Common Sense: Fred Thompson on the Economy
Fred Thompson delivers dose of common sense on the economy and our government’s “spend yourself to prosperity plan”.
Crap Sandwich 2.0 Passes The House 263-171
The Wall Street Journal has the details:
WASHINGTON — U.S. House of Representatives lawmakers wary of growing signs of the nation’s economic distress voted Friday in favor of a $700 billion Wall Street rescue package, sending the biggest government intervention in the financial markets since the Great Depression to President George W. Bush for his signature.
The 263-171 vote was a reversal from Monday, when House lawmakers shocked investors and their own leaders by voting against a more narrow version of the plan to buy up distressed assets from financial institutions. That vote sent financial markets tumbling and forced the Bush administration and congressional leadership to scramble and salvage the rescue plan.
The result: a $700 billion bailout for financial firms combined with $152 billion in unrelated tax breaks and broader tools for federal regulators to deal with the growing economic crisis. The Senate passed the bill with a strong, bipartisan tally of 74-25 Wednesday evening.
The vote in the House was closer, in part a reflection that lawmakers are less than five weeks away from federal elections and voters are increasingly focused on the economy. Supporters of the rescue plan in recent days made a concerted effort to draw a line between Wall Street’s woes and the concerns of everyday taxpayers.
I don’t think its any secret that I’m not a fan of this bill… It does nothing to address the root causes problems in the mortgage market and it puts too much power in hands of the Treasury Secretary with to little oversight.
I’ll add the roll call vote as it becomes available.
Senate Passes Crap Sandwich 2.0 74-25
From the Wall Street Journal:
Senate Passes Bailout Package
House Passage Remains Less CertainWASHINGTON — The Senate’s revamped bailout package drew support from 74 lawmakers in a roll call vote Wednesday evening, and the measure will now return to the balky House of Representatives for another vote following its unexpected rejection on Monday.
U.S. Senate Majority Leader Harry Reid speaks to the media on Capitol Hill on Wednesday.
The Senate approved a new bill loaded with tax breaks for business and an increase in deposit-insurance limits. It will be taken up in the House Friday.
The Senate bill is the latest twist in a dramatic week for a plan the president has said is vital to ensure the proper functioning of financial markets and, by extension, the broader economy. On Monday, the House delivered a stunning defeat to an earlier version of the bill amid a populist backlash from voters, tanking stock markets.
Stunned by the market reaction, lawmakers regrouped and added new items to the bill to win the extra needed support. One big change is the introduction of a 10-year, $150.5 billion package of tax proposals, including measures to ease the bite of the so-called alternative minimum tax and research-and-development tax credits coveted by high-tech companies and drug makers.
Count me among those who agree with Newt Gingrich… The Bush Administration’s handling of this has been irresponsible.
From CNSNews.com:
Bush’s Handling of Financial Crisis ‘Irresponsible,’ Gingrich Says
Wednesday, October 01, 2008
By Tiffany Gabbay(CNSNews.com) – Former House Speaker Newt Gingrich blasted President George Bush and Treasury Secretary Henry Paulson Tuesday over the proposed financial bailout, saying the president “is being absolutely irresponsible” in his handling of the problem.
“There are steps that the administration could take today that would dramatically improve where we are immediately, without legislation” Gingrich said.
“If the president believes anything he is saying in his speeches about how big this crisis is, he should pick up the phone this morning and call SEC (Securities and Exchange Commission) Chairman Chris Cox and tell him to suspend the ‘mark-to-market’ accounting rules, which are the fundamental problem today and can be suspended.”
The mark-to-market system of accounting requires all assets, mortgages, and holdings to be valued at their current market value, regardless of whether that reflects their true worth.
It is an accounting practice that “literally hundreds of the most revered economists” blame for 70 percent of the current problem in the financial markets, Gingrich said.
“If you calculate 70 percent of $700 billion, that is $490 billion” he said.
Lets hope Republicans in the House can kill this turkey once and for all… Let them know what think: 202-224-3121.
