Dodd's Answer To Paulsen's Blank Check Plan

Apparently, Senator Dodd was speaking softly on the Sunday shows while wielding a big legislative stick. Here is the proposed legislation.. Krugman likes the Dodd proposal.

In the end, Atrios gets to the crux of the issue:

[N]o proposal matters as long as the plan is to surrender when Mr. 24% stamps his feet.

Let's hope that is not the plan.

Speaking for me only

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    Robert Reich (5.00 / 1) (#9)
    by bjorn on Mon Sep 22, 2008 at 12:39:38 PM EST
    someone emailed these comments by Reich in terms of what we should ask for with the bailout:

    1. The government (i.e. taxpayers) gets an equity stake in every Wall Street financial company proportional to the amount of bad debt that company shoves onto the public. So when and if Wall Street shares rise, taxpayers are rewarded for accepting so much risk.

    2. Wall Street executives and directors of Wall Street firms relinquish their current stock options and this year's other forms of compensation, and agree to future compensation linked to a rolling five-year average of firm profitability. Why should taxpayers feather their already amply-feathered nests?

    3. All Wall Street executives immediately cease making campaign contributions to any candidate for public office in this election cycle or next, all Wall Street PACs be closed, and Wall Street lobbyists curtail their activities unless specifically asked for information by policymakers. Why should taxpayers finance Wall Street's outsized political power - especially when that power is being exercised to get favorable terms from taxpayers?

    4. Wall Street firms agree to comply with new regulations over disclosure, capital requirements, conflicts of interest, and market manipulation. The regulations will emerge in ninety days from a bi-partisan working group, to be convened immediately. After all, inadequate regulation and lack of oversight got us into this mess.

    5. Wall Street agrees to give bankruptcy judges the authority to modify the terms of primary mortgages, so homeowners have a fighting chance to keep their homes. Why should distressed homeowners lose their homes when Wall Streeters receive taxpayer money that helps them keep their fancy ones?

    LOL (5.00 / 1) (#38)
    by oldpro on Mon Sep 22, 2008 at 01:14:37 PM EST
    Right.  Like Senators Dodd and Obama are going to sign on to Reich's #3!

    I am going to an Obama fundraiser tonight (none / 0) (#12)
    by litigatormom on Mon Sep 22, 2008 at 12:44:19 PM EST
    with Bill Richardson and Henry Cisneros.  They are supposed to be addressing Iraq, but I have a feeling the discussion will "drift" to the current economic crisis.  If so, it will be interesting to see what they say.

    Hey, I'm going. . . (none / 0) (#15)
    by LarryInNYC on Mon Sep 22, 2008 at 12:46:37 PM EST
    to a fundraiser too -- but a considerably lower rent one, I imagine.

    I like his thinking... (none / 0) (#21)
    by santarita on Mon Sep 22, 2008 at 12:55:48 PM EST
    I wonder why Paulson is so reticent to limit compensation.

    Obama speech on the economic crisis (none / 0) (#42)
    by litigatormom on Mon Sep 22, 2008 at 01:20:20 PM EST
    in Green Bay today.

    I object to the wording of four... (none / 0) (#51)
    by Oje on Mon Sep 22, 2008 at 02:08:17 PM EST
    "Wall Street firms agree to comply..."

    They have no choice but to comply with any new legislation to regulate their business, with or without $700 billion.


    I would sign it, but then (none / 0) (#62)
    by hairspray on Mon Sep 22, 2008 at 04:19:38 PM EST
    I'm not a congress person.  And I don't think for a minute they will do this.

    You know... (5.00 / 2) (#32)
    by Oje on Mon Sep 22, 2008 at 01:07:33 PM EST
    In America's recent wars, in which sticky geopolitical issues complicate the economic / natural resource concerns that seem to play a major role in the decision making (terrorism v. Iraq oil), the impression that Americans' are underwriting the restructuring of the global economy to reduce risk for.... a particular set of global financial actors is difficult to demonstrate.

    What the Paulson bailout cries out to me, however, is the way in which Americans' great wealth has been turned into a political instrument to gird the economic empowerment of a class of global investors and agents. Since the 1970s, no new social programs of Medicare/Social Security importance. But, each Republican administration, marks a new level of government intervention on behalf of global markets and investments.

