Say No To The Senate Bailout Bill

As someone who supported the defeated House mortgage/credit crisis Wall Street Bailout, this may come as a surprise, but I oppose the Senate Bailout bill to be voted on today. Why? Because it includes irresponsible sops to the Republicans, corporate tax breaks:

Top lawmakers said the Senate proposal, worked out after a day of behind the scenes maneuvering, would include tax breaks for businesses and alternative energy and higher government insurance for bank deposits.

(Emphasis supplied.) The silly Obama/McCain proposal to raise the FDIC insurance limits does nothing to address this crisis. It is a silly stupid gimmick. And the idea of giving more corporate tax breaks and suspending the Alternative Minimum Tax in the face of record deficits is absolutely outrageous. Harry Reid has produced a travesty. It shocks me to say this, but Steny Hoyer is absolutely right:

Representative Steny H. Hoyer of Maryland, the majority leader and a chief advocate of paying for the tax breaks, saying, “I am talking with my House colleagues about the Senate action and how to best proceed.” On NBC’s “Today” program Wednesday morning, Mr. Hoyer, said he was concerned that the tax issues could complicate the chances of passage when the legislation comes back to the House floor for a vote.

“There’s no doubt the tax package is very controversial,” he said, according to The Associated Press, ”There’s no doubt in my mind that the Senate added this because they thought that’s the only way they could get it passed.” He said, however, that he was not pleased the tax provisions were attached to the bill.

This is nuts. Harry Reid has produced a disgraceful bill. And of course the GOP is jumping for joy:

House Republican leaders, who said they had been advised about the Senate plan, said the new elements would appeal to their rank-and-file, which voted strongly against the legislation Monday. A spokesman for Representative John A. Boehner of Ohio, the Republican leader, said that “Mr. Boehner was consulted and gave the green light.”

I hope the Blue Dogs say no to this. It is a disgraceful piece of work by Harry Reid. Just awful.

By Big Tent Democrat, speaking for me only

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  • Display: Sort:
    Can we stage a coup (5.00 / 2) (#1)
    by Fabian on Wed Oct 01, 2008 at 08:14:36 AM EST
    and replace Reid with Clinton?


    I think we need.... (5.00 / 1) (#12)
    by kdog on Wed Oct 01, 2008 at 08:37:55 AM EST
    a much bigger coup than that to be totally honest with you.

    I don't pray, but I'm hoping beyond hope our Senators find the guts to vote this p.o.s. down.

    Increase spending and decrease income...what's wrong with this picture.


    What about Obama's five principles? (5.00 / 1) (#105)
    by obiden08 on Wed Oct 01, 2008 at 12:06:50 PM EST
    Are Obama's principles met in the Senate version of the bill?  If not, why didn't Harry Reid and Co. push for those principles?  Are the Senate Democrats doing to Obama what the House Republicans did to McCain?

    I need Obama to stand firm on those principles. He needs to show leadership.

    One of my fears is that somehow Obama cedes the economy to McCain.  If that happens, all is lost.


    Obama's speech in LaCrosse, Wisconsin, (none / 0) (#108)
    by oculus on Wed Oct 01, 2008 at 12:17:49 PM EST
    according to news reports, centers on getting a plan passed and why it will benefit ordinary folk.  

    That would not help in this case. (5.00 / 1) (#96)
    by Manuel on Wed Oct 01, 2008 at 11:32:58 AM EST
    Clinton will vote for this bill as wil Obama.  The stakes are too high to not support it.  Ireland just bailed out its banks by putting a lot of money on the line.  As is the case in our crisis, the hope is that the eventual cost won't be so high.  In the meantime the anxiety in the gloal markets is causing real harm.

    The Foreign Governments (none / 0) (#130)
    by SteveSyracuse on Wed Oct 01, 2008 at 01:51:56 PM EST
    have bought equity stakes in the banks that need propping up. Why cant we simply do the same? That bill would pass, instead of this murky "buy the toxic securities" deal.

    If credit is the problem, fix the credit problem.


    No political support for such a bill (5.00 / 1) (#131)
    by Manuel on Wed Oct 01, 2008 at 02:12:15 PM EST
    You can't get 60 votes in the Senate for an equity bill.  I wish it weren't so.  The main reason the bill didn't pass on Tuesday is because the Republicans killed it.  They would be able to kill an equity bill as well and they would score points with the voters and the MSM (Have you been watching Lou Dobbs?) while doing it.

    Um, (5.00 / 2) (#2)
    by Ga6thDem on Wed Oct 01, 2008 at 08:16:43 AM EST
    are you surprised? This always happens. The GOP revolts and the dems accomodate.

    Okay, it is now a given that we really aren't in a serious financial crisis? That's the message I keep getting.

    The Hous PRogressicves have to say no (5.00 / 1) (#6)
    by Big Tent Democrat on Wed Oct 01, 2008 at 08:20:36 AM EST
    and hopefully the Blue Dogs will too.

    I say give the GOP a chance to vote on the same bill from Monday one more time and then it is the full Monty Dem bill.

    Reid just blew it.


    as if (5.00 / 3) (#30)
    by sj on Wed Oct 01, 2008 at 09:32:00 AM EST
    Your recommendations are music to my ears, but you know, right, that Reid and Pelosi are both deaf?

    Right now I'm completely expecting a corporate bailout with little or no assistance to homeowners, but with a lovely little tax cut to even more corporate beneficiaries.

    I think being bi/post-partisan is more important to Dem leadership than the national good.  

    Please let me be wrong.


    Republicans always outsmart us (none / 0) (#117)
    by BrassTacks on Wed Oct 01, 2008 at 01:07:28 PM EST
    Happens over and over.  It would appear that they are simply better at politics than we are.  Not good.  

    Hil and Chuck (none / 0) (#127)
    by MTSINAIMAMA on Wed Oct 01, 2008 at 01:33:48 PM EST
    These are my Senators, and I had a heck of a time getting through. I told both offices and an emphatic NO to this bill and explained that I was for the bailout--not just this bill with its onerous provisions.

    I'm still convinced that we are, (5.00 / 2) (#29)
    by Faust on Wed Oct 01, 2008 at 09:31:44 AM EST
    but I'm now ready and willing to play chicken. I'm calling my senators today and advocating no.

    On September 21 (5.00 / 6) (#5)
    by lentinel on Wed Oct 01, 2008 at 08:19:57 AM EST
    You wrote: " I think the most important question of the coming days for me is - will Barack Obama lead the Democrats in a fight against the 700 billion dollar blank check the Bush Administration is asking for to bail out Wall Street?

    This is a 3 AM moment. The time to lead is now. We will find out a lot about Barack Obama in the coming days."

    So I guess we found out.

    Yesterday already told the story (5.00 / 2) (#53)
    by Prana on Wed Oct 01, 2008 at 10:09:22 AM EST
    of Obama. he was out chastising those who voted No on the House Bill. So we know what side of the fight he is on in this battle. As I mentioned yesterday in a post he has received 27.9 Million dollars form Wall Street in hi short political career. His action are showing what side he thinks his bread is buttered on and sop far he can't say enough to promote the 700 Billion and does not want bankruptcy protection in the bill. Need anyone hear more?

    Yep.... (5.00 / 1) (#62)
    by kdog on Wed Oct 01, 2008 at 10:31:10 AM EST
    Bush, McCain, and Obama...all on the same page.

    Obama keeps this up and voters will think, "they're all the same, may as well vote for the war hero and the hockey mom."