Mark Levin: Thank You, House Republicans
Mark Levin writing in National Review Online’s Conner Blog:
I have read the posts here and elsewhere. Sometimes these things are made to look more complicated than they really are. From an economic perspective, if the problem is liquidity and credit, there simply is no need for the federal government to assume massive amounts of debt on its book by assuming loans in anticipation that their holders or borrowers will default. This seems to me like a brand new expanse of government power that is not justified (if it ever is) by the arguments made on its behalf. The government controls monetary policy through supply and interest rates, among other things. It can further ease money supply and credit, thereby increasing the flow of capital. The government controls tax policy. It can increase liquidity and the flow of new money into the economy both from within the country and from foreign sources by eliminating the corporate income tax and the capital gains tax even on a mid-term basis. No matter what is done, some financial institutions will fail, as they did in the 1981-82 recession and have since. And the Fed and Treasury and other instrumentalities of government will have to determine, on a case-by-case basis, whether to intervene and how to intervene. They will also have to determine whether other policies require modifying, such as the McCain proposal today, in which he suggests increasing federal insurance for individual depositors from $100,000 to $250,000. Other smart suggestions include modifying the mark-to-market rule requiring financial institutions to downgrade the valuation of assets. If the goal is to prevent panic in the economy by investors and depositors, then increase credit, liquidity, and the flow of capital, and deal with problem institutions that are significant enough in size that their demise could resonate to the wider economy. But the Soviet-style, top-down five year plan a la Paulson’s proposal, and to a significant extent the proposal that was voted down yesterday, could easily do more damage to both the economy and our governmental structure. So, in this respect, I must depart from NRO’s editorial. Read the rest…
My personal view is that a bailout of some kind has become a necessary evil… What I am opposed to is the “Paulson Plan”. There a number of things that can be done short of the Treasury using taxpayer dollars buying up billions in bad paper. As Levin points out we can quickly add liquidity to the market by suspending the corporate income tax and capital gains taxes and for example institute a government backed premium based mortgage insurance program. There are no perfect solutions to this problem and regardless of what actions Congress ultimately takes some financial institution are still going to fail.
Crash & Burn: $700 Billion “Crap Sandwich” Goes Down In Flames!
Whoa… I was expecting a close vote on bailout bill but this is a complete shock. The bailout bill has crashed and burned in the House.
The vote was 228 nay to 205 yea with 1 not voting. Democrats supported the bill 140-95, while Republicans opposed it 65-133.
Is this the reason?
Nancy Pelosi’s floor speech certainly didn’t help… I’d like to think the bills failure had more to with a majority of Congressmen being opposed to socializing business losses rather a reaction to the highly partisan nature of her remarks.
The truth is despite all the spin saying this bill needed Republican support to pass Democrats have a sufficient majority in Congress to pass it without Republican support… If just 10 Democrats had changed their votes it would have passed!
If anything this vote is a complete repudiation of Pelosi’s leadership… She simply couldn’t hold her caucus together, let me say this again Democrats have the votes to pass this pig without Republican support and Pelosi couldn’t get it done – 95 members of her caucus voted against it!
The Good, The Bad and The Ugly…
The Good (H/T: MM): Congressman Jeb Hensarling (R-TX), Chairman of the House Republican Study Committee, today issued the following statement on the agreement reached by House and Senate negotiators on the Paulson plan, and his intentions on the final bill:
“My top responsibility as an elected official is to protect the families and people who trusted me to represent their interests in Washington. I do not take lightly the critical nature of the credit crisis that our capital markets face today and the grave situation that every American will face should our credit markets freeze and remain frozen. Inaction has never been an option, but the Paulson plan should have never been the only option.
“In my heart and in my mind, I believe that this plan is fraught with unintended consequences, would force generations of taxpayers to pick up the tab for Wall Street losses, and could permanently and fundamentally change the role of government in the American free enterprise system. Once the government socializes losses, it will soon socialize profits. If we lose our ability to fail, we will soon lose our ability to succeed. If we bail out risky behavior, we will soon see even riskier behavior.
“I also believe that this Congress, in a rushed effort to provide stability to a troubled credit market, did not adequately discuss or investigate potential alternatives that would have constituted a work out and not a bail out. Even at this moment, it still remains more important for Congress to do it right than to do it fast. I stand ready, as do many of my colleagues, to stay here for as many days as it takes to do this right.
“For the last week, House conservatives have fought to protect innocent taxpayers from an unprecedented government raid on their wallets to bail out Wall Street from their bad decisions and financial losses. Principled Republicans like Paul Ryan and Eric Cantor helped improve the legislation before us by adding increased taxpayer protections and additional Wall Street accountability. But mere improvement is not the test for support. The test is whether, after weighing both the good and the bad, you believe that the plan ultimately leads America in the right direction. Using that test, I cannot in good conscious support this legislation.”