    This is an unimaginable redistribution of wealth from the poor to the rich. While homeowners continue to lose default on mortgages and lose their home and credit ratings, the U.S. government will step in to buy these properties at above market prices the worthless paper of their mortgage so that the global investors who put money into mortgage securities do not also lose their money. Everything that bankrupt American paid, already transferred into a banking system that allowed investment banks to gamble on mortgage securities. And, everything that institutional and global investors put into mortgage securities will now have their risk transferred to all Americans, including I would estimate 2+ million single-family, 1 home, households who will lose their properties during the entire length of the crisis and economic downturn.

    Just think, those 2 million households, at an average of 3 people, will now also have to pay $7,500,000-$15,000 for Paulson's bailout - and still lose their homes.

    Poorly written 3rd paragraph sb... (none / 0) (#39)
    by Oje on Mon Sep 22, 2008 at 01:16:12 PM EST
    This is an unimaginable redistribution of wealth from the American poor to the global rich. While homeowners continue to default on mortgages and lose their home and credit ratings, the U.S. government will step in to buy the worthless paper of these properties at above market prices so that the global investors who put money into mortgage securities do not also lose their money. Everything that Americans already paid into the banking system - that allowed investment banks to gamble on mortgage securities - is lost to these Americans following their bankruptcy or mortgage default. In  contrast, effectively seeking to eliminate the very nature of investment risk, everything that institutional and global investors put into mortgage securities will now be guaranteed by all Americans - including I would estimate 2+ million single-family, 1 home, households who will lose their properties during the entire length of this crisis and economic downturn.

    Of course (5.00 / 1) (#46)
    by Wile ECoyote on Mon Sep 22, 2008 at 01:54:41 PM EST
    Sen. Dodd was behind the Countrywide bailout just a few months ago.  Crickets here on this site.

    Yep! when Reagan and David Stockman (5.00 / 1) (#61)
    by hairspray on Mon Sep 22, 2008 at 04:16:40 PM EST
    sold Americans on "supply side economics" our country was doomed.  Recall that when we were solvent we bought goods and services when we had the money and therefore the working class wages had to rise to create demand. After Reagan, they got rid of that paradigm.  Instead they deregulated, made credit so cheap and expanded demand with the easy credit, not the value of money in the workers pocket. That is one part of the scenario you didn't elaborate but your description was spot on Donald. I wanted the candidate who was going to address this.  Now I just pray that Obama will do the job if he can, given the hand the GOP wants to deal him.

    Does anyone know exaclty what Dodd (none / 0) (#1)
    by tigercourse on Mon Sep 22, 2008 at 12:09:41 PM EST
    means by "allowing judges to renegotiate" mortgage terms?

    I think this provision refers (5.00 / 2) (#3)
    by litigatormom on Mon Sep 22, 2008 at 12:24:13 PM EST
    to the power of bankruptcy judges to restructure loans in a homeowner's bankruptcy.  Because mortgages are secured by the underlying property, the bankruptcy plan has to make the mortgage lender (and other secured creditors) whole before assets can be distributed to unsecured creditors, or back to the homeowner. Secured creditors thus have the right to recover the property that secures the loan; in the case of a mortgage lender, they can foreclose on the property.  Mortgage lenders and other secured creditors can consent to restructure their loans (reducing principal or renegotiated interest), but they can't be forced to do so.

    Without reading the legislation, I'm not sure what additional powers bankruptcy judges would be given to force, or create incentives, to mortgage lenders to restructure/renegotiate mortgage terms rather than proceed with foreclosure, but restructuring the mortgage so that the homeowner can remain in the home and make the restructured payments, rather than putting foreclosed upon properties back on the market to drive housing prices down, would presumably be the goal.


    Cram Down Power, I'd Think (5.00 / 1) (#17)
    by santarita on Mon Sep 22, 2008 at 12:53:46 PM EST
    Bankruptcy Court is the best way to handle the mortgage side.  The law could be amended to allow debtors to file under a revised Chapter 11 or 13 and then file a plan that calls for modification of loan either by writing down principal to the appraised value or writing down interest.  Or some combination.  What should happen is some formulaic approach that makes the filing fast and cheap.  Lenders should eat their attorney's fees and court costs.  