    Sad, isn't it? (none / 0) (#118)
    by BrassTacks on Wed Oct 01, 2008 at 01:08:35 PM EST
    Our guy isn't about to change anything.  He's just another politician, like the rest of them.

    Hyperbole? (5.00 / 1) (#128)
    by Manuel on Wed Oct 01, 2008 at 01:35:23 PM EST
    There are deep significant differences between the parties in how they would handle the economy.  The Democrats would at least be competent if not as progressive as we'd like.  The Republicans are badly out of ideas and out of step with the modern economy.

    Even in this bill, the only similarity between Dems who oppose the bailout and Republicans who oppose the bail out is the no vote.  Similarly for those who voted yes.

    The "They are all the same" argument gave us Bush in 2000.  Think that made a difference?

    I am not a strong Obama supporter but I can easily see that Obama would be more competent than McCain on the economy.


    Simple answers to simple questions (5.00 / 2) (#71)
    by lambert on Wed Oct 01, 2008 at 10:47:33 AM EST
    " Will Barack Obama lead the Democrats in a fight against the 700 billion dollar blank check the Bush Administration is asking for to bail out Wall Street?"



    LOL. Who is even asking that these days? (5.00 / 1) (#88)
    by ruffian on Wed Oct 01, 2008 at 11:05:45 AM EST
    The answer was a resounding NO almost 2 weeks ago now.

    That Has Been The Simple Answer To (5.00 / 1) (#132)
    by MO Blue on Wed Oct 01, 2008 at 02:30:52 PM EST
    every simple question to date. Why anyone at this late date thinks that Obama will lead on anything that benefits real people over corporate interests is beyond me.  

    You're right (none / 0) (#8)
    by Big Tent Democrat on Wed Oct 01, 2008 at 08:22:21 AM EST
    Yep and I stated that many times. (none / 0) (#100)
    by alexei on Wed Oct 01, 2008 at 11:37:31 AM EST
    I have called both my Senators, Sanders is already stated on his web site that he will vote no and he has an amendment to raise taxes on the rich to pay for the bail out.  I urge people to ask their Senators to support that measure.

    Hoyer used to be my Congressman - he is a corporate Dem but, you are right, I agree with him on this issue.


    Amazingly, MCMers, including WNYC talk show host (none / 0) (#45)
    by jawbone on Wed Oct 01, 2008 at 09:55:12 AM EST
    Brian Lehrer just now, are saying McCain made a big mistake by aligning himself with BushBoy on this Paulson Fix Is In (PFII).

    No mention whatsoever of Obama wrapping himself in the PFII as well.

    Well, when the MCM is on your side, you can do no wrong; if agin you, you can do nothing right. McCain is being moved (by the MCM) more and more into the MCM Agin Him position.

    Somerby said initially he was for Obama, not bcz he would be better than Hillary, but bcz he felt the MCM would definitely savage Hillary and he felt the MCM would be flummoxed by Obama and at least give him a somewhat even chance in their coverage. I think Somerby nailed it.


    As did (none / 0) (#93)
    by cal1942 on Wed Oct 01, 2008 at 11:19:54 AM EST
    BTD months ago.

    I felt it would go to McCain once the primaries were over.

    I was wrong.


    What ever happened to leadership? (none / 0) (#121)
    by BrassTacks on Wed Oct 01, 2008 at 01:10:40 PM EST
    I'm not seeing it anywhere, in either party.  

    Can someone remind me ... (5.00 / 5) (#9)
    by Robot Porter on Wed Oct 01, 2008 at 08:26:54 AM EST
    why I'm a Democrat again?

    Because when stuff like this happens, I honestly can't remember.

    I knew it had to be a bad bill when the (5.00 / 2) (#18)
    by Teresa on Wed Oct 01, 2008 at 09:01:28 AM EST
    Republicans were singing its praises. It's always us who gives in. This time without even trying the original bill in the Senate.

    According to the linked (5.00 / 3) (#59)
    by oculus on Wed Oct 01, 2008 at 10:17:33 AM EST
    NYT article, Pelosi and Reid sent the President a letter saying we're with you.  

    We need a new party, which will oppose the NuDems. (none / 0) (#50)
    by jawbone on Wed Oct 01, 2008 at 10:03:09 AM EST
    Along with Brad DeLong, I say we must rid ourselves of the Republican Party.

    As I said, raze the Republican Party to the ground. Plough it under. Scatter salt in the furrows so it can never grow back.

    We need another, very different opposition party to face the Democrats. We need it now. (My emphasis)

    But those NuDems must also be opposed. If we opposers/libs/progressives get to keep the Democratic Party name, will the NuDems have trashed it beyond all worth by then?

    If so, what do we call the actual lib/prog party?
    Progressive Democratic Party? Social Dem Party--too close to the word "socialism"? In honor of Face Book, how about the Friends Democratic Party? (Weak joke, but it appeals to those who loved "Friends," the TV show and all those "friends" so sought after on Face Book....)


    But can you do both at the same time? (none / 0) (#67)
    by Christy1947 on Wed Oct 01, 2008 at 10:41:21 AM EST
    One of many problems here is that as long as the repubs have the kind of lock step party discipline they have, you have to take them out before you reform Dems, for the simple but awful reason that the Rs will exploit every nook and cranny of the Dem reform battle for their own goals, just as the purity troll repubs turned on their own president and party headliner when it suited them.

    I don't disagree that there is too much compromise on stupid things in the current Dem leadership, but. . . if you want reform, you gotta take out the flank attack on both Dem sides by the disciplined if insane Rs  before you fight it out.


    Of course, businesses complain (5.00 / 1) (#15)
    by dutchfox on Wed Oct 01, 2008 at 08:55:29 AM EST
    Calculated Risk says
    The lobbying has really started.
    The comments on CR are always worthwhile.

    The comments on suspending the (none / 0) (#97)
    by santarita on Wed Oct 01, 2008 at 11:34:19 AM EST
    mark-to-market rule were pretty funny.  That site is great as is Brad DeLong's site and RGE Monitor (Roubini's site).  And many of the comments to Floyd Norris' columns and Joe Nocera's columns and Krugman's blog in the NY Times are educational.

    It amazes me (5.00 / 5) (#16)
    by lilburro on Wed Oct 01, 2008 at 08:56:15 AM EST
    that the Senate's idea of taking advantage of this political opportunity is to take the same crappy bill and make it crappier.  Where are the changes for the average Joe?  

    Don't work too hard now Congress.

    Bad, Bad and terrible (5.00 / 1) (#17)
    by koshembos on Wed Oct 01, 2008 at 08:57:44 AM EST
    Both the Senate and the House bailout versions are worthless. Many economist have stated categorically that the plan is useless and doesn't address the problem.

    Politically, giving more money to the Bush administration is a travesty. Paulson will feed his friends on wall street and starve main street.

    Enough is enough.

    No way you can compare the two (5.00 / 1) (#19)
    by Big Tent Democrat on Wed Oct 01, 2008 at 09:04:53 AM EST
    Say what you want about the House bill, at least it is confined to the crisis. The Senate bill is a travesty, with ridiculous sops to the GOP.

    Lots of economists (none / 0) (#38)
    by gyrfalcon on Wed Oct 01, 2008 at 09:40:25 AM EST
    on the other side, too.  See this, for example.

    Something has to be done (none / 0) (#57)
    by koshembos on Wed Oct 01, 2008 at 10:12:50 AM EST
    Opposing a proposal doesn't contradict the reality the there is an urgent need to act. It's not clear whether there is any contradiction between the two petitions as far as judging the urgent need to act.

