Pelosi: It's not a bailout, it's a buy-in

Your Congress and your president (I don't want 'em, you can have 'em) have again agreed on a $700-billion bailout, and this time they say they really mean it. Headlines and links first, and then as always I'd like to hear your thoughts.

The Los Angeles Times: "Congressional and administration officials unveiled their $700-billion rescue plan for Wall Street today, setting up the largest government intervention in the economy since the Great Depression."

House Speaker Nancy Pelosi, evidently with a straight face: "This is not about a bailout of Wall Street. It's a buy-in so we can turn our economy around" and protect the assets of ordinary Americans. Well, now I feel so much better about it. I'm buying in! I'm getting a piece of financial products that are so worthless that there's no market for them.

The New York Times: "Congress braced for a difficult vote on a $700 billion rescue of the financial markets after a weekend of tense negotiations produced a plan that Congressional leaders began selling to lawmakers on Sunday as significantly strengthened by new taxpayer safeguards.

"The 106-page bill, intended to ease a growing credit crisis, came after a frenzied week of political twists and turns and still faced some resistance from lawmakers on both the left and right who portrayed it as a dangerous rush to economic judgment.

Bold Bipartisan Leadership for Change department: The New York Times reports, "The two presidential candidates ... both gave guarded endorsements of the bailout plan Sunday."

-- Peter Viles

Your thoughts? Comments?

Photo Credit: A.P.

Comments

[RyanT]

No bailout. Privatizing profits and socializing risk is bad policy and wrong.

Economic expansion and contraction are normal functions of an economy. Downturns rid the system of the incompetent and weak.

JP Morgan/Chase buys WaMu. Bank of America buys Merrill Lynch. JP Morgan says they can now raise 8 billion dollars of new capital from the private markets
Do this 90 times and you've got your 700 billion of new capital in the banking system.

Wells Fargo and another bank are bidding to buy Wachovia. It appears to me the system is working fine.

194 economists, three of whom are Nobel prize winners, have submitted an open letter to Congress telling them the bailout will only make the situation worse. You can read this on Bloomburg.com and type in "bailout".

It's not too late to stop this tragic event. Fax your representatives and let them know you will vote them out of a job in November.

Here is link to your representative with email, fax and phone. I think faxing will be better since the paper will defiantly be seen as the outrage of faxes overflows their office.

http://www.visi.com/juan/congress/

[smrr]

Speaker Pelosi,
I don't want buy in. I don't want to buy worthless securities. I want banks that are insolvent to fail. I don't mind a lack of lending. That will help education, auto loans, housing get back into line. I don't mind a fall in the inflated stock market, I have moved to cash. Don't vote for the bailout, call me when the DOW is at 5000 and LA median home prices are a buck fifty. Or get voted out of office --- you and every other incumbent.

[smrr]

Sing Expat. I'm following your lead. The fifty percent of my six plus figures is going to be paid to another government if this baloney goes through. Go Russia!!

[upthecreek]

EXCUSE ME NANCY PELOSI..WHERE DO I GET MY MADE IN USA.... BARF BAG

THE TIME HAS COME TO VOTE ALL THESE IDIOTS OUT OF OFFICE.

[FireThem]

This bailout is a joke. Just the interest that we have to pay out before we allegedly get our money back (which I am pretty sure we won't) is billions of dollars. I guarantee if there was no plan, we would magically survive. Sure, Paulson might be out a few hundred million, but hey, I'm sure he could still get his 5lb lobster at The Palm. It is sickening to watch the constant politicization of this whole thing. If it was so bad, I'm sure Pelosi would keep her stretched mouth shut and really do what is best for this country. I hope everyone votes out their incumbent congressperson. I know I will.

[Sam in Simi]

These folks got rich putting their money into the same institutions that paid for their campaigns and now they're just returning the favor. If these 'financial' institutions go down Congress critters will lose a bundle. Can't have that happening, now can we? I was all set to vote for McCain because Obama's Let's Suck The Rich Dry attitude scares the heck out of me. Now I'm voting Bob Barr. Pelosi, Feinstein, Boxer - you'll never get a vote from me. Of course, neither will any other incumbent.