    The best way to do cram down is HOLC (none / 0) (#44)
    by lambert on Mon Sep 22, 2008 at 01:36:54 PM EST
    See Stirling Newberry (DK, sorry), and here for HOLC details, and here for a pithy summary of Newberry's proposal.

    The unique feature of Newberry's proposal that makes it feasible is the "state of emergency" point. That addresses the need for perceived immediate action, without the $700 billion giveaway, and provides a legal framework as well, which Paulson's insane proposal does not.


    Not Opposed to HOLC but (none / 0) (#45)
    by santarita on Mon Sep 22, 2008 at 01:41:52 PM EST
    I think having a bankruptcy court component makes a lot of sense because it eliminates some of the moral hazard argument and eliminates people who had "unclean hands" themselves.  

    The problem is that... (none / 0) (#60)
    by lambert on Mon Sep 22, 2008 at 03:55:40 PM EST
    ... the court is a onesies and twosies solution.

    Nor should people have to go bankrupt. Getting non-performing mortgages performing is good for the banks, too.


    Thanks, that's about what I thought, (none / 0) (#6)
    by tigercourse on Mon Sep 22, 2008 at 12:34:31 PM EST
    and hoped.

    I read it (none / 0) (#19)
    by scribe on Mon Sep 22, 2008 at 12:54:49 PM EST
    and it's a number of things:

    1.  the cram-down (renegotiating the terms and conditions of the mortgage when the homeowner is in bankruptcy),
    2.  an elimination or sharp limitation on fees which can be assessed when a mortgage goes into default and the mortgagor (homeowner) goes into bankruptcy
    3.  an "out" around the mandatory credit counseling requirement and time between credit counseling and filing bankruptcy, if the homeowner certifies when filing bankruptcy that a foreclosure has started.

    A lot of this - particularly the interest and cram-down - is in section 11.

    The cramdown severely limits the amount of interest and (not so much) the term of the post-cram-down mortgage (no longer than 40 years) which can be imposed in the bankruptcy.  The interest is to be a fixed rate, viz:

    at a rate of interest accruing after such date calculated at a fixed annual percentage rate, in an amount equal to the most recently published annual yield on conventional mortgages published by the Board of Governors of the Federal Reserve System, as of the applicable time set forth in the rules of the Board, plus a reasonable premium for risk; and...

    This Act also deals with the money market account problem, by bringing them under FDIC insurance, but only for the amounts of accounts up to the current limit for FDIC insurance.  So, if your money market account is in an FDIC insured bank, it would be insured just like a savings account.  Again, this helps the little guy a lot.  

    Moreover, it looks like it deals with the problem of banks/investment houses which have gone into insurance and similar lines, by breaking them out and precluding shifting the money or losses between those lines of business.  That's only to a degree - it's not a complete bust-up.

    Most importantly to me, the authority the Treasury Secretary would get would be severely circumscribed, and actions could be set aside if a court determined they were "arbitrary, capricious and unreasonable".

    In other words, no Dictator Paulsen.


    Seems to me that the FDIC limit (none / 0) (#23)
    by andgarden on Mon Sep 22, 2008 at 12:57:45 PM EST
    ought to be doubled and then have a zero added to it.

    The point is to protect the little guy (none / 0) (#28)
    by scribe on Mon Sep 22, 2008 at 01:04:18 PM EST
    who uses a money market account for checking or to hold his money, maybe b/c his bank has been giving better interest there than in savings, etc.

    I'd suspect the vast majority of money market accounts (as opposed to funds) are small, well under the FDIC insurance limit.


    This is a good development (none / 0) (#2)
    by Manuel on Mon Sep 22, 2008 at 12:20:54 PM EST
    Dodd's plan is sensible.  It may cost more because of the inclusion of other bad debt (e.g. credit cards) besides mortgages.  Neither side can afford to walk from a deal.  Let's hope they get something done without too much delay.