    I think that we can all agree that letting one guy, Paulson who has said just two months ago that everything is fine and dandy, manage all the money by himself is outrageous.


    Alice Rivlin Signed It. (none / 0) (#103)
    by santarita on Wed Oct 01, 2008 at 11:47:42 AM EST
    Good enough for me.

    Reid really must go (5.00 / 3) (#21)
    by pluege on Wed Oct 01, 2008 at 09:08:26 AM EST
    He is horrible. He needs to go nearly as much as bush. And while we're at it, Pelosi must go also. Two really, really bad, corrupt leaders to have. There will be no progressive agenda ever with what currently passes for democratic leadership. Combine them with Obama and you have a trifecta of more of the same do nothing Government.

    He has a majority of one, and that's if (none / 0) (#68)
    by Christy1947 on Wed Oct 01, 2008 at 10:43:33 AM EST
    Lieberman is behaving that day. Otherwise, if we had the party discipline of rs which we have never had and don't have now, Cheney decides everything.  This means he has to do a lot more compromising than the House does, and even they have the Blue Dogs to deal with. Don't be misled by the rheteoric that we have working majorities in both houses. We Do Not.

    Wallowing in Weakness (5.00 / 2) (#77)
    by mmc9431 on Wed Oct 01, 2008 at 10:54:15 AM EST
    This is true, but even a 60 seat majority won't do us any good in 2009 if 1/3 of them a Republican lites. So November won't change a thing.

    I still find it interesting that the Republican's have managed to block Democrat's at every turn as a minority. And yet when the Democrat's were the minority they couldn't block anything. I think the Democratic leadership enjoys their weakness. This way they can always say that whatever goes on, it wasn't their fault. It's so much easier to straddle the fence than to actually lead.


    there aren't any: (5.00 / 3) (#22)
    by cpinva on Wed Oct 01, 2008 at 09:13:21 AM EST
    Where are the changes for the average Joe?

    and none were ever intended. this has nothing to do with the average joe, and everything to do with the fat wall street cats who, with the collusion of the bush administration and a republican congress, gave us the current mess.

    the sky isn't falling, the world isn't ending (film at 11), and it's time chicken little was butchered and made into a lovely stew, complete with dumplings.

    the people that profited the most, should suffer the most; it's called equity.

    oh, and spare me the "but no one will be able to get any credit!" nonsense. of course they will. the terms may be a bit tighter, more documentation may be required, but that's as it should be. it was the unrealistic ease of credit that helped foment this "crisis" to begin with.

    to assert that the entire US & world economies will crash to ground, if these banks aren't bailed out, is a flat out lie. what will happen is that the pigs, who've been feeding at the trough, will be trussed up, tied to a stake and slow-cooked over an open-pit fire.

    the pig picken' will begin when they're done.

    Exactly cp..... (none / 0) (#34)
    by kdog on Wed Oct 01, 2008 at 09:36:19 AM EST
    Credit will be harder to get, yes, but that is a good thing!  Credit was way too easy to get for far too long, and that is exactly why the credit industry is in crisis.

    Also if banks become ... (none / 0) (#60)
    by Robot Porter on Wed Oct 01, 2008 at 10:18:56 AM EST
    more dependent on deposits they may actually have to start giving us a real reason to put our money there.

    My first savings account, as a little kid back in the seventies, had 8% interest.


    Wow.... (none / 0) (#64)
    by kdog on Wed Oct 01, 2008 at 10:35:22 AM EST
    8%, thats so foreign to me....I haven't had a bank account in 10 years, mainly because between fees and hassles it was costing me time and money to keep my money there.

    That and I just don't trust 'em:)


    Do you remember ... (5.00 / 1) (#65)
    by Robot Porter on Wed Oct 01, 2008 at 10:37:47 AM EST
    when banks would give you things like toasters for starting a new account?

    Before my time.... (none / 0) (#69)
    by kdog on Wed Oct 01, 2008 at 10:44:02 AM EST
    all the banks ever offered me was grief.  

    My grandmother was a teller, I remember her always having lollipops to give away to kids, but that's about it.

    Somewhere along the line people became convinced that they need the bank more than the bank needs them...how that came to be I have no idea.


    Spring will be busy. (none / 0) (#70)
    by Christy1947 on Wed Oct 01, 2008 at 10:45:40 AM EST
    There was a post on Kos yesterday about a provision someone slipped into legislation a few years ago, but in Bush Time, in which the 3% minimum reserves for banks became a 3% max, with the option of going down to zero. I don't have the title but I think there were two of them yesterday.

    Kdog, I keep telling you... (none / 0) (#116)
    by shoephone on Wed Oct 01, 2008 at 01:00:41 PM EST
    ... credit union.. credit union.. credit union... fees are minimal, if you have to pay any at all...

    Thanks shoe.... (none / 0) (#119)
    by kdog on Wed Oct 01, 2008 at 01:08:55 PM EST
    but no need, I'm doing fine without a bank.  

    On the occasion when I need to cut a check, I give my friendly neighborhood convenience store/smoke shop the business and buy a money order.  


    Allright (none / 0) (#123)
    by shoephone on Wed Oct 01, 2008 at 01:22:16 PM EST
    Whatever works for ya.

    Come On (none / 0) (#63)
    by Manuel on Wed Oct 01, 2008 at 10:33:57 AM EST
    Show me one economist that says doing nothing is an option.  Yes, there is no single plan that can get universal support but that is not an excuse for not acting.

    This is the price we pay for our form of government.  Getting bils passed is a messy process.  I was doing social studies homework with my 4th grade son last night.  The topic was "The Great Compromise", the one that gave us the House and Senate.  I wonder how we would handle that today.

    The Senate bill is worse than the one the House voted down but that was to be expected.  The House Dem leadership wants Republican support for this bill.  How else are they supposed to get it?

    Now, if we want to go for DeFazio's bill, let's try it.  Bush is sufficiently spooked, he may even sign it.  I am doubtful that bill can get 60 votes in the Senate, however.  I am also not sure it can pass the house since there would be Democratic defections added to universal Republican opossition.

    Can't the worst parts be stripped out in negotiations after the house passes its own version?


    Obama nor McCain showing any leadership (5.00 / 1) (#25)
    by stefystef on Wed Oct 01, 2008 at 09:23:30 AM EST
    The silly Obama/McCain proposal to raise the FDIC insurance limits does nothing to address this crisis. It is a silly stupid gimmick. And the idea of giving more corporate tax breaks and suspending the Alternative Minimum Tax in the face of record deficits is absolutely outrageous. Harry Reid has produced a travesty.

    I asked the question before in another thread if someone could explain to me what good an increase in the FDIC would do for the immediate needs of the financial crisis.  Protecting deposits does nothing for the collapse home market or dwindling pension funds.

    I have heard nothing NOTHING from Barack Obama that would indicated that he would have a solid, workable solution for this problem.  I know this is a "Bash McCain" blog and it's pretty easy to bash him, but not one, NOT ONE, pundit, commentator has made any critique to Barack Obama, questioning his lack of direct involvement, as a US Senator, in this crisis.

    But since I don't worship Obama or fall for his smooth, cool talk, I guess I'm too slow to understand.

    I'm not completely (5.00 / 1) (#33)
    by liminal on Wed Oct 01, 2008 at 09:36:00 AM EST
    opposed to increasing the FDIC insurance ceiling.  That's not a problem for me, unless they increase it to like, insane levels.  

    NPR had an interesting take on that provision, this morning, pointing out that small, regional and local banks like that provision quite a bit, and could perhaps put local pressure on House members to support the bill, making it more likely that some of the Republicans could flip.

