Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Mon 09.29.2008
In Financial Food Chains, Little Guys Can’t Win IMAGINE, if you will, that a man who had much to do with creating the present credit crisis now says he is the man to fix this giant problem, and that his work is so important that he will need a trillion dollars or so of your money. Then add that this man thinks he is so indispensable that he wants Congress to forbid any judicial or administrative questioning of anything he does with your dollars. . . . . you should be thinking of Treasury Secretary Henry M. Paulson Jr. and the rapidly disintegrating United States of America, right here and now. . . . . In fact, there are roughly $62 trillion in credit-default swap derivatives out there, compared with about $1 trillion of subprime mortgages. These derivatives are “weapons of financial mass destruction,” in the prophetic words of Warren E. Buffett. . . .
Rep. Michael Burgess warns that "martial law" declared last night (Sat, 9.27.2008) . . . by Nancy Pelosi
Main number: 202 225 -3121 - ask for your elected officials in D.C. Our elected Senators and Representatives supposedly work for us, the taxpayers! Tell them what YOU think about the bailout proposal on the table.
Burning Down the House: What, or rather WHO (among others, Barney Frank & Barack Obama) Contributed to the Economic Crisis?
Sold to US taxpayers for $700B: banks' bad assets Congress adds oversight to $700B rescue package that sets up purchase of banks' worst assets Sold to American taxpayers for up to $700 billion: an unprecedented plan to buy distressed banks' least desirable mortgage assets. What started as a fairly simple three-page proposal giving the Treasury Secretary unchecked power to orchestrate a bailout of the country's financial system ended up as a complex rescue package, with enhanced congressional oversight, some added protections for taxpayers and a slap on the wrist to highly paid, underperforming executives. The ultimate goal of the plan remains the same: buy bad mortgage-related bets from weakened financial companies so they can raise fresh capital and resume normal lending operations to businesses, municipalities and consumers.
Bailout can't hide it - the United States is broke Even leading Republicans in Congress, including presidential nominee Sen. John McCain, recoiled from Treasury Secretary Henry M. Paulson's proposal to take absolute power over $700 billion to be borrowed by the federal government and used to purchase every sort of bad debt without ever having to answer for it - not to the courts, not to regulatory agencies, and only occasionally and incidentally to Congress itself. The bad-debt bailout would be the biggest government patronage program in history and would amount to declaring martial law over the U.S. financial system and economy. Even if such martial law is necessary, its implementation should be put in democratic hands - a non-partisan agency with full transparency, statutory standards for its purchases, and close accountability to Congress.
Too Big to Bail Every few days we hear that another leading financial institution has written down billions more on subprime investments gone bad. Nearly every major financial institution, it turns out, had a hand in loans to low-credit borrowers--borrowers whose ability to pay often hinged on endlessly low interest rates or a strong housing market. How could this happen? How could nearly all the leading lights of the financial industry--the experts in assessing and managing risk--expose themselves to such massive losses? Or, as a Fortune cover crudely put it: "What were they smoking?" A major part of the answer is: government bailout crack.
Bailout bill unveiled, heads to House Text includes some executive-pay caps, taxpayer protections Democratic congressional leaders announced their agreement on the details of a massive financial rescue plan Sunday, releasing a draft text trumpeting taxpayer guarantees and caps on executive compensation. The draft bill, entitled the Emergency Economic Stabilization Act of 2008, follows days of legislative wrangling. "This isn't about a bailout of Wall Street, it's a buy-in so we can turn our economy around," said House Speaker Nancy Pelosi in a press conference announcing the agreement. "It comes down to one word: Jobs. So we can create jobs." The bill will be introduced in the House of Representatives on Monday morning, and then will head to the Senate, said Senate Majority Leader Harry Reid.
Foreclosures are key element missing in plan $700 billion bailout likely to offer little help for struggling homeowners Hard as it is to believe, even a $700 billion bailout may not be enough to dig the economy and financial markets out of the hole they're in. By committing such a staggering sum to end the widening financial crisis, Congress and the White House are hoping to deliver a swift knockout punch to the fear gripping the global markets and economy. But to win bipartisan support, key provisions have been watered down or left vague — including any efforts to stop the wave of foreclosures at the heart of the meltdown.
The Real Reason for the Rush? One of the questions that has come up in connection with this week's scramble to pass a $700 billion bailout package for the beleaguered financial sector is: Why the rush? Why not take some time to fully explore the risks, discuss the financial, economic and political ramifications, and figure out ways to minimize the cost to taxpayers? Although those in charge have attributed their sense of urgency to fears of an imminent seize-up in financial markets, it is conceivable that policymakers could have applied a few more of the band-aids they have been using prior to now so that the issues and prospective outcomes could be examined more fully in the harsh light of day.
Who wins, who loses under proposed bailout plan? Financial industry a big winner in bailout proposal, but not so troubled homeowners The proposal to bail out U.S. financial markets to the tune of up to $700 billion creates a lot of potential short-term winners, as well as some losers. Wall Street and the banking industry are perhaps the biggest winners. Scores of banks and other financial institutions faced with going under stand to gain a lifeline that should allow them to start making loans again. Under the plan that congressional aide sought to put into final form Sunday, the Treasury Department can start buying up troubled mortgage-related securities now held by these institutions. These securities are clogging balance sheets, leaving banks without the required capital to make new loans and putting the banks dangerously close to insolvency.