    I tried to read.... (none / 0) (#4)
    by kdog on Mon Sep 22, 2008 at 12:27:03 PM EST
    or at least skim through the bill, but I couldn't get past the header.

    To provide authority for the Federal Government to purchase certain types
    of troubled assets for the purposes of providing stability or preventing
    disruption to the financial markets and banking system and protecting
    taxpayers, and for other purposes.

    Protecting taxpayers?  Is this a cruel joke?

    Yes it is a cruel joke (5.00 / 1) (#7)
    by Faust on Mon Sep 22, 2008 at 12:35:31 PM EST
    but sometimes there is truth in a joke.

    At this point to quote Roubini

    You either nationalize the banks or you nationalize the mortgages...Otherwise, they're all toast.

    Now people who favor a HOLC like Roubini (and Clinton and uhhh me) favor the latter, i.e. nationalizing the mortgages, but either way the objective is to prevent economic collapse and yes...that does "protect" the taxpayers in the sense that we are all part of the economy and would like it not to collapse.


    As someone... (none / 0) (#11)
    by kdog on Mon Sep 22, 2008 at 12:44:02 PM EST
    who rents and doesn't borrow...I say let the broken economy collapse, and suffer the hardship until we build a better economy, one where 40% of GDP isn't the financial sector...aka money changing and lending.  

    Lets make things again instead of basing an economy on moving money around while leeches feed on it.


    "Let's burn it all down and hope we (5.00 / 1) (#16)
    by tigercourse on Mon Sep 22, 2008 at 12:46:54 PM EST
    rebuild things better" seems like a pretty risky plan.

    As does.... (none / 0) (#18)
    by kdog on Mon Sep 22, 2008 at 12:53:52 PM EST
    borrowing unfathomable amounts of money when you're already in the red up to your eyeballs.

    The thing already done burnt itself down, no?  The question is whether to rebuild the existing structure (with all that fire damage), or raze the site and build a bigger and better building out of something concrete, instead of iou's.


    We aren't even close to burnt down. (5.00 / 1) (#20)
    by tigercourse on Mon Sep 22, 2008 at 12:55:42 PM EST
    I don't want to see how I'd fair during a Great Depression on the off chance that there is some kind of utopia on the other end.

    I'm willing to risk it.... (none / 0) (#31)
    by kdog on Mon Sep 22, 2008 at 01:05:52 PM EST
    the difference I see with the pro-bailout and anti-bailout positions is this.

    Pro-bailout people are willing to gamble with the necks of the kids, grandkids, and not yet born....Anti-bailout people are willing to gamble with their own neck on the line.  No doubt which is the more rightoeus, selfless position.


    Letting the financial markets collapse (none / 0) (#37)
    by Manuel on Mon Sep 22, 2008 at 01:13:32 PM EST
    is gambling with the necks of the not yet born.  How many generations do you figure it will take to rebuild a financial system along your preferred lines?

    The debt (and social security insolvency) is not as big a problem as it is made out to be.  That is a conservative talking point.  The same people who are decrying this plan as socialism when it is nothing of the kind.


    I don't know.... (none / 0) (#47)
    by kdog on Mon Sep 22, 2008 at 01:57:14 PM EST
    how long it will take to rebuild a strong sustainable economy....but for the life of me I can't see the point in bailing out an unsustainable one.

    I have no "preferred lines"...whatever works and can be sustained.  Obviously what we've been doing does not work, why put an expensive band aid on a mortal wound?


    So you don't have kids (none / 0) (#59)
    by Faust on Mon Sep 22, 2008 at 03:52:07 PM EST
    I take it?

    Yes, risky, and perhaps more so for renters (none / 0) (#30)
    by Cream City on Mon Sep 22, 2008 at 01:05:39 PM EST
    than apparently some realize.  Do they know their landlord's fiscal solvency and stability?

    And the bailout plan.... (none / 0) (#34)
    by kdog on Mon Sep 22, 2008 at 01:08:23 PM EST
    ain't risky?  Do you know your share of the national debt?

    Everybody seems to forget the USA is broke, dead broke, not even close to the black.  We don't have any money, period...much less any to buy Wall Street's garbage.