    But the corporate tax breaks - that provision is almost criminally irresponsible.  It's the "Good job, Brownie!" provision of the bill.  


    No corporate tax breaks!!! (none / 0) (#47)
    by stefystef on Wed Oct 01, 2008 at 09:55:57 AM EST
    Where is the accountability?
    Where is the punishment?

    Is anyone going to pay for this crap???


    Will somebody please post a list of all of these (none / 0) (#73)
    by Christy1947 on Wed Oct 01, 2008 at 10:48:55 AM EST
    tax breaks? I keep seeing summaries in the print news which don't tell me what's up here, and who is getting them. I know generally it involves AMT, bane of the middle class, some research, alternative fuels. But that's not enough to know what's happening here. And what is getting slipped by. I am made anxious by the published whoops of lobbyists in said print papers.

    According to the NY Times the community ... (5.00 / 1) (#87)
    by santarita on Wed Oct 01, 2008 at 11:05:18 AM EST
    banks lobbying group lobbied heavily for this provision.  Their argument is that small businesses have amounts in excess of $100,000 and need the benefit of that insurance.  Small banks are struggling to keep deposits because of competition from larger banks and money market mutual funds.  When Paulson provided insurance protection to money market funds (to prevent a run on them) it was only a matter of time before the banks would start hollering.

    I think the FDIC change isn't a bad idea. (5.00 / 1) (#27)
    by tigercourse on Wed Oct 01, 2008 at 09:25:35 AM EST
    The tax cuts are ridiculous. Of course, given how closely divided the Senate is, we absolutely need Republican support there.

    I don't really agree (5.00 / 2) (#28)
    by andgarden on Wed Oct 01, 2008 at 09:25:40 AM EST
    I think the implications of what could happen to the economy if a second bill fails in the House are very troubling.

    OTOH, I think Hoyer is trying to telegraph that this version is, in fact, less likely to pass the House. That seems possible to me.

    Why not pander to the liberals in the house? (5.00 / 1) (#54)
    by coigue on Wed Oct 01, 2008 at 10:10:23 AM EST
    Why give the rich MORE tax breaks?

    From Time blog Swampland (5.00 / 1) (#39)
    by WS on Wed Oct 01, 2008 at 09:41:09 AM EST
    The business tax cuts aren't all bad:

    The tax extenders are a hodge-podge of business tax measures that include the annual Alternative Minimum Tax fix, energy tax incentives, extensions of expiring tax cuts, including a popular R&D credit essential to many businesses, and a mental health parity measure that requires providers of health insurance to include mental health coverage. The mental health bill has passed the House before and becomes the Senate vehicle upon which everything is loaded.

    Here's some more from the same blog post:

    The Senate passed the tax extenders last week 93-2 but the measure has had problems in the House because the Blue Dogs don't like that they are only half paid for. Pelosi could lose some blue dogs with this move, but apparently will gain enough GOP votes to pass the measure. Though, Boehner has green-lighted things before, and look how that turned out...

    It adds to the deficit since these tax cuts don't pay for themselves though.  Thoughts?  

    Party pooper! (5.00 / 1) (#46)
    by gyrfalcon on Wed Oct 01, 2008 at 09:55:53 AM EST
    Injecting actual facts into angry arm-waving about evil corporate tax cuts-- shame on you.

    Why not stick to the task at hand? (5.00 / 1) (#49)
    by Fabian on Wed Oct 01, 2008 at 10:01:15 AM EST
    This is supposed to be about the credit/banking fiasco, not supporting everyone's pet projects, even if they were worthy ones.

    It makes Congress look like a bunch of compulsive opportunists which peeves the public - again.


    The tax breaks (5.00 / 1) (#66)
    by wasabi on Wed Oct 01, 2008 at 10:40:36 AM EST
    I think for the most part that the tax breaks overall are Democratic friendly.  The AMT needs to go because it is no longer effecting the wealthy as the sheltering that caught the rich have been written out by tax loopholes.  The Dems have been trying to eleiminate this for years, but wanted to see a corresponding increasing in taxes on the rich to maintain pay-go.  
    If the total amount added to this bill is $100B, after the suspending of the AMT, that leaves about $35B for extending the business tax credit for research and development, expanding the child tax credit, and providing tax relief to victims of recent floods, tornadoes and severe storms.

    The Democrats are too scared (5.00 / 1) (#74)
    by Manuel on Wed Oct 01, 2008 at 10:50:13 AM EST
    (rightly so IMO) to push for a progressive Democratic alternative.  A Democratic progressive alternative would not get 60 votes in the Senate and may not even pass the house (ever hear of conservative Democrats?).  A failure by Congress will reinforce the view of Democrats in Congress as incompetent.  It would provide McCain and the Republicans with their chance to rail against the extremist left wing liberals.  This would hurt Obama's chances and the chances of Democrats in the House and Senate.  Don't forget Congress has an even lower approval rating than Bush.  I am for fighting but let's fight smart.

    The GOP already rails against (none / 0) (#84)
    by ruffian on Wed Oct 01, 2008 at 11:02:53 AM EST
    Obama and Pelosi as extremist left wing liberals.  They always will, no matter what sops we throw to the GOP.

    Might as well get some real policy improvements out of the deal.


    You and I know (5.00 / 1) (#90)
    by Manuel on Wed Oct 01, 2008 at 11:15:44 AM EST
    that Obama and Pelosi aren't extremist left wing liberals.  The current polls are proof that most of the country doesn't buy it either.  An attempt to force through a "socialist" plan could change the public perception.  The country can be moved left but not by shock treatment.

    I thought Frank and Dodd got as much in terms of policy as we could expect out of the current situation.  There will be a chance to push further once there is change in Washington.  In the interim, there is a real crisis that needs action.


    It is far from shock treatment (5.00 / 1) (#99)
    by ruffian on Wed Oct 01, 2008 at 11:37:17 AM EST
    or socialist to put more progressive policies in this bill, instead of more regressive ones.  I believe the public supports that.

    They will not push further next year, for just the reasons you say - they will not stand up to the ridiculous name calling. If they will not stop a tax cut now, do you think they will push hard for a tax increase later?  I don't.  


    Truly stunned !! (4.75 / 4) (#23)
    by Stellaaa on Wed Oct 01, 2008 at 09:16:03 AM EST
    At a time when the nation is battling the effects of greed, to include tax cuts is truly reprehensible.  Such a cruel joke when they  start cutting the measly 35 Billion HUD budget and when Healthcare will be off the table.  We are now living in a feudal society.  

    And this is why.. (3.00 / 2) (#37)
    by TheRealFrank on Wed Oct 01, 2008 at 09:39:00 AM EST
    ..Dems should have voted for the original one. It was flawed, but workable until a real fix (under a new Congress) could be implemented.

    Is anyone really surprised that a worse bill is now coming up for a vote? Did anyone seriously believe that there was going to be a better one that would pass in these circumstances. Sure, it would be nice, but not bloody likely.

    Pass the Paulson Plan (1.00 / 1) (#72)
    by caliman on Wed Oct 01, 2008 at 10:48:33 AM EST
    This should not be a partison issue. We need to have the Paulson Plan passed.

    Anyone who is oppossed to it just does not understand what is at stake. And if, after all that has happened so far this year, one cannot see the urgency for this kind of action then one is indeed blinded by ignorance or ideology.

    There is no alternative to the Paulson Plan. If Paulson did not propose it, someone would else would have to have offered exactly the same thing.  