The Bad: Just were did the Treasury Department come up with that $700 Billion bailout figure? They made it up… From Forbes:
“It’s not based on any particular data point,” a Treasury spokeswoman told Forbes.com Tuesday. “We just wanted to choose a really large number.”
Presumably they picked a frighteningly large number in order to scare Congress into acting quickly without thinking the matter through.
The Ugly: From Today’s New York Post:
O’S DANGEROUS PALS
BARACK’S ‘ORGANIZER’ BUDS PUSHED FOR BAD MORTGAGESBy STANLEY KURTZ, New York Post, September 29, 2008
WHAT exactly does a “community organizer” do? Barack Obama’s rise has left many Americans asking themselves that question. Here’s a big part of the answer: Community organizers intimidate banks into making high-risk loans to customers with poor credit.
In the name of fairness to minorities, community organizers occupy private offices, chant inside bank lobbies, and confront executives at their homes – and thereby force financial institutions to direct hundreds of millions of dollars in mortgages to low-credit customers.
In other words, community organizers help to undermine the US economy by pushing the banking system into a sinkhole of bad loans. And Obama has spent years training and funding the organizers who do it.
THE seeds of today’s financial meltdown lie in the Commu nity Reinvestment Act – a law passed in 1977 and made riskier by unwise amendments and regulatory rulings in later decades.
CRA was meant to encourage banks to make loans to high-risk borrowers, often minorities living in unstable neighborhoods. That has provided an opening to radical groups like ACORN (the Association of Community Organizations for Reform Now) to abuse the law by forcing banks to make hundreds of millions of dollars in “subprime” loans to often uncreditworthy poor and minority customers.
Any bank that wants to expand or merge with another has to show it has complied with CRA – and approval can be held up by complaints filed by groups like ACORN.
I wish I had something intelligent to say but the only words that come to mind all contain four letters and are not generally used in polite company.
Bailout Deal Reached?
The Wall Street Journal is reporting that lawmakers reached a tentative bailout deal overnight:
Top U.S. policy makers emerged from hours of tense negotiations with a clear message just after midnight Sunday morning: A deal to bailout U.S. financial markets has been agreed on and all that remains to be done is to commit the legislation to paper.
Treasury Secretary Henry Paulson, House Speaker Nancy Pelosi (D., Calif.), and Senate Majority Leader Harry Reid (D.), were flanked by key negotiators in the Capitol as they announced that a $700 billion plan to have Treasury buy up toxic assets had been all but finalized after hours of exhausting negotiations.
“I think we’re there,” an exhausted Mr. Paulson said, a sentiment echoed in the statements of negotiators such as House Financial Services Chairman Barney Frank (D., Mass.) and Senate Banking Committee head Christopher Dodd (D., Conn.).
Those present said the bailout plan still needs to be drafted in its final form, a process staff members were expected to continue throughout the night in what one aide called a “marathon drafting session” in Ms. Pelosi’s office just off the rotunda in the Capitol building. A formal announcement is scheduled for some time Sunday, though an exact time and location were not immediately available.
A summary of the tentative agreement released by Ms. Pelosi’s office said the plan “gives taxpayers an ownership stake and profit-making opportunities with participating companies; puts taxpayers first in line to recover assets if a participating company fails; (and) guarantees taxpayers are repaid in full — if other protections have not actually produced a profit.” (See Ms. Pelosi’s summary.)
Additionally, the summary said the legislation will expand the range of firms that can sell troubled assets to the government to include pension plans, local governments and community banks serving “low- and middle-income families.”
A House Democratic aide said the government would be able to receive warrants it could hold until maturity from financial firms on assets received either through auctions or through direct purchases.
I’ll reserve comment until I see a markup of the final bill.
Update: Ed Morrissey has more at Hot Air… It looks like House Republicans were able to get most of the pork removed from the bill.
Update (1:50 p.m. eastern): House Republican Whip Roy Blunt’s office has released a side by side comparison of the new bill versus the Paulson Plan and the Frank-Dodd bill.
The new bill does look more palatable but the devil’s in the details… I what to see the final bill and the conference report before I say yea or nay.
Update (4:10 p.m. eastern): N.Z. Bear @ Porkbusters has the draft bill… (H/T: MM)
Update (6:40 p.m. eastern): Michelle Malkin has an updated draft and a quick and dirty analisys of the bill.
This thing stinks to high heaven… Unfortunately I think this bailout has become a necessary evil – the Bush Administration, Congress and the media have painted us into a corner and if this bill doesn’t pass Secretary Paulson’s dire warnings will ultimately become a self-fulfilling prophecy.
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