Financial Troubles Humble U.S. $$ The success of the pending rescue of the U.S. financial system probably depends as much on the central banks of China and the Middle East as on Congress and the Federal Reserve. The U.S. is turning to foreign governments and other overseas investors to buy a good chunk of what could total $700 billion in Treasury debt expected to finance the bailout. Foreign investors also are needed to shore up the depleted capital of the nation's financial institutions, seen in the plan by Japan's Mitsubishi UFJ Financial Group to buy a large stake in Morgan Stanley, which is weighed down by bad debt and market distrust. This is a bittersweet moment in U.S. economic history.
A shattering moment in America's fall from power The global financial crisis will see the US falter in the same way the Soviet Union did when the Berlin Wall came down. The era of American dominance is over Our gaze might be on the markets melting down, but the upheaval we are experiencing is more than a financial crisis, however large. Here is a historic geopolitical shift, in which the balance of power in the world is being altered irrevocably. The era of American global leadership, reaching back to the Second World War, is over.
Crisis puts whole of the west at risk Thursday afternoon was the moment America realised its version of capitalism is not working any more. You could feel the pain of that eureka moment from Wall Street to Main Street, where the middle class howled at the magnitude of a mooted $700bn bail-out package. The most direct expression of this epiphany was on Capitol Hill, where an apostate faction of House Republicans declared their 11th-hour opposition to the financial plan being advanced by their own president and secretary of the Treasury. Part of what was going on was political posturing ahead of the November 4 election. But at the heart of the rebellion was the fear that, as Jen Hensarling, the Texas congressman who led the resistance said, the rescue plan would lead the US down “the road to socialism”. Socialism is probably stretching it. But there is no denying that the financial crisis, and the Treasury and Federal Reserve’s response to it, mark the end of a long era of US laisser-faire capitalism and the beginning of a period of government intervention and reregulation.
What’s Free About Free Enterprise? THERE was a time, in my childhood during the Great Depression, when the streets of Manhattan were filled with unshaven men in threadbare clothes, their coat collars turned up against the cold, their shoes stuffed with newspaper to plug holes in the soles. And there were bank failures. A huge bailout plan is being hammered out in Washington precisely to avert this kind of economic calamity. The plan is needed, and it needs to be put in place quickly. But at the same time, we need to ask how the financial system came to require a rescue of this magnitude. This time around, assets are evidently so rotten in so many places that no financial institution wants to risk doing business with any other financial institution without a government backstop.
How quickly we forget the flaws of state ownership The wisdom of hindsight will be brought to bear with a vengeance this week on the pros and cons of demutualisation. The plight of Bradford & Bingley; the rescue bid by Lloyds TSB for HBOS, owner of Halifax; Alliance & Leicester’s disappearance into the maw of Banco Santander, which earlier absorbed the troubled former building society, Abbey – all this adds up to a sorry verdict on the wave of demutualisations that began under Margaret Thatcher in the 1980s. Yet before passing a devastating black and white verdict, it is worth recalling that the building societies of the pre-Thatcher era were not God’s gift to the customer. All forms of organisational ownership involve conflicts of interest. In the case of mutually-owned building societies, there was little accountability to owner-customers.
Who wins, loses in proposed bailout plan The proposal to bail out U.S. financial markets to the tune of up to $700 billion creates a lot of potential short-term winners, as well as some losers. Wall Street and the banking industry are perhaps the biggest winners. Scores of banks and other financial institutions faced with going under stand to gain a lifeline that should allow them to start making loans again. Under the plan that congressional aide sought to put into final form Sunday, the Treasury Department can start buying up troubled mortgage-related securities now held by these institutions.
Tentative accord reached on bailing out bankers Congressional negotiators and the Bush administration's top Treasury officials go to work Sunday on settling the final details of a historic $700 billion Wall Street bailout aimed at keeping credit flowing and saving the nation's shaky economy from collapsing into a crippling recession. "We've made great progress. We have to get it committed to paper so that we can formally agree," House Speaker Nancy Pelosi, D-Calif., told reporters in announcing the tentative deal shortly after midnight Sunday. Congressional leaders hope to have a House vote on the measure Monday, with a vote in the Senate coming later.
U.S. Rescue Plan Finalized, $250 Billion in Funding to be Released Up Front Congressional lawmakers have reached agreement on the final details of a $700 billion U.S. financial market rescue package that will release $250 billion of funding immediately. The 106-page document, entitled the Emergency Economic Stabilization Act of 2008, calls for $700 billion of funding to be delivered in stages. The plan will also limit compensation for executives at companies that sell mortgage assets to the Treasury. Also, companies that participate in the plan will be prohibited from offering so-called "golden parachutes". Those companies will also not be allowed to deduct executive salaries of more than $500,000.
Main Street turns against Wall Street A populist backlash is changing America's political climate. Inflamed by the financial crisis and bailouts, a form of class warfare could haunt business leaders for years to come. In one frenzied month Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke remade Wall Street. Along the way they may also have recast American politics. A month of historic government interventions shows signs of triggering a political version of climate change - unleashing a new era of class fury that could hurt U.S. companies, business leaders, and wealthy investors for years.
The current crisis was seen coming long ago and congress was warned. Want to know why nothing got done? Listen to Barney Franks' remarks when the administrations warns of impending financial trouble...