    I expected that liberals, and especially our elected liberal leaders, would be able to rise above the unthinking rabble. But I see that many liberals are no different than anyone else when it comes to embracing a self rightous indulgence in ignorance.

    Thank you Hank (none / 0) (#85)
    by ruffian on Wed Oct 01, 2008 at 11:03:57 AM EST
    Didn't know you had an account at TL.

    Like Robert Kuttner? Noriel Roubini? Many others (none / 0) (#110)
    by jawbone on Wed Oct 01, 2008 at 12:21:44 PM EST
    who have called the shape of the mess quite correctly, when Paulson and Bernanke were enabling the offending mess makers?


    Kuttner piece here. With link to earlier pieces.

    Roubini here.

    But, whatever happens, good luck to all....


    Kuttner Argues for the Bailout But ... (5.00 / 1) (#115)
    by santarita on Wed Oct 01, 2008 at 12:56:19 PM EST
    only as a stopgap.

    I was unable to see what Roubini is advocating because the link refers to a 43 minute audio program.  Maybe you could summarize for us?

    I'm with those who support a more systemic reform which would be a permanent solution.  I think that the short term solution will require some Government equity participation in the banking system.  But it may just be that we need a stopgap solution until the short term solution can be put in place.  That's what Kuttner is arguing for at this point.  And maybe Roubini as well.


    Option Maybe it can be amended in 09 (none / 0) (#3)
    by Saul on Wed Oct 01, 2008 at 08:18:00 AM EST
    What is the possibility looking at polls that the Senate and House will be overwhelming controlled by the Democrats and if Obama wins then you would not have to worry about veto issue.  

    So if time is of the esscence on this bailout then try to get what you can knowing that you will modified it to make sure it helps the people more than big businesses in 09.

    It will never be amended (5.00 / 4) (#35)
    by Demi Moaned on Wed Oct 01, 2008 at 09:36:54 AM EST
    ... any more than the FISA legislation or any of the other boondoggles that we have been saddled with. Because very few in Congress (and I mean Democrats) think there's anything particularly bad about this stuff.

    Well (none / 0) (#4)
    by Steve M on Wed Oct 01, 2008 at 08:19:41 AM EST
    The FDIC proposal isn't a complete solution, but it's a piece of one.  I don't agree that it's a gimmick, it will definitely help keep troubled banks capitalized.

    I'm truly baffled that I live in a country where the "fix" to a bill which could potentially add $700 billion to the deficit is to throw in a bunch of tax cuts as if that somehow lessens the burden.  News flash, the $700 billion is not getting paid by today's taxpayers either way!  There is an AMT fix in this bill, which I'd support in any form, but that's about it.

    Stop deposit removals? (none / 0) (#7)
    by Big Tent Democrat on Wed Oct 01, 2008 at 08:21:53 AM EST
    Are people putting money under their mattresses?

    Steve, the problem is the TED spread - banks will not lend to each other. The FDIC thing does nothing at all about that. It is a silly stupid gimmick.


    Well (5.00 / 3) (#10)
    by Steve M on Wed Oct 01, 2008 at 08:32:46 AM EST
    I wrote a longer version of what you just said here.  I agree that the interbank lending market is the overarching problem.

    But the concerns about a run on troubled banks are real.  WaMu was taken over by the regulators because it lost $18 billion in deposits in a single day.  If your business has a bank account that sometimes exceeds the insurance limit, and you're hearing rumors about the bank having trouble, you better believe you're going to think about moving the money to a different institution or institutions.


    How much of the deposit removal was (none / 0) (#11)
    by Big Tent Democrat on Wed Oct 01, 2008 at 08:37:42 AM EST
    due to withdrawals over $100,000? How many would have been stymied by a $250,000 limit?

    Sorry, a gimmick.

    I have nothing against it. Do it. But it does nothing to help the real problem.


    Raising the FDIC limits (5.00 / 3) (#41)
    by eric on Wed Oct 01, 2008 at 09:43:37 AM EST
    is silly and even wrong because it sends signal that we are more concerned with people that have between $100,000 and $250,000 to put in the bank.

    First of all, if you have $250,000 in cash just sitting around, you aren't going to put it in a silly savings account at the local bank.  It would almost certainly be invested otherwise.

    Second, the average American has only $3,800 in the bank.    Are they worried about those poor people at the top with $101,000 to put into the bank?  Since when are Democrats the party of all of these wealthy people?


    I think the increase in the FDIC limits (5.00 / 1) (#55)
    by befuddledvoter on Wed Oct 01, 2008 at 10:12:00 AM EST
    is aimed at the businesses who do keep over the 100K in one bank for steady payment of employees etc.  There are many.  What you don't want is for them to suddenly put that money elsewhere, leaving the banks with no liquid assets.  At least that is the story that has been presented.  

    Think about it though.  That money is actually the money of the depositors, not that of the bank.  Somehow there has been the creation of the fiction that it is the bank's money so that it is counted as the bank's asset.  So, the bank plays with the money as it sees fit and FDIC covers up to 100K on single accounts and 250K on retirement accounts.  The rest of the money, over and above, the limits are unprotected.


    Yes, local businesses... (5.00 / 1) (#89)
    by santarita on Wed Oct 01, 2008 at 11:14:35 AM EST
    as I mentioned above this is the result of the community banks lobby.  Not a bad result either.  

    Banks earn money on deposits.  Ever hear of the term "float"?


    Ever hear fo the term "float?" (none / 0) (#95)
    by befuddledvoter on Wed Oct 01, 2008 at 11:29:21 AM EST
    No. I have never had anything near 100K in the bank or anywhere.  LOL  I never took an interest until now.  I am fascinated and surprised at how this all really works and how fictional "wealth" can be.

    The concept of the float is the check-clearing (none / 0) (#101)
    by santarita on Wed Oct 01, 2008 at 11:44:22 AM EST
    time - when you pay by check, the payee deposits the check in her bank and your bank deducts the money from your account.  But it doesn't happen simultaneously.  By law check clearing now has to happen within 24 hours if the banks are within the state and I think 36 hours otherwise.  For that clearing period, the payor bank still earns interest on your funds.  

    Well (5.00 / 1) (#79)
    by Steve M on Wed Oct 01, 2008 at 10:55:33 AM EST
    I am more concerned with the actual impact of keeping banks solvent than with the signal being sent.  I'd rather have good policy than a good signal, and frankly, I think most people understand that keeping banks solvent helps everyone.

    Small business. (none / 0) (#78)
    by Christy1947 on Wed Oct 01, 2008 at 10:54:19 AM EST
    People with that much $ (none / 0) (#120)
    by shoephone on Wed Oct 01, 2008 at 01:09:12 PM EST
    are not going to keep it all in a savings account. However, there are many different financial options offered by banks these days. Checking, savings, money markets, CD's, retirement accounts. It is entirely plausible that some people who have been working for thirty years or more and have retirement accounts and CD's through their bank would have more than $100,000 in different kinds of accounts at the same banking institution. (Not everyone wants to just invest in individual stocks.) But those accounts are not covered separately by FDIC. The whole amount, up to $100,000, is covered.

    I think the FDIC plan is reasonable.

    I think that more corporate tax breaks is outrageous, but I haven't seen a list of what tax breaks are being written into the bill.


    That's correct (none / 0) (#14)
    by Steve M on Wed Oct 01, 2008 at 08:49:13 AM EST
    but as my link suggests, I'm not clear on how anything in the progressive proposal addresses the real problem.

    So vote down the Senate bill, but in favor of what? The House progressives have already made their bid.  Someone other than us blog babblers has to put a piece of real legislation on the table.