[cyberbian]

It steals a trillion in worth from everyones assets, If if works, it puts the value into the national debt, which will be immediately pork barrelled back to debt or blown on another war.

I want a real piece of the pie for the people. Just sieze all the assetts. This is a matter of national security!
Teach the financiers a real lesson, don't screw up or you loose!

Sieze the good with the bad, and use the money for education, healthcare, retirement, and infrastructure. Ear Mark it but good for the benefit of the people and shoot anyone who even suggests some other purpose for it.

Why buy the bad, when you can take it all? They are going to belly up the whole financial world with their greed. They should be ecstatic we don't bring back the guillotine and do a reinactment of the french revolution!

[fred]

There was a perfectly good model to follow (Sweden - http://www.nytimes.com/2008/09/23/business/
worldbusiness/23krona.html?em)

Why could they not follow this? We deserve an explanation.

[arroyogrande]

There is so much more going on re: The No Bankers Left Behind bill:

www.nakedcapitalism.com
Mussolini style corporatism in action

"Various readers wrote us, and it was confirmed by a detailed report on the call at DealBreaker, that the Treasury Department held a conference call this evening for investors on the bailout bill...this was most assuredly not intended to be a call open to the public at large. If anyone from the media or other member of the great unwashed was listening in, it was by accident..."

"...The exec comp provisions sound like a joke, They DO NOT affect existing contracts, they affect only contracts entered into during the two years of the authority of this program and then affect only golden parachutes. More detail on that point, but I don't need more detail to get the drift of the gist..."

"...Waiting a couple of weeks because no one has any idea when or where the next bomb will blow up. In other words, all their doomsday scenarios about Black Monday were B.S. They screamed the check had to be written by Monday, but now they're saying they actually have a few weeks before they need to cash it. Plus, this will allow them to "seek guidance" from GS, JPM, and other selfless public servants about where the money should be funneled..."

And on to calculatedrisk.blogspot.com:
Draft: Emergency Economic Stabilization Act of 2008

"...SEC. 132. SUSPENSION OF MARK-TO-MARKET ACCOUNTING..."

This legislation will be "interesting" should it pass...it went from Hank Paulson's original 3 pages to the current 110 pages (!!!), and by many accounts, the accords on equity participation for the taxpaters, and executive compensation were watered down considerably (in other words, it's full of loop-holes).

- arroyogrande

[Nick]

Thoughts, you ask? I think it stinks. I think it's ridiculous that my government would spend $700 billion dollars they don't have (pushing the burden on future generations and/or national stability) to pay off the irresponsible financial organizations who drove themselves to the brink of bankruptcy chasing profits and executive bonuses. I think it's equally ridiculous that our "representatives" added a provision to force loan "workouts" and delay foreclosures, thus also rewarding the irresponsible borrowers who drove themselves to the brink of bankruptcy chasing profits and "get rich quick using real estate" schemes.

I think the reason they feel the bailout is essential is that the Fed has "loaned" out all their money trying to prop up and bail out banks through the back door, and as a result they can no longer perform their essential market stabilization duty. I think it's also ridiculous that Congress is legitimizing the Fed's market manipulation and backdoor bailout "quasi-legal" activities, instead of investigating them for their large hand in creating the current crisis.

As a side-note, I'm kinda surprised neither presidential candidate has taken the "hard-line against" tact. One would think that in today's popular opinion climate, especially this close to the election, you could probably ride that stance alone into the White House, if not into a Congressional majority. I guess neither candidate is really the pro-change outsider maverick they both claim to be, when push comes to evisceration of the responsible American taxpayer, so to speak.

[flubber]

Peter, Please post the names of the congress who voted for this bailout, and if available in printable version. So next time I'm at the poll, I'll have a handy dandy list of those who I will NOT be voting for.

[John]

Welcome to the new, improved, United Socialist States of America! Our government is using the capitalist pig's own free market to take back our economy. Hopefully Uncle Sam won't foreclose on our houses any time soon. Now all we need to do is get our government to "buy in" on the auto industry. And then oil. And those pesky healthcare companies. We can print more money to pay for it all, and finance our glorious revolution.

Good day, comrades.