Power Shifts From N.Y. to D.C. After Wall Street's Quake, Manhattan Braces for Financial Tsunami This is the town of money -- freewheeling, high-stakes, high-risk and big-spending. The home of the $20 martini, the seven-figure bonus, the multimillion-dollar condos owned by the titans of the Street. Washington is the town of politics -- bureaucratic, stodgy, conservative. The home of cheap happy-hour beer and clean-cut young interns living in cramped quarters on the Hill, who are about making a difference, not making money. But with Wall Street hobbled by the biggest financial crisis in generations, the culture of big money has lost some of its luster. And with the Street now looking to the U.S. Treasury for an unprecedented bailout, it's suddenly Washington that has become the center of financial action -- creating, at least for this instant, an unlikely shift of power and influence.
Public anger builds over Wall St. bailout talks As politicians, financiers haggle, readers register fear, confusion, distrust As politicians and business leaders struggle to reach a deal on a $700 billion bailout for Wall Street, anger is reaching the boiling point on Main Street if readers’ e-mails to msnbc.com are any indication. In less than 48 hours, nearly 2,000 readers filled out and submitted their view of the bailout and the U.S. economy in general in response to a Gut Check America appeal asking them to vote on their top economic concern and describe how it is affecting their lives.
Compromise at top of bail-out’s agenda One of the most controversial issues was the unbridled authority the original plan gave to the Treasury secretary to buy the distressed assets he deemed necessary. The compromise legislation establishes an oversight board with the power to direct and potentially limit the secretary’s discretion. It is likely to include three heads of federal agencies (the US Federal Reserve, the Securities and Exchange Commission and the Federal Deposit Insurance Corporation) and two directors appointed by Congress. It will set up controls on conflicts of interest for investment firms hired by the Treasury to advise on the programme; establish a new Treasury inspectorate to monitor and oversee the use of the fund; require all transactions to be posted online; and make them subject to judicial review.
Backing Paulson’s bank bail-out The good news is that, after much brinkmanship, agreement has arrived on the outlines of a bail-out plan for the troubled US financial system. The bad news remains the need for such a rescue. Self-evidently, big lessons have to be learnt from the scale of the calamity. It is easy to sympathise with Republicans who oppose bail-outs on principle and Democrats who object to the generous treatment of those whose folly and greed created the current financial mess. But seizure of the credit system is now on the cards. That is not a danger a sane person should run. This scheme is indeed imperfect, but it is also the only one on offer. A sufficiently large number of members of Congress, from both sides, seem to have recognised this grim reality. They have not given Hank Paulson, US Treasury secretary, the $700bn blank cheque he demanded so importunately. But he has got most of what he wanted.
Theme is reform, not rescue, as Paulson plan goes through shredder Congress makeover shows treasury secretary out of touch with political reality The words "Wall Street" and "bail-out" are conspicuously absent from a financial plan cobbled together in Congress which is designed to look as little as possible like a rescue package for overpaid bankers. Alarmed by voters' reaction to any use of taxpayers' money to aid banks, Democrats and Republicans have filled the package with compromises, qualifications and ambiguities, to leave it far removed from the brief proposal put forward by the treasury secretary, Henry Paulson, last week.
Wall Street Seeks Signs of Response in Markets Washington hopes its sweeping bailout plan will get credit flowing again. But will it work on Wall Street? That is the $700 billion question swirling around the biggest financial bailout in American history. The first answer will come on Monday from the credit markets, where this crisis has unfolded for more than a year now. As details of the plan trickled out on Sunday, few economists saw the rescue as a quick fix. Even if the frozen credit markets thaw a bit — and many analysts say they will — the good old days of easy money are over for now. The stock market, which has lost about 17 percent this year, is bound to remain volatile. To many, a recession seems unavoidable.
Bailout vote awaited as European banks struggle U.S. lawmakers geared up to vote on Monday on creating a $700 billion government fund to buy bad debt and alleviate the financial crisis while European authorities raced to the rescue of three troubled banks. With global markets hanging on every twist and turn in Washington, European regulators on Sunday scrambled to prevent two banks from collapsing. U.S. President George W. Bush said the plan being finalized by Congress provides the tools and funding to protect the U.S. economy from a "system-wide breakdown."
Congress expected to pass rescue package Key lawmakers who struck a post-midnight deal on a $700 billion bailout for the financial industry predicted Sunday it would pass Congress, putting in place the largest government intervention in markets since the Great Depression. Flexing its political muscle, Congress insisted on a package that gives lawmakers a stronger hand in controlling the money than the Bush administration had wanted. The rescue plan casts Washington's long shadow over Wall Street with the federal government taking over huge amounts of devalued assets from beleaguered financial firms in exchange for more oversight.
Since government oversight was "fundamentally flawed" from the beginning, why should taxpayers trust promised government 'oversight on the bailout proposal?
S.E.C. Concedes Oversight Flaws Fueled Collapse The chairman of the Securities and Exchange Commission, a longtime proponent of deregulation, acknowledged on Friday that failures in a voluntary supervision program for Wall Street’s largest investment banks had contributed to the global financial crisis, and he abruptly shut the program down. The S.E.C.’s oversight responsibilities will largely shift to the Federal Reserve, though the commission will continue to oversee the brokerage units of investment banks. Also Friday, the S.E.C.’s inspector general released a report strongly criticizing the agency’s performance in monitoring Bear Stearns before it collapsed in March. Christopher Cox, the commission chairman, said he agreed that the oversight program was “fundamentally flawed from the beginning.”