    I frankly do not expect the new bill to pass the House, even with these new tax cuts.  I don't know if the original bill was a pig, but the majority sure thought it was a pig, and it's silly for the Senate to waste time trying to put lipstick on it.  Er, to coin a phrase.


    You mean the DeFazio joke? (none / 0) (#20)
    by Big Tent Democrat on Wed Oct 01, 2008 at 09:06:26 AM EST
    I ginored it in deference to them, because they should be embarrassed by it. It is a sign of incredible ignorance that they even released it.

    Andy Stern must not have any economists on the payroll.


    It May Pass... (none / 0) (#92)
    by santarita on Wed Oct 01, 2008 at 11:19:18 AM EST
    From what I've read the various lobbyists groups thought this was going to pass the first go round and when it didn't and the market sold off big time, the ABA and the Business Roundtable swung into action as well as individual businesses like Google.  

    And the chastened MSM is trying to do their best cheerleading now.


    It doesn't help the TED spread (5.00 / 1) (#40)
    by Maryb2004 on Wed Oct 01, 2008 at 09:42:30 AM EST
    or the credit crunch but it is a good idea and it helps small businesses.  

    Many small businesses are in current credit relationships with lenders that require them to keep all of their deposit accounts at the lending bank.  It is a default if they don't.  For the last 2 weeks they have been scrambling, since many of them have accounts with over $100,000.  They can't spread out among different banks but they can try to move into accounts at the bank invested in treasuries.  

    Too many people think only of individual accounts when they think of FDIC limits.  Individuals can spread out among banks. Small businesses have a harder time.  This is a good change.

    But it does nothing to relieve the credit crunch.  And the tax provisions are outrageous.  But what did you expect?  It's typical.


    What is the "TED spread"? (none / 0) (#58)
    by oculus on Wed Oct 01, 2008 at 10:14:39 AM EST
    The difference between (5.00 / 1) (#124)
    by Maryb2004 on Wed Oct 01, 2008 at 01:23:07 PM EST
    the T-Bill rate and the rate that banks charge each other to make loans to each other (which has risen dramatically.)The TED Spread is explained here.

    This   will give you the visual to see how much it has jumped.


    It's not about deposit removals (5.00 / 1) (#61)
    by Prana on Wed Oct 01, 2008 at 10:24:28 AM EST
    Sure the FDIC  does nothing for the main problem but the main problem set into motion a new subset of problems. People and businesses are moving out of stocks and into cash. Typically that cash goes into the bank in the form of accounts like checking, savings, money market, and CD's - all of which are FDIC insured. So with the movement of money to safely insured banks it makes all the sense in the world to increase the amount that FDIC insures because people are putting larger amounts into banks - particularly money market accounts and CD's.

    It is no gimmick. It's a solution to address the subset problem of the flow of assets from stocks and into cash.


    Corp. tax cuts (none / 0) (#32)
    by gyrfalcon on Wed Oct 01, 2008 at 09:35:23 AM EST
    are a package that's already passed the Senate and were waiting for House approval, according to Kevin Drum.

    No real reform (none / 0) (#13)
    by Abdul Abulbul Amir on Wed Oct 01, 2008 at 08:46:50 AM EST
    There seems to be every side issue on the planet rolled into this monstrosity.  Where is the real reform of Fan and Fred that puts an end to packaging high risk, and zero down mortgages?  

    Its not as if this was unforseen.

    Plus also, meanwhile, back at the ranch - (none / 0) (#24)
    by liminal on Wed Oct 01, 2008 at 09:22:37 AM EST
    the Republicans have convinced the SEC to start walking back the "mark to market" regulations.

    They always win. Even when they lose, they freaking win.


    SeC has had the ability to do this for (none / 0) (#83)
    by Christy1947 on Wed Oct 01, 2008 at 11:02:12 AM EST
    some time. It doesn't need legislation. this is what the House deadenders meant when they said the govt was not using tools already available to them. Ditto the FDIC increase. The problem before was that Bush wouldn't. Now he is willing. But all this will do is make the deadenders hungry for more, and then we will see the true depth of the deregulation they got through.  

    Reagan would be proud! (none / 0) (#26)
    by mmc9431 on Wed Oct 01, 2008 at 09:24:53 AM EST
    If you read this bill without knowing who wrote it, you'd swear it was the Republican's. If this is a further example of the "new" Democratic Party, progressive's may as well pack their bags and leave. The further into this election we go, the further away we get from our goals.

    What form of help does this bill offer to the middle class? Again we're expected to wait for the trickle down effect.

    I LOL when I read about the Senate bill last night (none / 0) (#31)
    by ks on Wed Oct 01, 2008 at 09:35:04 AM EST
    To paraphrase Don King : "Only in the Democratic Party". Of course the House Repubs are going to sign it.  It gives them all they want AND tax cuts!  They might make a big show for the folks back home but there will be enough votes when the time comes.  

    They were going to get the tax cuts anyway (none / 0) (#44)
    by gyrfalcon on Wed Oct 01, 2008 at 09:52:38 AM EST
    It's a package of stuff that had already been approved by the Senate and was waiting for the House to vote on.

    True... (none / 0) (#76)
    by ks on Wed Oct 01, 2008 at 10:54:09 AM EST
    But adding TRAP to the bill seems adding insult to injury.

    TRAP? TARP? Well, the TARP/Paulson Fix is a trap.. (none / 0) (#106)
    by jawbone on Wed Oct 01, 2008 at 12:10:30 PM EST
    Going from bad to worse (none / 0) (#36)
    by mmc9431 on Wed Oct 01, 2008 at 09:38:58 AM EST
    I agree, there needs to be a bill passed to restore confidence in our economy. But any proposed bill needs to address more than tossing a life preserver to the top tier. And I have no confidence that Congress will "fix" a bad bill after the election. (I'm still waiting for those election reforms that were coming after 2000).

    Well at least (none / 0) (#43)
    by Wile ECoyote on Wed Oct 01, 2008 at 09:49:41 AM EST
    there is one backer of the AMT around.

    Did they extend protection against AMT or did (none / 0) (#86)
    by Christy1947 on Wed Oct 01, 2008 at 11:04:03 AM EST
    they fix the COLA failure in it which made its scope creep down and down. If not the latter, a fix for the Spring without destroying it entirely. So it only applies to the $250K+ crowd the way it was supposed to in the first place.

    BTD (none / 0) (#112)
    by Wile ECoyote on Wed Oct 01, 2008 at 12:41:04 PM EST
    seems to want to keep it where it is now.

    Heh (none / 0) (#113)
    by Steve M on Wed Oct 01, 2008 at 12:49:37 PM EST
    Let's put puppies and kittens in the bill next, so if you oppose the bill, you're against puppies and kittens.  That's your silly logic.

    steve m, inquiring minds (none / 0) (#114)
    by oculus on Wed Oct 01, 2008 at 12:55:44 PM EST
    want to know:  what is "TED spread"?  Thanks.

    Looks like (5.00 / 1) (#126)
    by Steve M on Wed Oct 01, 2008 at 01:30:40 PM EST
    you now have an answer in #124 above.

    On a related note, at one point last week, the quoted price on 3-month Treasury securities was actually negative.  In other words, people were so concerned about finding a safe place to stash their money for the next 3 months that they were actually willing to PAY the government a small fee to hold it for them, as opposed to putting it in an interest-bearing account or CD.  That's a signifier of big-time panic, which fortunately seems to have passed.


    For now (none / 0) (#136)
    by gyrfalcon on Wed Oct 01, 2008 at 03:15:32 PM EST
    If this second bill goes down, though...

