Not buying the bailout: Gingrich stirs the pot

News item: Former House Speaker Newt Gingrich (pictured) is urging fellow Republicans to slow down and ask tough questions about the proposed Paulson bailout, warning that implementing the bill "is going to be a mess" and that "Congress has an obligation to protect the taxpayer."  These were not throwaway remarks; Gingrich published a lengthy argument against the bailout at National Review online Sunday evening.

Also not buying it: Conservative columnist William Kristol, who wrote Sunday of the case for the bailout, "I'm not convinced."

Much as I don't want to turn this blog into a political blotter, the politics of the bailout bill are shifting rapidly and worth watching. If Republican leaders can't deliver votes for the bailout, it turns into a purely Democratic bill, and Democrats have little reason at this point to let a lame-duck President tell them what should be in it. That means the bill is more likely to be expanded to include aid to homeowners and limits on executive compensation at banks, whether the president wants those provisions or not.

Analysis: The Paulson bailout is not a done deal. What appeared to be a slam dunk on Friday night no longer looks so certain. Every day that goes by makes it tougher to pass. Every hour brings new objections to the proposal, on numerous grounds; it is expensive, unprecedented, unfair to taxpayers and will generate new profits for the least popular businesses in America, banks and brokerages.  Notice that neither presidential candidate yet supports it. Polls will likely show it to be unpopular. I'm also guessing calls and letters to members of Congress will be heavily against the bailout. (Click here to learn how to call or write your member of California delegation to Congress.)

Of course, the Dow lost 372 points today. Another day or two of selling like that could help make the White House case for action.

-- Peter Viles

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Photo Credit: Getty Images

Comments

[LAwriter]

George W Bush = worst president ever

911 - it happened on his watch
Iraq - unneccessary war costing 500 billion and counting
Katrina - watching an American city drown, disgracefull
economic collapse - just when you thought it couldn't get any worse

The largest transfer of wealth to the top 1% is almost complete. MISSION ACCOMPLISHED!

[Steve]

What a debacle, can it get any worse. I was a die hard Republican and I will vote for Obama. Get real this is the direct fault of Greenspan and GW, both morons and they should be held accountable, take all of thier assets and book money now and then jail them in the Middle East.

[Pete]

Thanks Newt . I am from GA and was of the other end of the political spectrum from your and Barr . You sure have it right on this one .

What the Bush admin is doing is an act of Fascism . They are robbing the Taxpayer . If the eiher party of Congress oes along with it (even a "modified plan" ), they are just as guilty .

[Will]

Both Democrats and Republicans are to blame for this mess and GREED. I never heard anyone on either side mention the abyss we were falling into. In fact Alan Greenspan seemed to constantly counter any arguments when the market correction comment was brought up. John McCain in 2005 did sound a warning bell on Freddie and Fannie but the Democrats did not want to tinker with their pockets lined of donations. And no Wall Street types who knowingly allowed these situations to exist and decimate their firms should receiveany parachutes, bonuses or the like.

[Art Johnson]

I am not sure a bail out is needed or not but I know when I don't do my job I get fired and when a breach of contract happens golden parachutes are not paid. Bailing out US financial institutions may be in the best interest as far as mortgages but this cart banc for all debt is ridiculous. Bailing out foreign institutions is a major slap in the face let their own country pay for their executives’ mistakes.

[Louise]

Eternal Summer - In fairness to Whoopi Goldberg, the point she was making was that Wall Street was being bailed out while normal people aren't yet are holding the tab for their indiscretions. But if we're going to give 700B why not funnel it through mortgages first so at least some average joes are being bailed out as well. I am not advocating that, just saying if we're bailing out these people why not bail out two birds with one stone.

[Jane]

Why do we care that Newt Gingrich is rearing his ugly head on this? Newt Gingrich is not the solution to the problem-- Newt Gingrich IS the problem. The radical theory that government is never necessary for anything, was the root of the laissez faire policies that led into this mess. There is no evidence that laissez faire will solve the problem.