Constituents oppose bailing out Wall Street 'fat-cats' Sen. Dianne Feinstein's office has heard from about 50,000 constituents since Congress began considering a financial rescue plan about a week ago - and "only one of a thousand supports it - whatever it is," the California Democrat said. Lawmakers from both parties reported similar confusion and concern among constituents as they spent their Saturday painstakingly, and sometimes painfully, trying to craft a still-elusive compromise package. Senate Majority Leader Harry Reid and Republican Leader Mitch McConnell aimed to have a final plan ready by 6 p.m. Sunday, in time for the opening of markets around the world.
Hedge Funds Are Bracing for Investors to Cash Out Even as Washington reached a tentative agreement on Sunday over what may become the largest financial bailout in American history, new worries were building inside the nearly $2 trillion world of hedge funds. After years of explosive growth, losses are mounting — and so are concerns that some investors will head for the exits. No one expects a wholesale flight from hedge funds. But even a modest outflow could reverberate through the financial markets. To pay back investors, some funds may be forced to dump investments at a time when the markets are already shaky. The big worry is that a spate of hurried sales could unleash a vicious circle within the hedge fund industry, with the sales leading to more losses, and those losses leading to more withdrawals, and so on. A big test will come on Tuesday, when many funds are scheduled to accept withdrawal requests for the end of the year.
Bailout Plan Gains Key Support $$ The emerging plan to rescue wounded U.S. financial markets received the tentative support of both presidential candidates and key lawmakers Sunday, as days of haggling over the $700 billion package appeared to be coming to a close. . . . Lawmakers plan to vote on the bailout measure on Monday. Final details haven't been released yet, but the agreement will include significant oversight of the Treasury Department's purchases of troubled assets, executive compensation restrictions, the potential for equity stakes in firms that participate in the asset-sale program, and other taxpayer protections.
Rescue bill revealed Congress details legislation to enact historic bailout of nation's financial system. Congress on Sunday made public a proposed bill that would enact a far-reaching government rescue of the financial system. The core of the bill is based on Treasury Secretary Henry Paulson's request for authority to purchase as much as $700 billion in troubled mortgage assets from financial institutions so banks can resume lending and so the credit markets, now virtually frozen, can begin to operate more normally.
Rival Republican bailout plan poses stark alternative Whether House Republicans accomplish what they sought by introducing a sketchy but distinctly contrarian alternative to the Bush administration's bailout plan depends on how they intended it: as a better mousetrap, an ideological line in the sand, a negotiating tactic, or a platform that will let them and their presidential candidate run against Washington, the White House and the Democrats all at once. As a straightforward alternative it is far from the "core" ideas of Treasury Secretary Henry Paulson Jr. and the Federal Reserve chairman, Ben Bernanke, ideas that the White House put forward with the utmost urgency. Instead of buying sickly mortgages with $700 billion borrowed by the Treasury, it would make financial institutions buy insurance from the government and throw in a capital gains tax cut for good measure.
Deal reached on financial markets bailout House vote could come Monday, with Senate balloting Wednesday earliest llion bailout for the financial industry predicted Sunday it would pass Congress, putting in place the largest government intervention in markets since the Great Depression. Flexing its political muscle, Congress insisted on a package that gives lawmakers a stronger hand in controlling the money than the Bush administration had wanted. The rescue plan casts Washington’s long shadow over Wall Street with the federal government taking over huge amounts of devalued assets from beleaguered financial firms in exchange for more oversight.
Bailout Deal Appears Headed to Vote $700 Billion: 'Nobody Believes That's Going to Be the Final Cost' After marathon day-and-night negotiations this weekend, the $700 billion deal to bail out the financial industry may be close to becoming reality. The Democratic chairman of the House Financial Services Committee, Barney Frank, said the House will "definitely" begin debate Monday on the rescue package. A vote could follow the same day, with the Senate possibly voting by mid-week. Democrats agreed to the deal after accepting compromises demanded by some conservative Republicans and moderate Democrats.
Bailout deal vote, market verdict awaited U.S. lawmakers pushed to finalize a deal to create a $700 billion government fund to buy bad debt and halt the financial crisis as European regulators scrambled to prevent two banks from collapsing. However, questions abound as to whether the U.S. financial rescue plan, which would use taxpayer funds to buy up toxic mortgage debt, would restore confidence to shaky markets and head off a deeper downturn.
Payback provision in US bail-out plan The US financial services sector could be forced to reimburse the US government for any losses on its $700bn rescue plan under a breakthrough agreement that paves the way for congressional approval as early as Monday. After a weekend of frenzied talks, Hank Paulson, the Treasury secretary, and Nancy Pelosi, the Democratic House speaker, announced early on Sunday that a tentative deal had been reached authorising the government to buy up to $700bn of troubled assets from financial institutions. The deal envisages historic restrictions on executive pay for banks involved in the programme and opens the door for the government to take equity warrants in those institutions.