    Get 'er done! Obama's idea of leadership (none / 0) (#48)
    by stefystef on Wed Oct 01, 2008 at 10:00:42 AM EST
    Just heard Obama's statement about meeting up with Reid and Pelosi and told them to do what was necessary to get this done.  That's all.

    Wow, what leadership!  Reminds me of all the CEOs who  tell the rank and file to go out and make money without any suggestion or criteria- just get 'er done!  

    Saying alot of nothing so if the plan doesn't work, Obama doesn't have to put his name on it.  Slick move, Barack.

    McCain's not the only one getting greasy...

    Just imagine (5.00 / 2) (#51)
    by Fabian on Wed Oct 01, 2008 at 10:04:07 AM EST
    if Obama went toe to toe with the Bush administration, right here, right now on this legislation.

    I want Fighting Dems.


    Well, he did tell you (none / 0) (#75)
    by Manuel on Wed Oct 01, 2008 at 10:52:30 AM EST
    he was going to say thing you would not want to hear.  This is such a moment.  

    Obama must be feeling the pressure (none / 0) (#137)
    by bridget on Wed Oct 01, 2008 at 03:15:34 PM EST
    because he promised to do the bidding of Wall Street and the rich expect results. Now.

    Obama is the worst Dem candidate of my time lifetime ... Timid. He is no leader.

    But he knows what is expected of him if he wants to move into the White House: First, keep the rich safe and second, satisfy certain lobbies with promises of warswarswars in the name of America's "security." Blow up the world if that what it takes ...

    Of course, one could never expect for Obama to show just the tiniest of backbone against the Bailout. Why? He doesn't care about "the people."
    That is a no-brainer. The sad part of it is that his fans don't even demand it from him. They are just satisfied it's not Hillary Clinton who is running against McCain in the General Election but Barack Obama "Reclaiming the American Dream."

    P.S. From the above quote it is obvious I just received another Obama letter asking me to send money in the special Obama way:

    "Dear Barack, I agree!
    We are the ones we've been waiting for ... we are the change we seek. You can count on me to support you and our movement for change all the way to the White House."

    Gag. It's hard to believe people fall for this but those who did ... I was not waiting for them. From the start the Obama nonsense  movement was based on nothing but air.


    I constantly stick up for these guys (none / 0) (#52)
    by coigue on Wed Oct 01, 2008 at 10:09:00 AM EST
    but this goes too far. What a disgrace.

    New York Senators (none / 0) (#56)
    by SteveSyracuse on Wed Oct 01, 2008 at 10:12:25 AM EST
    I just called both Sens Clinton and Schumer to express my opposition to this bill. I don't have much hope that they will vote NO, however.

    It just makes so much more sense for the Dems to craft their own bill and then pass it, even if along party lines. Go on Offense!

    Make that zero hope Steve... (none / 0) (#80)
    by kdog on Wed Oct 01, 2008 at 10:58:10 AM EST
    this is NY State, home of Wall St.

    Clinton and Schumer don't have that kinda guts.


    As a state, can we afford for it (none / 0) (#98)
    by nycstray on Wed Oct 01, 2008 at 11:34:21 AM EST
    not to pass? Isn't the Gov talking about leasing assets and the Mayor slashing the budget?

    I'm not keen on the 700 billion dollar gamble with no other prongs being put into place (help for homeowners, small businesses and job creation), but I do wonder how much of a hit we can take.


    Yeah.... (none / 0) (#104)
    by kdog on Wed Oct 01, 2008 at 11:56:28 AM EST
    the city and state are gonna lose out on a ton of tax revenue due to Wall St.'s failures...I guess I can expect cigarette taxes to go up another 1.50 a pack.

    And they're already going after the tribes with renewed vigor for selling to whitey without collecting the tyrannical taxes.

    I'd tear down Wall St. and build Vegas style casinos...revenue problem solved, and casinos give you an honest gamble!


    Call and ask for limited exposure for Hanky Panky (none / 0) (#109)
    by jawbone on Wed Oct 01, 2008 at 12:17:55 PM EST
    for Paulson to play with. Say, $150B, which Paulson said would take them through January. Or a max of $250B.

    Something must be done--just seems this is not he thing which will WORK.

    And I'd rather they blow $150-2150B on it that $700B Plus. On Charlie Rose, NYTimes econ reporter Andrew Sorkin and Mort Zuckerman both said they don't think it will work, but, hey, give it a try. I'd rather not take that gambling approach with $700B.

    And Marty Feldstein said it would not work probably and suggested something which would. But, Congress--lead by Barry-Harry-Nancy-Barney and BushBoy-Paulson-Bernanke-McConnell-Boehner-McCain (well, maybe not McCain; today he said he's not sure he can vote for the New Improved Paulson Fix Is In) isn't listening to economists outside the Very Serious People/Villagers.


    Most mortgages outside business are not (none / 0) (#81)
    by Christy1947 on Wed Oct 01, 2008 at 11:00:04 AM EST
    non-recourse. The borrower is liable unless something changes for the excess of the debt over the value of the house. that's why banks don't want the bankruptcy court to have the ability to work with primary home mortgages in bankruptcy.

    In California - (none / 0) (#94)
    by liminal on Wed Oct 01, 2008 at 11:22:06 AM EST
    initial purchase loans are non-recourse loans & California had many of the bubbliest markets in the country.  Not all, but many.  

    Per these economists mortgages in US are no (none / 0) (#111)
    by jawbone on Wed Oct 01, 2008 at 12:35:50 PM EST
    recourse loans.

    LINK to Daniel Gros.

    How much are the toxic assets worth? A bit of logic and a straightforward application of the Black-Scholes formula suggests that if current expectations of house price declines are right, securities built on subprime mortgages might be close to worthless. The key is that US mortgages are `no recourse' loans, i.e. debtors can walk away from the mortgage without being held personally liable, a feature that gives homeowners a virtual put option.


    Traditionally, Fannie had required the mortgages it purchased to be so-called 80/20 mortgages wherein the borrower puts at least a 20% down payment on the mortgage. This was a requirement because residential mortgages in the US are a "no-recourse" loan in which the borrow can generally "walk away" from the loan with no recourse to the lender other than seizing the house and reporting the default to a credit agency.  A 20% down payment was generally thought to be enough to dramatically limit the moral hazard of borrowers "walking away" because housing values would have to decline 20%+ for the borrower to be underwater and even then the borrower would still face the prospect of losing their own sunk capital which makes walking away even more difficult from a psychological perspective

    Or just go here, "mortgages no recourse loans" Google search.

    If I'm wrong, please give some links which back up your take on this. I may be mislead by all these econ types, plus I am an econ dummie. So, links would be appreciated. T/U.


    Deeds of Trust (none / 0) (#129)
    by MsAmericanPie on Wed Oct 01, 2008 at 01:51:30 PM EST
    Most residential security instruments are not traditional mortgages, but are Deeds of Trust that allow the lender to foreclose without going to court. The trade-off is that the debtor is not liable for the difference between the debt and what the house will sell for.  A Deed of Trust can be foreclosed judicially, but it much more expensive and so lenders choose not to do so.   Deeds of Trust are, in effect, nonrecourse loans.

    Cool-thanks for your info. If I could find my deed (none / 0) (#138)
    by jawbone on Wed Oct 01, 2008 at 03:21:35 PM EST
    I'd check it out!

    Not knowing where it is (after house damage) has been a bit of small niggling worry since my mortgage holder, WaMu, went down. Of course, it had been transferred to them, so I'm expecting no problems....