Not to say that the current proposal should pass, but people who are smarter than I am (including Paul Krugman, no friend to the current administration or to the current proposal) believe that government will have to act. Our lives and well-being are too interwoven with the markets to let them collapse. Greed used to be considered the only necessary motivator in our society. Now we're going to have to try leadership and the best interest of the country. And that will have to come out of government, because it's all we've got.

The problem of course, is that the executive branch of our current federal government is full of people who don't view themselves as civil servants -- who sneer at the idea (remember the "community organizer" dig?). They aren't good at governing. So we're in a double bind. The free market is broken, the government is barely functionall. We're reaping what we sowed. At least we'll learn, perhaps, that the government and the market are symbiotic, not separate.

[jane]

Since 2006, the federally sponsored mortgage giant Freddie Mac has paid at least $345,000 to John McCain's campaign manager Rick Davis. Davis was charged with the task of promoting home ownership while at the same time counter efforts of the government to impose tighter loan regulations. This is considered as one of the cause of the current major meltdown financial crisis in the country since the 1930s economic depression.

Although the previous arrangement had terminated, Rick Davis himself approached Freddie Mac in 2006 and asked for a new consulting arrangement. As a result, Davis's Washington, D.C. based lobbying firm known as Davis & Manafort received $15,000 a month from Freddie Mac until last month. The arrangement was approved by Hollis McLoughlin, Freddie Mac's vice president for external relations. Davis being a campaign Manager and a potential Chief of Staff for the next President it was felt you couldn't say no.

Despite of this new revelation, it is not ideal for Davis to voluntary or be requested to step aside at this time, six weeks before the general election.

[Cryos]

I say forget the bailout let them crash. A lot of the investment is from foreign business and banks anyways. So what we're basically doing is guaranteeing all of the foreign firms their money and sticking the entire bill with the taxpayers.

Here's my take on what led to the problem.

Democrats keep mentioning "deregulation" but don't mention the reason. Beginning in 1999 we lowered loan standards with the "social justice" goal of increasing "minority" home ownership. We did this by the government telling financial firms they had to accept lower standards for credit and in return we would underwrite the loans using Fannie Mae and Freddie Mac. From there it was greed that took over.

I think this is why you see support for the bailout from both republicans and democrats; they don't want people to really know WHY we got here they just want to keep things vague with "deregulation" and "greed."

This is a perfect example of why you have to be careful letting "feel good" politics get in the way of business. We told businesses they had to accept bad loans and it just got worse and worse from there from greed as everyone tried to prolong the housing bubble.

Housing was going up at a ridiculous, unsustainable rate and no one was complaining. Real estate companies and financial firms were getting their money, homeowners were quiet believing they were gaining wealth, politicians (both parties)were getting their political donations, and the noble cause of home ownership even for people that don't deserve it was being fulfilled.

However housing was becoming so high prices the middle class could no longer buy homes. The market should have leveled out or decline slightly a couple years ago. Rather than let the market naturally level out or decline the financial firms, real estate companies, politicians, etc wanted to keep making their money so they got more and more creative with the loans based off of the poor standards established in the late 90s until the bubble could no longer be contained and it popped. And here we are.

[Cryos]

"Despite of this new revelation, it is not ideal for Davis to voluntary or be requested to step aside at this time, six weeks before the general election."

Howyou take this logic and apply it to democrats also. Obama, Hillary and Dodd are 3 of the biggest beneficiaries of money from Fannie Mae and Freddie Mac. Although the paper is only publicizing the republican angle (gee I'm shocked) McCain has received several times less from Fannie Mae and Freddie Mac in his careers than Obama has in 3 years.

[Gaias Child]

We already experimented with doing such a major correction laizzez faire. That was called the Great Depression. In this country, people suffer, lose homes, go hungry. In other countries they starve to death and die. So if we want to let the market correct itself that radically, it is the people who don't want the brother's keeper option who are responsible. Nothing wrong with doing it intelligently and not giving a blank check to a government we don't know yet, the next administration. The solution crafters have at least made an effort not to do the 1930s again. For that, they need appreciation. I'd say it might be better than free fall.

[butch]

I do not agree with bail out. At least 50 per cent should be put back to each state that has the problem. If California has 40 per of the foreclorsure then they should be responsible of 40 per cent of the bill.