Pelosi: This is not a bailout, it’s a buy-in House vote could come Monday, with Senate balloting Wednesday earliest Congressional leaders and the White House agreed Sunday to a $700 billion rescue of the ailing financial industry after lawmakers insisted on sharing spending controls with the Bush administration. The biggest U.S. bailout in history won the tentative support of both presidential candidates and goes to the House for a vote Monday. The plan, bollixed up for days by election-year politics, would give the administration broad power to use billions upon billions of taxpayer dollars to purchase devalued mortgage-related assets held by cash-starved financial firms.
Boutiques provide a glimpse of a new-look Wall Street A few short weeks ago, way back on September 4, the unthinkable happened: a Wall Street investment bank – Lazard – sold $265m worth of its own stock to the public in an underwritten offering. What is more, this was a secondary offering of shares, meaning that the proceeds flowed into the pockets of the selling shareholders – in this case a long list of the bank’s most senior executives – and none of the proceeds went into the company, which has been around since 1848 and has never needed much more than a drop of capital to operate profitably anyway. The offering flew out the door. Huh? That this offering occurred at the precise moment when the pluralistic investment banking system that has thrived for so long now seems to be coming apart at the seams makes the Lazard offering all the more remarkable. But it also provides a glimpse into what the post credit-crisis Wall Street will look like.
Breakthrough Reached in Negotiations on Bailout Congressional leaders and the Bush administration reached a tentative agreement early Sunday on what may become the largest financial bailout in American history, authorizing the Treasury to purchase $700 billion in troubled debt from ailing firms in an extraordinary intervention to prevent widespread economic collapse. Officials said that Congressional staff members would work through the night to finalize the language of the agreement and draft a bill, and that the bill would be brought to the House floor for a vote on Monday. The bill includes pay limits for some executives whose firms seek help, aides said. And it requires the government to use its new role as owner of distressed mortgage-backed securities to make more aggressive efforts to prevent home foreclosures.
Lawmakers Reach Accord on Huge Financial Rescue Vote on $700B Bailout Plan May Come as Early as Monday Congressional leaders and the Bush administration this morning said they had struck an accord to insert the government deeply into the nation's financial markets, agreeing to spend up to $700 billion to relieve Wall Street of troubled assets backed by faltering home mortgages. House and Senate negotiators from both parties emerged with Treasury Secretary Henry M. Paulson Jr. at 12:30 a.m. from a marathon session in the Capitol to announce that they had reached a tentative agreement on a proposal to give Paulson broad authority to organize one of the biggest government interventions in the private sector since the Great Depression.
Lawmakers work to nail down $700B bailout plan Lawmakers work to nail down financial rescue plan details, which House GOP still must review Key lawmakers who struck a post-midnight deal on a $700 billion bailout for the financial industry predicted Sunday it would pass Congress, putting in place the largest government intervention in markets since the Great Depression. Flexing its political muscle, Congress insisted on a package that gives lawmakers a stronger hand in controlling the money than the Bush administration had wanted. The rescue plan casts Washington's long shadow over Wall Street with the federal government taking over huge amounts of devalued assets from beleaguered financial firms in exchange for more oversight.
Congress aims to finalize rescue bill on Sunday The federal government would provide as much as $700 billion in a far-reaching plan to rescue the nation's troubled financial system, according to a draft of the proposed bill obtained by CNN. The legislation is still being negotiated and elements of the bill could still change. The core of the bill is based on Treasury Secretary Henry Paulson's request for authority to purchase troubled assets from financial institutions so banks can resume lending and so the credit markets, now virtually frozen, can begin to operate more normally.
Congress, White House reach financial bailout deal Congressional leaders and the Bush administration reached a tentative deal early Sunday on a landmark bailout of imperiled financial markets whose collapse could plunge the nation into a deep recession. House Speaker Nancy Pelosi announced the $700 billion accord just after midnight but said it still has to be put on paper. "We've still got more to do to finalize it, but I think we're there," said Treasury Secretary Henry Paulson, who also participated in the negotiations in the Capitol.
U.S. Democrats seek Wall Street tax in bailout plan Democrats in the U.S. House of Representatives are pushing for a new Wall Street tax that would cover the potential costs of a $700 billion bailout being negotiated by Congress and the Bush administration. U.S. House Speaker Nancy Pelosi, speaking to reporters after a meeting with fellow Democrats, said the fee could be assessed after five years if the non-partisan Congressional Budget Office determined taxpayers had lost money in the bailout. "If after five years ... the CBO decides that the American taxpayer has lost money in this, then there would be a fee on financial institutions," Pelosi said, adding that she hoped the provision could be part of a final bailout deal.
Advocates Demand Congress Put Bailout Details on Internet The prospect of a gargantuan $700 billion Wall Street bailout agreement presents a prime opportunity for Congress, and in particular the presidential candidates, to live up to their promises of using the internet to free themselves of undue influence. When Congress rushes through important legislation such as this upcoming bill, extraneous items of questionable merit are usually thrown in during the final stretch of the haggling process among key staff members behind closed doors.
Whose conservatism is it? When President George W. Bush went before the nation Wednesday evening to speak about the crisis on Wall Street, he declared that "my natural instinct is to oppose government intervention." But his ultimate recommendation to the American people was the $700 billion bailout plan outlined by his Treasury secretary, Henry M. Paulson Jr. That proposal is seen by some as the latest evidence that the Republican Party has embraced the "big government" ideology of the Democrats. Unsurprisingly, there has been a revolt on the right.