    So this shade of lipstick is not as flattering (none / 0) (#82)
    by ruffian on Wed Oct 01, 2008 at 11:00:51 AM EST
    to the pig?

    Also, get ready for the next 4 years. Just like the last 10. From the AP:

    The bipartisan move caps a day of behind-the-scenes maneuvering on Capitol Hill over what sweeteners to add to the bill to attract votes from House Republicans.

    Reid and Pelosi must go as leaders. If Obama comes out for that, I will make a donation.

    Obama seems to have . . . (none / 0) (#91)
    by Doc Rock on Wed Oct 01, 2008 at 11:19:12 AM EST
    . . . bought into the bailout party line hook, line, and sinker.  I was worried about his Social Security, and health care stances.  Now his great concern for big money without a word about those floundering on the bottom, scares me (not floundering, but sympathetic). Bring back HOLC!  If you are worried about credit, set up new lenders with real oversight and limited executive compensation (rip-off oportunities). We need to rebuild a financial structure with trust, security, and sensible limits.  End predatory lending and big middle man pay offs.

    Contact Your Senator, say, "No!" (none / 0) (#102)
    by Doc Rock on Wed Oct 01, 2008 at 11:47:41 AM EST
    Here's a link to the AARP website. Put in your Zipcode and click the names to contact your senators.

    Bernhard at MoonofAL takes jaundiced look at SEC (none / 0) (#122)
    by jawbone on Wed Oct 01, 2008 at 01:13:19 PM EST
    change from Mark-to-Market to Mark-to-Make Believe (below is full quote from b):

    Counterparty Risk Increases

    When banks lend or take on other forms of exposure to each other, they gauge the counterparty risk. In recent weeks, there has been a widespread withdrawal of confidence in counterparties that has resulted in efforts to reduce exposure.
    Dennis P. Lockhart, President and Chief Executive Officer Federal Reserve Bank of Atlanta, Sep. 30, 2008

    Whatever the best way to regain confidence in counterparties may be, this isn't it:

    Under pressure from banks and legislators, the Securities and Exchange Commission issued an interpretation of an accounting standard that could make it easier for banks to report smaller losses, or perhaps even profits, when they announce results for the third quarter, which ended Tuesday.

    Now nobody will trust the Q3 results of any bank. Counterparty risk will be perceived as higher than before. The interbank credit market will freeze further.

    It starts to feel like there is an intend to make the outcome as bad as possible.

    The comments are dyspeptic, suggesting this may be using Shock and Awe to create chaos to leave the Big Banker Boiz fully in charge of a command economy. Yikes!

    Dystopia, here we come?

    Even if not this bad, the change in valuing assets is truly remarkable so soon after so many were burned and destroyed by Enron's Mark-to-Make Believe accounting. How soon we forget--or at the pols forget. Guess those big campaign contributions help with that.

    Who will trust us economically? We've messed up our foreign policy cred. Now, we're going after our credit cred.

    Thank you, Bush-Paulson-Bernanke-Greenspan-McConnell-Boehner. And their enablers: Barry-Harry-Nancy-Barney (Barney, I hardly know ye!).

    Chatted with the mail woman--she was alarmed about how Europe thinks of us economically now. I said the former banana republics in Latin America think we're crazy--and getting our comeuppance.

    She had heard the Dems were putting in some middle class tax relief--is that the AMT stuff? Or something else?

    AMT Relief is For Middle Class and... (5.00 / 1) (#125)
    by santarita on Wed Oct 01, 2008 at 01:25:46 PM EST
    the mark-to-market change is being pushed by some as a way to transform bad looking financial statements into good ones.  There is some argument for a temporary suspension of the mark-to-market rule.  Or a tweaking of it so that additional factors (other than just what the market is saying the value is)  are included in the valuation.  But at stake is more versus less transparency and the whole concept of letting the market determine value (as opposed to Merlin Paulson or whoever takes his place).  It is an odd argument for free market loving Republicans to make.

    Give 'em and inch and they'll take a mile. n/t (none / 0) (#134)
    by jawbone on Wed Oct 01, 2008 at 02:36:55 PM EST
    Altho' I can agree that there could be some kind of very temporary adjustment. However, who would evaluate the evaluators?

    Comes back to the loaners not trusting the counter parties, right? If you think Bank A is cooking the books, and you know your own bank as done so, why would you accept the word of any other bank?

    Bad moon arisin'....


    Precisely... (none / 0) (#135)
    by santarita on Wed Oct 01, 2008 at 02:57:34 PM EST
    Thee is an excellent article on the mark-to-market issue  at RGEMonitor.

    Oy vey! Euro pols urging the Mark-to-Make Believe (none / 0) (#133)
    by jawbone on Wed Oct 01, 2008 at 02:33:31 PM EST
    accounting bandwagon. Urged on by Clinton Secty of Treasury Robert Rubin. Oh my.

    So we can all be Enronzied now? Sheesh.

    The pressure on regulators and accounting rulemakers to ease fair value accounting standards in an effort to help end the financial crisis has been intensified by politicians.

    Nicolas Sarkozy, French president, is to urge his European Union counterparts to back changes that would introduce more flexibility in the accounting rules. David Cameron, leader of the UK's opposition Conservative party, said the rules had made the crisis worse and needed to be addressed. On Wednesday, Charlie McCreevy, the EU's internal markets commissioner, said the bloc would follow if other parts of the world relaxed fair value accounting standards.
    Robert Rubin, former US Treasury secretary and currently a senior adviser to Citigroup, said fair value accounting worsened the financial sector's problems. He told a Financial Times conference that fair value "is not serving our system well" and urged regulators to change the rules.

    Or, as it was referred to by Stirling Newberry at The Agonist post where I found this article, Mark-to-Big $h*t Pile accounting.

    Rep. Brad Sherman on Paulson demanding right to (none / 0) (#139)
    by jawbone on Wed Oct 01, 2008 at 04:14:47 PM EST
    buy any toxic waste from anywhere.

    ...The Bank of Shanghai can transfer all of its toxic assets to the Bank of Shanghai of Los Angeles which can then sell them the next day to the Treasury. I had a provision to say if it wasn't owned by an American entity even a subsidiary, but at least an entity in the US, the Treasury can't buy it. It was rejected.

    The bill is very clear. Assets now held in China and London can be sold to US entities on Monday and then sold to the Treasury on Tuesday. Paulson has made it clear he will recommend a veto of any bill that contained a clear provision that said if Americans did not own the asset on September 20th that it can't be sold to the Treasury.

    Hundreds of billions of dollars are going to bail out foreign investors. They know it, they demanded it and the bill has been carefully written to make sure that can happen.

    LINK has language from the New, Improved Paulson Fix (Is In).

    This is not exactly new, but I actually thought it had been taken out of the Paulson Fix (Is In). And per Sherman, Paulson said if it's not there, he will recommend Bush veto the bill. Period. The all important bill which must be passed NOW, NOW, NOW. Interesting, no?

    Found at Don's post on The Agonist, with video of commentary on it--which mentions that early on China had been talking about the need for the US to take over toxic waste sold overseas, and is now not mentioning it. Bcz it's a done deal? I have no idea. But this is gonna cost us a lot.

    And under the new SEC rule, the banks give the value of the asset.... That does solve the problem of them not wanting to sell if they lose too much on their toxic waste. We all will lose, it seems.

    Rep. Roy Blount on NPR right now bamboozling away like mad. No chance any taxpayer money will be lost over short term. Hey, what's not to like?

    Wanna buy a bridge in NYC?