere. It's so unfair that those of us who played by the rules and managed our money carefully are stuck with this bill.

One thing I disagree about, though, is that both parties are equally to blame. Bush and the Republicans were in charge for most of the time that this was happening. It is indeed time for a change.

[Michael Snyder]

Is it just me or does anyone else see parallels between this scenario and the run up to the Iraq war? Now I'm not saying Saddam wasn't a problem, but he certainly didn't pose the threat Dick Cheney said he did. Conversely the financial sector is under threat, abbe it because of their own bad decisions, but is the threat as advertised? No matter, last night Hank had Ben call a meeting:

From the NY Times: "WASHINGTON — It was a room full of people who rarely hold their tongues. But as the Fed chairman, Ben S. Bernanke, laid out the potentially devastating ramifications of the financial crisis before congressional leaders on Thursday night, there was a stunned silence at first.

Mr. Bernanke and Treasury Secretary Henry M. Paulson Jr. had made an urgent and unusual evening visit to Capitol Hill, and they were gathered around a conference table in the offices of House Speaker Nancy Pelosi.

“When you listened to him describe it you gulped," said Senator Charles E. Schumer, Democrat of New York.

As Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Banking, Housing and Urban Affairs Committee, put it Friday morning on the ABC program “Good Morning America”: “The congressional leaders were told “that we’re literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally.”

Mr. Schumer added, “History was sort of hanging over it, like this was a moment.”

That's the kind of prattle I'd expect out of Schumer. Nothing like being in a textbook after you've gone. Only he'll be on the fooled me twice list.

I haven't heard a word about any regulation in the derivatives market and the subprime packaging of securities that led to this mess. I have heard about "deposit based reserves" (your checking & savings accounts) and an investment of taxpayer dollars.

My head's getting lumpy from banging it when some politician who can't spell economy parrots, "The fundamentals remain strong." No s**t Sherlock! In spite of whatever this brain trust tries to tell you; ignoring/attempting to manipulate the fundamentals is what got us into this mess.

Principle among the fundamentals is trust. Trust is built by transparency and there is no transparency in the financial sector. I watched the head of Moody's ratings division, Jay Drui get hard balled on CNBC the other day and he clearly could not codify a modicum of Moody's rating system. What's more he could not explain why securities rated AAA five weeks ago were rated B- at the time of broadcast. Accounting procedures can be best defined as convoluted and P &Ls have become a sales tool unrelated to the real condition of the concern.

More from the NY Times: " “We have got to deal with the foreclosure issue,” Mr. Dodd said. “You have got to stop that hemorrhaging..If you don’t, the problem doesn’t go away. Ben Bernanke has said it over and over again. Hank Paulson recognizes it. This problem began with bad lending practices. Those are his words, not mine, and so this plan must address that or I’ll be back here in front of a bank of microphones at some point explaining the next failure.”

Even before the drafting of the plan was complete, the Bush administration and the Fed began efforts to sell the idea of a huge rescue to potentially skeptical rank-and-file members of Congress. Mr. Paulson and Mr. Bernanke held a conference call with House Republicans to explain their thinking.

Senator Richard C. Shelby of Alabama, the senior Republican on the Senate banking committee, said in a television interview that cost to the government of purchasing bad debt could run to $1 trillion — a potential warning sign since Mr. Shelby is a longtime skeptic of government intervention in the private market.

Until Mr. Shelby was interviewed on Friday morning, officials on Capitol Hill had been careful not to discuss specific figures, though the rescue envisioned by the Treasury Department clearly entails a government appropriation of hundreds of billions of dollars."

But don't worry folks. In a week or so we'll hear about another "mission accomplished" and we'll spend the rest of our lives paying for it. Any one got odds on Detroit being the next sector "too big to fail"?

[Garrett]

MyLessThanPrimeBeef:

http://www.lorencollins.net/tytler.html

[Numb and Angry]

What I came here to say Rachel already said perfectly so I will just copy and paste her. Thank you Rachel.

I'm really angry. We have worked hard and saved our money, and we've been priced out of the housing market for years. Yeah, we could have bought a mini-mansion with an ARM in 2005, but we crunched the numbers and realized it was not a wise move.

So now, not only am I priced out, but I also have to pay for all those other people's granite countertops? Why can't we go after all those crooked mortgage brokers, flippers, and hedge fund managers? I'm sure many of them have stashed all the money they made off these crooked deals in offshore bank accounts somewhere. It's so unfair that those of us who played by the rules and managed our money carefully are stuck with this bill.