Stopping a Financial Crisis, the Swedish Way A banking system in crisis after the collapse of a housing bubble. An economy hemorrhaging jobs. A market-oriented government struggling to stem the panic. Sound familiar? It does to Sweden. The country was so far in the hole in 1992 — after years of imprudent regulation, short-sighted economic policy and the end of its property boom — that its banking system was, for all practical purposes, insolvent. But Sweden took a different course than the one now being proposed by the United States Treasury. And Swedish officials say there are lessons from their own nightmare that Washington may be missing. Sweden did not just bail out its financial institutions by having the government take over the bad debts. It extracted pounds of flesh from bank shareholders before writing checks. Banks had to write down losses and issue warrants to the government.
Washington’s waning way: how bail-outs poison a free market recipe for the world Debating with Al Gore in the presidential election eight years ago, George W. Bush defined a new, humbler attitude towards the rest of the world. “I’m not so sure the role of the United States is to go around the world and say, ‘this is the way it has got to be’,” he said. “I just don’t think it’s the role of the United States to walk into a country and say: ‘we do it this way, so should you’.” In one area Mr Bush might be about to get his wish, though not perhaps in the way he expected. The events of the past few weeks on Wall Street have handed ammunition to the opponents of free markets well outside the financial sector and way beyond America’s shores. A model of freewheeling finance the US has pushed around the world, which had already undergone some tactical withdrawals over the past decade, appears in headlong retreat.
Wall Street, R.I.P.: The End of an Era, Even at Goldman WALL STREET. Two simple words that - like Hollywood and Washington - conjure a world. A world of big egos. A world where people love to roll the dice with borrowed money. A world of tightwire trading, propelled by computers. In search of ever-higher returns - and larger yachts, faster cars and pricier art collections for their top executives - Wall Street firms bulked up their trading desks and hired pointy-headed quantum physicists to develop foolproof programs.
Congress fiddles while Rome burns Just nine days ago - Thursday, Sept. 18 - financial Armageddon was warded off when word began to leak about the government's giant bailout plan. The news first broke around 2:10 p.m., New York time, when Bloomberg News moved an article quoting Senator Charles Schumer, Democrat of New York, as saying the government was considering a "permanent" plan to address the financial crisis. (In fact, as Schumer told me later, he had not meant for his words to sound so definitive; he really didn't know the planning was so far along.) Then, less than an hour later, CNBC reported that a plan was being readied by the Treasury Department along the lines of the savings-and-loan bailout of the 1980s. That did it. In the time between the Bloomberg article and the CNBC report, the stock market rose 145 points. In a 45-minute burst right after the CNBC report, stocks rose another 270 points. The Dow closed up 410 points.
What $700B Won't Buy: A Quick Fix for the Economy Not even $700 billion will be enough to spare the United States from more economic anguish if the government's proposed banking bailout pans out like similar desperation moves during the past two decades. It usually takes years to recover from a financial crisis severe enough for politicians to ride to the rescue with truckloads of taxpayer money. Take, for example, the U.S. government's August 1989 bailout of the savings-and-loan industry. The stock market fell by 12% within the first 14 months of the rescue plan while the economy slipped into an eight-month recession that began in July 1990. Housing prices that had just begun to erode continued to fall for another three years.
Auto Makers, DOE at Odds on Loans $$ U.S. auto makers may not have access to a proposed $25 billion loan package for at least 18 months, Bush administration officials said, setting up a potential clash with congressional lawmakers. The loan package to help companies meet stricter fuel-economy standards was passed by the U.S. House on Wednesday and is expected to be passed by the Senate as soon as Saturday. The president is expected to sign the bill. Detroit's Big Three auto makers -- General Motors Corp., Ford Motor Co. and Chrysler LLC -- said it is critical they get the low-interest loans soon so they can begin retooling auto plants to make hybrids and other fuel-efficient vehicles. As sales plummet and credit markets tighten further, their need for the loans has become increasingly urgent.
Big Banks and Bumbling Idiots The really chilling news is that investment banks are being changed into commercial banks, which gives them the right to create - out of thin air, and then loan - money using fractional-reserve banking! Yikes! They are now banks! These greedy, thieving, lying, staggeringly stupid weenies who are at the epicenter of the biggest financial catastrophe in American history are now being given the right to increase the money supply at their whim to satisfy the willingness of customers, and themselves, to borrow the money! Astounding!
Citigroup and Wells Fargo Said to Be Bidding for Wachovia Citigroup and Wells Fargo were locked in a bidding war on Sunday over a possible emergency takeover of the Wachovia Corporation, people involved in the talks said. The intense negotiations come as concern grew about Wachovia’s stability on Friday, these people said, despite a breakthrough reached Sunday by Congressional negotiators on a $700 billion bailout for the financial system. The government, led by the Federal Reserve and Treasury Department, has been involved in the talks as well, these people said. But so far, the government is resisting pressure to help bidders by guaranteeing a part of Wachovia’s assets the way it did for Bear Stearns when it was sold to JPMorgan Chase in March. The government has also opposed taking over Wachovia the way it did Washington Mutual last week, these people said, unless its financial position deteriorates more rapidly.