[Valley Observer]

Yes, Peter, you and I and everyone else are becoming the owners of a lot of securities and real estate and who knows what else, that's not worth the present face value of the loans it's collateral for, and we'll probably end up losing some money. Could you please post a link to the blog where you proposed an alternative program, I must have missed it. And when you posted proposed regulations that would forbid the masters of the universe from making profits from schemes that go bankrupt, maybe something really complex like paying commissions progressively, based on the asset's value some years later? Perhaps you could also repost what you wrote back in 1999 when Glass-Steagall was repealed by the Gramm-Leach-Bliley Act. Hmm.... I've heard that name Gramm somewhere in the presidential campaign. If we had voted against Gramm and all the rest of his ilk back then, we might have stopped this -- it would have come down to congress vs the lobbyists, and the lobbyists might have won anyway, but at least we wouldn't have given it away at the beginning.

[Robert NO longer in LA]

It's bad enough not being able to hang corrupt politicians, but then we have 'sailor7x', whose thinking proves the danger of mothers breast feeding their children into their military service age.

[Valley Observer]

For those who think $700 billion is too much, what's your feeling about the Iraq war and related expenses? How about the defense budget? DoD plus DOE for nuclear weapons plus coastguard (under transportation) plus veterans plus supplementary bills to actually pay for the Iraq-Afghanistan war (which is mostly not covered by the DoD budget) plus DHS plus anti-terrorism projects in other departments (would you believe that includes Agriclture?) come to a trillion *every year*. A one-time cost of $700 billion is chickenfeed in that context.

[tew]

If you're willing to spend some time I recommend this:
http://us1.institutionalriskanalytics.com/pub/
IRAstory.asp?tag=312

[SevenHundredBillion.com]

My take on the whole thing is that the thieves who robbed the money in the first place will get a second chance to unload hundreds of billions again. In short, we should be asking yourself where did the money go in the first place, where is it now? I could not have evaporated, so whoever holds that money now has to pay it back in some form. So if it's Wall Street traders, go after them or whoever it is. Just my 2 cents...

[bigunit]

Fred- Sounds like a perfectly reasonable solution. Unfortunately, GW doesn't take the NYTimes...it's kinda like negotiating with your enemies.

[upset in San Diego]

in november be sure to vote the incumbents out of office...throw out anybody that supported this bailout and off shore drilling off the california coast!!!

[Putzmiester]

The banks simply wish to do a reverse "run on the banks", they propose a "run on the citizens". What if for 3 consecutive days this week everyone in the country withdraws $1,000 or whatever they can afford to not have in their account for a week from their friendly bank?
The first day its $333, the second, another $333, the third, another $333. Would that get the bank's attention?
Think you have a liquidity problem now, just wait! Kick 'em where they'll feel it! These prostituted politicians won't represent us, so let's bust they're Wall St. pimps!

[Wes Boudville]

To "Todd in WeHo" - "I'm happy to announce my candidacy for the U.S. Senate. My qualifications? I pay my bills on time, I balance my checkbook each month, and I live within my means. I challenge any incumbent to match this."

?? That's so un-American. Are you a freak?

:)

[1929]

Thanks for the bailout blogs Pete... If this thing passes this morning, I really think that I'm going to throw up. Over 200 economist said that this thing is a BAD IDEA... And by the way, how the heck are we going to finance this $700B that they want??? There goes America's AAA rating. I guess we'll be in the same boat as the Japanese... Here is to another 10 years of depression.

[LA-renter]

I'm tired... Tired mostly for the lies...

[Lucas Cantin]

I am really upset about the 700 billion dollar bailout. This is obviously another scam to pad executives retirement accounts. De-regulation simply doesn't work. If the government is going to step in, then these banks should become public entities like what is currently happening in England.

You should let Wall Street crash. A 'credit crunch', shrinkage and firing of these executives will clean up Wall Street, not a bunch of free money. This is the Republicans problem and they should suffer for it, not the tax payers. I have voted for you several times and like your ability to make tough decisions. Don't let this one get past you.

Sincerely,

Lucass Cantin

[Doug in Toronto]

Now for the $700 billion question: what is this corporate cash advance going to do for people who are stuck with toxic mortgages they can't pay and are trying to sell houses that no one seems to want? My guess is: next to nothing.