    In the choice between risky, and near (5.00 / 1) (#36)
    by tigercourse on Mon Sep 22, 2008 at 01:11:28 PM EST
    certain catastrophe, I will pick risky.

    Of course, the bailout plan is risky (none / 0) (#41)
    by Cream City on Mon Sep 22, 2008 at 01:19:34 PM EST
    but it's all risky to you, too, even as a renter.  That was the point of my comment, not the point to which you're trying to twist it.

    I know I'm as at risk.... (none / 0) (#49)
    by kdog on Mon Sep 22, 2008 at 02:03:28 PM EST
    as the next guy, if not more so.  Yes, I have no debts due to a frugal lifestyle, but I also have no assets and little savings.  Basically a check to check guy with a small cash emergency fund.  

    I am anti-bailout knowing the risks to my relatively easy living, I just think the bailout, in the long term, is far riskier than letting failed banks and financial services companies fail.


    What will you do if you can't get any (none / 0) (#50)
    by tigercourse on Mon Sep 22, 2008 at 02:05:18 PM EST
    employment for years?

    Whatever it takes.... (none / 0) (#54)
    by kdog on Mon Sep 22, 2008 at 02:50:47 PM EST
    I have faith in my ability to survive...don't you?  

    All the banks in all the world can fail...I'm still gonna eat, one way or the other...aren't you?


    Taxpayer protection (none / 0) (#10)
    by Manuel on Mon Sep 22, 2008 at 12:43:09 PM EST
    comes in the form of "contingent shares" in the companies that sell the troubled securities to the government.  The taxpayers are "guaranteed" that they will not get less for the assets than they paid for them.  There is still a risk of course that the financial institution will go belly up and the contingent shares end up being worthless.  We'll have to trust the Treassury to make deals only with companies that are likely to survive.  Oversight should help here.

    Smells like a "guaranteed".... (none / 0) (#13)
    by kdog on Mon Sep 22, 2008 at 12:44:59 PM EST
    piece of sh*t.

    IF you read on, you see (none / 0) (#26)
    by scribe on Mon Sep 22, 2008 at 01:02:33 PM EST
    that "Contingent shares" is defined:

    (4) DEFINITION.--As used in this subsection [subsection 2(c) of the Act], the term ``contingent share'' means any equity security traded on a national securities exchange.

    In other words, for every dollar of help the government gives, the companies give the government $1.25 (or more, in some cases) of their stock.

    And there is a provision to address them trying to water their stock down, too.


    Incentive (none / 0) (#43)
    by Manuel on Mon Sep 22, 2008 at 01:30:59 PM EST
    That is a great incentive for the companies to sell as little of the debt as they need to remain solvent thus keeping our costs down.  Overall, it looks like the process is working.  Paulson outlined what he wanted.  The Dems have countered.  I don't think Paulson will be averse to the contingent shares idea.  He extracted equity, not to mention an 11% interest rate, from AIG for their bailout.

    The 1.25 rate would mean the (none / 0) (#56)
    by sarcastic unnamed one on Mon Sep 22, 2008 at 03:31:51 PM EST
    gvt is valuing the mortgages as being worth 80% of their face value, or said another way, of the pool of mortgages the gvt would buy they figure 20% are worthless.

    1. Is this realistic?
    2. Is the 1.25 ratio fixed, or can the gvt/us get more stock/$ of bailout?

    read this (none / 0) (#57)
    by Jlvngstn on Mon Sep 22, 2008 at 03:40:08 PM EST
    and I think you will come to agree that a bailout for either side is short sighted.

    I said this before the stimulus and I will say it again, create jobs.  McCain was right when he changed his stance on the fundamentals of the economy being strong inasmuch as the American worker is a hard worker.  Americans took on second jobs in the 80's and 90's to pay their debts and would do so again if only the jobs were there.



    had we done this months ago (none / 0) (#58)
    by Jlvngstn on Mon Sep 22, 2008 at 03:50:57 PM EST
    we might not be here.  Well not as bad anyway.