'Hope for Homeowners,' Still Long in Coming We interrupt this financial crisis with a word from its sponsor: the families who are losing homes to foreclosure. They're still circling the drain, to pick up on Federal Reserve Chairman Ben S. Bernanke's colorful metaphor describing credit markets as the economy's plumbing. Right now, the plumbing is clogged with bad securities backed by bad home mortgages. The federal bailout is designed to free up the system. A separate bailout for troubled homeowners is supposed to launch this week. The new "Hope for Homeowners" program, passed in late July, is scheduled to go into effect Wednesday. (That's lightning speed by government standards.) It's designed to allow refinancing for people who cannot pay their mortgage and who can't refinance into something better because their home value is now too low to pay off the unaffordable old loan.
How Fannie -- and You -- Bought a Hapless House The American taxpayers own Yellowstone, Yosemite, the Grand Canyon, dozens of parks, monuments, wildlife refuges, forests, pastureland, government complexes and historic sites. And now, for all intents and purposes, the American people are the major stakeholders in a little townhouse at 14746 Barksdale St. in Dale City. The titular owner is Fannie Mae, which the U.S. government effectively subsumed this month, though the legal machinations are still ongoing. With the Treasury backing Fannie Mae, taxpayers have a huge interest in the fate of the mortgage giant's assets. They include the 1,296-square-foot, two-level, three-bedroom, 1 1/2 -bath house on Barksdale.
Behind Insurer’s Crisis, Blind Eye to a Web of Risk "It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of those transactions." - Joseph J. Cassano, a former A.I.G. executive, August 2007 Two weeks ago, the nation’s most powerful regulators and bankers huddled in the Lower Manhattan fortress that is the Federal Reserve Bank of New York, desperately trying to stave off disaster. As the group, led by Treasury Secretary Henry M. Paulson Jr., pondered the collapse of one of America’s oldest investment banks, Lehman Brothers, a more dangerous threat emerged: American International Group, the world’s largest insurer, was teetering. A.I.G. needed billions of dollars to right itself and had suddenly begged for help. The only Wall Street chief executive participating in the meeting was Lloyd C. Blankfein of Goldman Sachs, Mr. Paulson’s former firm. Mr. Blankfein had particular reason for concern. Although it was not widely known, Goldman, a Wall Street stalwart that had seemed immune to its rivals’ woes, was A.I.G.’s largest trading partner, according to six people close to the insurer who requested anonymity because of confidentiality agreements.
Want to know if it works? Watch the banks Earliest measure of success will be how key interest rate is affected The New Deal it is not. The government's biggest economic bailout since the Great Depression is aimed not at relieving unemployment or reforming questionable business practices, but at resuscitating financial markets debilitated by lousy bets on the housing market. Put simply, the hastily crafted plan lawmakers agreed to in principle on Sunday is intended to revive jittery and fragile banks on Wall Street with enough money — by using taxpayer funds to purchase billions upon billions of their worst mortgage-related assets — so that lending, the lifeblood of the American economy, flows freely again.
A successful bailout? Watch lending between banks Bailout's success will be evident once banks begin lending freely to each other -- and then us The New Deal it is not. The government's biggest economic bailout since the Great Depression is aimed not at relieving unemployment or reforming questionable business practices, but at resuscitating financial markets debilitated by lousy bets on the housing market. Put simply, the hastily crafted plan lawmakers agreed to in principle on Sunday is intended to revive jittery and fragile banks on Wall Street with enough money -- by using taxpayer funds to purchase billions upon billions of their worst mortgage-related assets -- so that lending, the lifeblood of the American economy, flows freely again.
Bailout Too Late to Matter Much Not even $700 billion will be enough to spare the United States from more economic anguish if the government's proposed banking bailout pans out like similar desperation moves during the past two decades. It usually takes years to recover from a financial crisis severe enough for politicians to ride to the rescue with truckloads of taxpayer money. Take, for example, the U.S. government's August 1989 bailout of the savings-and-loan industry. The stock market fell by 12 percent within the first 14 months of the rescue plan while the economy slipped into an eight-month recession that began in July 1990. Housing prices that had just begun to erode continued to fall for another three years.
Day of Reckoning for Uncle Sam How did the United States of America, the richest nation on earth, whose economy represents 30 percent of the global economy, arrive at the precipice of a financial panic and collapse? The answer lies in the abject failure of both America's financial elite and the political elite of both parties – the same elites now working together to determine how much of our wealth will be needed to bail the nation out of the crisis of their own creation. Big Government is riding to the rescue – saddlebags full of our tax dollars – to save us from the consequences of the stupidity and folly of Big Government. New York and Washington, the twin cities responsible for the crisis, are now being hailed by the media as the 7th Cavalry, coming to rescue a beleaguered nation.
Buffett warns Congress Lawmakers face "biggest financial meltdown in American history" if they don't act. Legendary investor Warren Buffett warned Congressional leaders Saturday night of "the biggest financial meltdown in American history" if they did not act to secure the financial system. Buffett, by telephone, was consulted by lawmakers who were in marathon talks on Capitol Hill to forge a deal on the administration's $700 billion economic bailout plan, according to two sources. One lawmaker in the negotiations said that the participants called Warren Buffett to get his help in gauging potential market reaction.