One thing I disagree about, though, is that both parties are equally to blame. Bush and the Republicans were in charge for most of the time that this was happening. It is indeed time for a change.

[MyLessThanPrimeBeef]

Garrett, thanks.

Makes you wonder, doesn't it? What, who or which link can we trust?

Maybe we should all become solipsists.

[MattJ]

I doubt FDR described the New Deal as a bailout, either. This is a time for reassuring talk and unity from our fearless leaders. It has taken decades of mismanagement of our economy to get to this point; very few if any of our elected leaders were not part of the problem. Unfortunately, we don't get to choose who will deal with this; we are stuck with who we have now.

[Bryan Morris]

Detroit will be allowed to fail. Why Detroit and not Wall Street? Because those silly people in Detroit still insist on hanging on to this prehistoric business model of employing "workers" in "factories" to make "products" that other people "buy". As everyone should know by now, that the way things are done anymore. No, our bright future is one where multinational companies hire third world offshore contractors who provide phone centers to frustrate stupid Americans who pay outrageously high fees for poor quality services. How do Americans earn the money to pay for these services? By saying "would you like fries with that?"

[annoyed]

Rachel,

Wake up there aren't two parties, it's one drunk party. Biden, Obama, McCain all in the Senate at the time of the R.E. bubble. The Democrats may have been in the minority ( not the last two yrs. ) but you didn't hear from them. They could have spoken up. But they were happy with these bad loans, it meant creating more "victims" that the Democrats would have to bail out. That poor homeowner who didn't know what they were signing.

None of them care. The FEDERAL GOVERNMENT (republicans and democrats) is out of control .

If you think the messiah is going to change anything in D.C. you are sadly mistaken. You will now pay more taxes and even more taxes.

[MyLessThanPrimeBeef]

I think they have also avoided the 'F' word - as in 'failure.'

The government and both parties, have failed to protect the American taxpayers.

[CathyG]

Thank you, Rachel, for an intelligent thoughtful post. One thing I would disagree with:

"But don't worry folks. In a week or so we'll hear about another "mission accomplished" "

I don't believe at all that the mission will be accomplished in a week or a month. Delinquencies leading up to foreclosures are still increasing in velocity and Alt-A mortgages with a terrible failure rate have barely begun to hit their resets, yet. That bubble will be unwinding over the next two years and is, potentially, considerably worse than the sub-prime mess. How is that going to be dealt with?

Huge amounts of toxic debt have been sold around the world. Are US taxpayers supposed to bail out foreign investors on top of bailing out our own financial system?

Since the United States Government operates at a deficit, we need to borrow truckloads of money every day. Will China, Russia, and the Saudis continue to lend us these truckloads when we're bankrupt and bankrupting others around the world?

I have a lot of respect for everything Bernanke and Paulson have tried to do. I just think the problem is much bigger than anything they can throw at it.

[The Original RZ]

Sometimes I wonder, what is the point of doing the right thing?

I've done just about everything that we are told is the "right" thing to do: go to college; get a well-paying job; pay off student loans; save a lot more than I spend, including a downpayment for a home; wait out (and am still doing so) the ridiculous housing market knowing that I can't afford anything; drive the same car for over 10 years; put a bunch of money in a 401(k) because I doubt that Social Security will be around when I retire; go without many luxuries; etc., etc., etc.

But what has doing the "right" thing gotten me? NOTHING except a huge tab with the IRS to help out millionaire (and some billionaire) CEOs, greedy lenders, unethical appraisers, and uniformed or selfish buyers.

[JM]

It's remarkable. In less than two weeks, President Bush and his "Conservative" henchmen have magically transformed the Federal Government into their ideological nemesis: the Republic of France. Since Bush and Co. have driven the American economy into the ground, perhaps now is the time for the good Republicans in Orange County to quietly swallow their pride and steal away to Paris for a holiday shopping spree...

[she does have a point]

From press sec'y Dana Perino, 9/18/08:

"I would ask you to go back and look and ask Speaker Pelosi or any of the other Democrats who are pointing fingers, what specific regulation did they want that we blocked? What specific regulation did we eliminate? In fact, it was the White House that worked to try to get them to act on GSE reform as early as 2003. Unfortunately, they did not act on that until most recently when there was a crisis and we got the authorities that we needed in August of 2007. What we were looking for in that GSE reform was a strong regulator. That's what we wanted. It was more regulation, more transparency, and a stronger independent regulator who could actually look at the books of the GSEs, Fannie Mae and Freddie Mac, and tell us exactly what was going on."