    jobs (5.00 / 3) (#23)
    by Jlvngstn on Fri Aug 01, 2008 at 11:01:25 AM EST

    will continue to worsen through the end of this year and we will be over 6% easily.  We still have the credit crisis which is separate from the housing crisis that has not flushed out yet.  Our deficit is too high to apply Keynesian principles for a recovery and with higher unemployment and less spending, there will be gov't layoffs as well.  We are in a sour pickle that is moving toward a prolonged recession. Without the 90 billion band aid from the gov't we could call this a recession officially.  they could do 3 more rebates and it won't solve the problems of the economy.  Job creation is the only way to address the ongoing credit/housing crisis and we are cutting jobs at too high a pace.  Job creation programs allow people to work o.t. and simply work which help them pay down their debt which eases the credit crisis.  Without job creation, credit crisis will become much worse and recession will be a long one.  The sickness of the economy is being overshadowed by the steadiness of the market which is stabilized by companies announcing restructures (layoffs) to cut costs and maintain shareholder value.  Look for the market to stumble heavily in Sept and Oct right before the election (more in Oct) and fear the October Monday doomsday scenario.  Had we not gone to war the government ala keynesian philosophy could be investing reserves into infrastructure thus creating millions of jobs and killing the credit crisis in its tracks.  As it stands, we blew that cash and have very limited options to help the american people.  The war was bad on a lot of fronts but the damage it has done to the US financially is bloody awful.  Obama has been overseas building credibility for the debates to come and has some great quotes from foreign dignitaries that he will use in the debates.  He has lost ground because of his being overseas but will regain that and more because he is now safe from foreign policy criticism.  He needs to present a solid economic recovery/job creation program within the next 6 weeks (after all the rebate checks are spent and people are still in debt looking for the right answer which is job creation).  Hillary could help him immensely with that.


    As usual, Leahy's comments worry me (none / 0) (#8)
    by robrecht on Mon Sep 22, 2008 at 12:36:17 PM EST
    Obama didn't say whether these changes should be part of the current bill or addressed in later legislation.

    That may be the crucial question this week: Can Democrats succeed in loading their proposals onto Paulson's runaway legislative train -- or will they be content with promises that their concerns will be addressed soon after?

    Leahy isn't sure how things will work out. But he says Paulson's reputation as a straight shooter means it's more likely that Democrats will trust his assurances.

    "Paulson carries far more credibility than most people in the administration -- apart from [Defense Secretary] Bob Gates," Leahy says.


    More protection (none / 0) (#14)
    by hgardner on Mon Sep 22, 2008 at 12:45:27 PM EST
    the unconscionable mortgage contracts the courts have to enforce are Lochner era.  It is time for a legislative change:

    Help for homeowners must be a strong component of the bailout of Wall Street.  Innocent people borrowed mortgage money they could afford at six percent but could not afford when the ARMs reset at 10 and even 13 percent.  These borrowers were lured into the loans by unscrupulous mortgage brokers and predatory lenders.  Why shouldn't the brokers and lenders have to cough up some of their ill-gotten gains?  The subprime loans did not go bad until Wall Street had sucked every nickel out of hapless borrowers.  Then the borrowers started to default.  The lenders have been handsomely rewarded by unconscionable interest rates for the risks they took.  When the risk came home to roost the lenders now ask for a handout.  The borrowers who were their victims should receive some benefit.  

    I believe any bailout must include help for Wall Street's victims as well as the predators.

    1.    By assuming the bad loans, the Government is giving the banks 100% on the dollar.  None of the banks can possibly expect that.  The banks should pay the Government 20 to 50 cents on the dollar to take the loans.

    2.    Homeowners either in default or behind in their mortgage payments, or whose payments equal more than a third of their monthly incomes, with ARMs occupying the homes so financed should be able to reset their interest rates to 5 or 6 percent without penalty.  But, those who received cash out at the settlement that created the ARM mortgage should have to repay 10 percent of the cash they received to receive a reset.  This would be restricted to those whose ARM mortgage is on their primary or only residence.  

    3.    Regulation needs to include mortgage brokers as well as lenders.  

    4.    We seem to be in a Lochner era for borrowers who are held to the contracts they signed, no matter how unconscionable.  Congress should give the borrowers a fair shot at solving their problems by halting the spiral upwards of interest rates.  