Bank CEOs Made Billions Before Crash As the backlash builds around the country to the proposed $700 billion bailout of Wall Street, a shocking new figure is making headlines. It turns out that the five biggest investment banks gave their top execs more than $3.1 billion over the last five years alone, doubling their pay even as those executives made the decisions that landed the country in this huge mess. From Bloomberg News, here's a couple of highlights: Merrill Lynch paid $172 million to former CEO Stan O'Neal. It paid another $86 million to CEO John Thain, for a month's work, before Bank of America bought the firm. And Bear Stearns managed to give $161 million to CEO Jimmy Cayne before it was taken over by the government. Treasury Secretary Henry Paulson, the architect of the current bailout plan, got $111 million between 2003 and 2006. He was CEO of Goldman Sachs before coming to Washington.
After the Deal, the Focus Will Shift to Regulation Even before Congress passes a $700 billion bank bailout that nearly all legislators believe to be both necessary and unpopular, the jostling has begun over legislation that may prove to be the first test for the next president: How to reshape the financial system and its regulation. It is clear that the old system failed — it wouldn’t need the bailout otherwise — but the diagnosis of why that happened may be crucial in deciding what changes are needed. Already, liberals are blaming the deregulation that began under Ronald Reagan for letting a financial system get out of control, and conservatives are pointing to market interventions by liberals — notably efforts to assure mortgage loans for the poor and minorities — as being the root cause of the mess.
Buffett's Nuclear Bargain Warren Buffett has gotten a lot of ink for his $5 billion investment in Goldman Sachs, but his other deal - the $4.7 billion takeover of Constellation Energy Group - might have been an even better one. How good a deal? Think about it this way. To build a brand new nuclear plant - assuming you can get the permits and the loans - would cost about $6 billion (at least), take about 10 years, and in the end would produce about 1,000 megawatts. Buffett has bought himself a company with 9,000 megawatts of electric power production, including four nuclear plants, for less than the price of a single new nuclear unit. Oh, and he also got the Baltimore utility, an energy trading operation and a few other odds and ends, too. Of course those Constellation nuclear plants aren't new. But they're also generating relatively cheap electricity now, and for the next few years electricity costs are almost definitely heading up. And if Congress and the next president agree on a cap-and-trade approach to climate change legislation that puts a price on carbon emissions, those nuclear plants will be even more profitable.
GM Claims 100 Miles-a-Gallon Volt 'Bragging Rights' General Motors Corp. said it reached a preliminary agreement that clears the way for U.S. regulators to certify the Chevrolet Volt, an electric vehicle that can be recharged at home or with a 1.4-liter gasoline engine, as the first 100 mile-per-gallon car. The country's biggest automaker, whose sales of pickup trucks and sport-utility vehicles collapsed this year as gasoline topped $4 a gallon, is cutting the mileage deal while urging Congress to approve $25 billion in government loans to help the industry meet new federal fuel-economy standards.
Hong Kong investors in Lehman protest again Hong Kong investors in Lehman Brothers stage another protest over banks' sales methods Investors in Lehman Brothers in Hong Kong held their second protest in a week on Sunday, accusing local banks of misleading them about investment products backed by the failed U.S. investment bank. Holding signs that said "Return my blood money" and "Crafty salesmanship, sugarcoated poison," about 400 people marched through Hong Kong's Central financial district to nearby government headquarters. The protesters complained that banks that sold them Lehman-backed bonds didn't properly explain the products to them and urged the Hong Kong government to better regulate methods of selling investment products.
Israeli Banks Can Cope With Credit Woes, Fischer Says Israeli banks are financially "strong" and can cope with the impact of the global credit crisis, Bank of Israel Governor Stanley Fischer said in an interview with Israel Radio. "Our financial system is integrated into the world, so there will be an impact," Fischer said in a recorded interview broadcast today. "But our financial system, in particular the banks, is very, very strong. We can't know how changes in the world in the long term will hurt our financial system. We have to be prepared."
Fortis Gets EU11.2 Billion Rescue From Governments Fortis, the largest Belgian financial-services firm, received an 11.2 billion-euro ($16.3 billion) rescue from Belgium, the Netherlands and Luxembourg after investor confidence in the bank evaporated last week. Belgium will buy 49 percent of Fortis's Belgian banking unit for 4.7 billion euros, while the Netherlands will pay 4 billion euros for a similar stake in the Dutch banking business, the governments said in a statement late yesterday. Luxembourg will provide a 2.5 billion-euro loan convertible into 49 percent of Fortis's banking division in that country.
U.S. installs early-warning radar in Israel to warn against Iran attack JERUSALEM: The U.S. Army has deployed an advanced American radar system on Israeli soil, an official here said Sunday, allowing early detection of incoming ballistic missiles and enhancing Israel's defensive capability against any future attack by Iran. The system will at least initially be operated by an American crew. No official announcement has been made by either side about the arrival of the system. The Israeli Army said in a statement that while it "enjoys longstanding strategic cooperation" with all branches of the American military, it is not its practice to discuss details of the bilateral activities. But an official confirmed a Sept. 26 report published by Defense News weekly saying that the system had been flown to Israel in parts over the past week and was being installed in the Negev. He added that it would serve not only Israel, but the Americans, too.
Chavez says Venezuela will develop nuclear power President Hugo Chavez said on Sunday Venezuela will develop a nuclear reactor for peaceful purposes, in another challenge to Washington just days after Russia offered nuclear assistance to the socialist Latin American leader. "In Venezuela we are interested in development of nuclear energy, of course for peaceful purposes, for medical purposes, for purposes of electricity generation," Chavez said at a political rally. "Brazil has various nuclear reactors, so does Argentina. We will have ours."
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