    The right will save us (none / 0) (#22)
    by Demi Moaned on Mon Sep 22, 2008 at 12:55:58 PM EST
    See Greenwald's latest. After noting the number and prominence of voices on the right decrying Paulson's plan, he makes the obvious point:
    Right-wing opposition to the Paulson plan is vital for having any meaningful chance to stop it. Does anyone have any confidence at all in the Democrats' willingness and/or ability to impede this bailout train if the Bush administration and the Right were vigorously behind it, warning the nation of impending doom unless we submit to vast, unchecked government power of the type Henry Paulson is demanding?

    Dick Shelby helpful on CNBC this am (none / 0) (#25)
    by robrecht on Mon Sep 22, 2008 at 01:02:30 PM EST
    Also see Greenwald yesterday. (none / 0) (#40)
    by oldpro on Mon Sep 22, 2008 at 01:18:45 PM EST
    I assume the assets/securities will be (none / 0) (#24)
    by Green26 on Mon Sep 22, 2008 at 01:01:17 PM EST
    purchased at varying prices--none of which would be face value or 100 cents on the dollar. The problem is that the market (and market price) for the assets/securities has dropped very low, and somewhat into a free fall.

    That doesn't mean the assets/securities are worthless. In fact, the assets/securities are worth a considerable amount--because the underlying mortgages are still worth a considerable amount. I believe the problem is that no one knows what the underlying mortgages are worth--given declining housing prices, increased mortgage defaults, and huge market uncertainty. And no one (or few) want the assets/securites.

    Depending how the assets/securities are priced/purchased, it's possible that the government will ultimately make money on many of the asset/security purchases.

    Republican argument (none / 0) (#27)
    by bjorn on Mon Sep 22, 2008 at 01:03:13 PM EST
    Republican argument

    As a neophyte, I read this and wonder what is true.  This article lays blame at the feet of Clinton, Dodd, Obama etc for blocking a bill co-sponsored by McCain in 2005 to reform Fannie and Freddie. They are arguing that Fannie and Freddie collapse has caused all the other problems and their collapse could have been averted had this reform bill passed in 2005.
    What say you all?  Is this crap?

    Yes. (none / 0) (#29)
    by scribe on Mon Sep 22, 2008 at 01:05:06 PM EST
    then what is the counter (none / 0) (#33)
    by bjorn on Mon Sep 22, 2008 at 01:08:03 PM EST
    argument for all my Republican friends who believe the crap line?

    Not printable (none / 0) (#52)
    by scribe on Mon Sep 22, 2008 at 02:09:20 PM EST
    but along the lines of "it's all your fault, having been in charge of the economy, presidency, and both houses when all of this got started (tax cuts in 2001-2002, end of tech bubble in 2001, purported "biotech is the next internet" line of crap being pitched in 2002) and, selling everything off to any furriner who'll loan money."

    If they don't like it, they should be willing to step outside to defend it.  Otherwise, they should shut up.


    Well said Don... (none / 0) (#35)
    by kdog on Mon Sep 22, 2008 at 01:10:31 PM EST
    what is the sense of bailing out an unsustainable paper economy?  To squeak by for another 20 years and pass the buck to the next generation?

    How do you differentiate (none / 0) (#48)
    by sarcastic unnamed one on Mon Sep 22, 2008 at 02:02:25 PM EST
    between those defaulting borrowers who are actual victims of predatory lending and those who simply f'd up or had some bad luck?

    That's Why Bankruptcy Courts May Be... (5.00 / 1) (#53)
    by santarita on Mon Sep 22, 2008 at 02:48:22 PM EST
    the best bet for dealing with loan modifications.

    Sounds reasonable. (none / 0) (#55)
    by sarcastic unnamed one on Mon Sep 22, 2008 at 03:23:47 PM EST
    pay provision? (none / 0) (#63)
    by espeaks on Tue Sep 23, 2008 at 02:49:22 AM EST
    Dodd's plan should include a pay provision for bailed out firms to move onto the Federal GS(General Schedule) pay scale.

    Read Anglachel's Journal (none / 0) (#64)
    by hairspray on Tue Sep 23, 2008 at 03:07:36 PM EST
    about the Glass Steagall reversal in 1998.