Pelosi Announces Bailout Deal Reached

Just after midnight on Saturday, House Speaker Nancy Pelosi announced a bailout deal has been reached.

The plan calls for the Treasury Department to buy deeply distressed mortgage-backed securities and other bad debts held by banks and other investors. The money should help troubled lenders make new loans and keep credit lines open. The government would later try to sell the discounted loan packages at the best possible price.

At the insistence of House Republicans, some money would be devoted to a program that would encourage holders of distressed mortgage-backed securities to keep them and buy government insurance to cover defaults.


The legislation would place "reasonable" limits on severance packages for executives of companies that benefit from the rescue plan, said a senior administration official who was authorized to speak only on background. It would affect fired executives of financial firms, and executives of firms that go bankrupt. Some of the provisions would be retroactive and some prospective, the official said.

Other details:

Also, the government would receive stock warrants in return for the bailout relief, giving taxpayers a chance to share in financial companies' future profits.

To help struggling homeowners, the plan would require the government to try renegotiating the bad mortgages it acquires with the aim of lowering borrowers' monthly payments so they can keep their homes.

I have no idea what any of this means, but the language sounds like smoke and mirrors to me. It A law that "encourages," requires the Government "to try" and has "the aim of" ? Where's the teeth?

Is it any different in effect than what Bush proposed in the first place?

Despite the changes made during an intense week of negotiations, the heart of the program remains Bush's original idea: To have the government spend billions of dollars to buy mortgage-backed securities whose value has plummeted as hundreds of thousands of Americans have defaulted on their home loans.


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  • Display: Sort:
    "Bush's original idea"? Does anyone (5.00 / 1) (#4)
    by tigercourse on Sun Sep 28, 2008 at 01:42:58 AM EST
    believe for a second that George Bush had anything to do with putting together Paulson's plan?

    I'm glad they did this before Monday.

    Quite (none / 0) (#6)
    by andgarden on Sun Sep 28, 2008 at 01:44:56 AM EST
    I'm really scared about the banking system. I'll bet you anything that $100K+ depositors at iffy banks (any banks, frankly) are running around trying to secure their money.

    I'm scared to find out how much money has flowed out of Wachovia in the last month. (My bank, but I'm personally well under the limit. .. )


    Wachovia is my bank as well. I'm not sure (none / 0) (#9)
    by tigercourse on Sun Sep 28, 2008 at 01:48:31 AM EST
    it will be our bank for long. If the deal hadn't gone through, I'm pretty sure it would have been taken over by Citi or Wells Fargo. It still might.

    I hope Citi takes it, frankly (none / 0) (#12)
    by andgarden on Sun Sep 28, 2008 at 01:51:53 AM EST
    I pine for my poor CoreStates.

    That would be just an absolutely (none / 0) (#16)
    by tigercourse on Sun Sep 28, 2008 at 02:17:17 AM EST
    huge bank. It would mean a good 3 trillion in assets. "Too big to fail" would be a huge understatement.

    My suspicion is (none / 0) (#17)
    by andgarden on Sun Sep 28, 2008 at 02:23:10 AM EST
    that it would make room for some smaller competitors in the next five years.

    What it sounds like to me? (5.00 / 1) (#5)
    by nycstray on Sun Sep 28, 2008 at 01:44:09 AM EST
    102 plus pages of gibberish for the taxpayer and 700 billion for Wall Street. AKA, we more than likely got screwed.

    Forget the freakin' ponies! I want a house!!!

    I read that there were negotiations (5.00 / 2) (#15)
    by Faust on Sun Sep 28, 2008 at 02:09:27 AM EST
    to make it so that the money was given out in installments with the final 350 Billion requiring authorization from congress. Hopefully that was put in as well.

    I hope that was put in place. I just want them to do the minimum for now until after the elections. Then maybe, just maybe, we'll get a better sense of what is going on.

    Just remember though folks, however much this particular bill screws us, we've been getting raked over the coals for a long damn time.

    Iraq: 1,000,000,000,000 dollars.

    Bailout 1,000,000,000,000 dollars. (remember they've already bailed out other companies here)

    Deficit: Skyrocketing

    Economy: In recession

    Heal Care: What's that?

    Military: Overstretched

    American Reputation: In shambles.

    Value of the Dollar: LOL.

    We are at the tail end of the worst administration in the history of the United States.

    This bailout is just two feet of icing on the $hitcake.

    it may satisfy (5.00 / 1) (#19)
    by cpinva on Sun Sep 28, 2008 at 04:00:07 AM EST
    dr. krugman (who i very much respect), but it doesn't satisfy me, not one iota. it's essentially a "gimmee" for the very same "greed taken to levels not seen on planet earth, ever" people that brought us this mess to begin with.

    if you, as ceo, took actions (or conversely, failed to take actions) resulting in the bankruptcy of your company, why the hell should you be compensated for that? any idiot can do that, even me, or the president.

    of course, by the same token, the heads of the various federal and state regulatory agencies, charged with oversight of these same firms, who failed to do their jobs, should be booted to the curb, now, right this very second!

    that would also require booting the man who gave the go ahead to, essentially, de-regulate the industry, by letting everyone know they shouldn't waste good time and money actually enforcing the rules.

    any guesses on who that might be?

    But does it really help homeowners facing foreclosure now?

    no, not one bit. does it provide a job for the unemployed, about to lose their home because they can't make the payments? nope. and frankly, there shouldn't be.

    is there any language mandating that troubled loans be restructured, with longer terms and lower interest rates, and abatement of penalties? nope, not that i saw.

    to be harshly blunt, this is a fiscal stew of the industry's own making, complicit with the agencies charged with regulating them.

    the non-performing loans aren't non-performing because the interest rate is too high, it's so because the debtor has no income. this bill does nothing to change that.

    most of those loans were made bypassing the normal checks & balances, put in place since the 30's to keep this sort of thing from happening. the bill doesn't, and can't, address those loans.

    the only ones to benefit from this legislation are the investors and the banks, not the taxpay or the unfortunate homeowner.

    during the last great banking scandal, the S & L and commercial bank collapse of the 80's (remember "the keating 5"?), many of these same chicken littles were running around swearing that the sky was, indeed, falling. they averred that, absent huge federal loans, the entire economy would collapse in just a big, ol heap.

    strangely, it didn't. the RTC was established, to sort out and parcel out the assets of the worst offenders (my mortgage was among them, though it tooks several phone calls to find that out), and life went on.

    as i recall, dr. krugman was a huge supporter of that plan, for the very reasons i am vigorously opposed to the current proposed one. why he feels this is the best that can be done is a mystery to me.

    i could go on, but i think you get my drift.

    Two short weeks ago (none / 0) (#25)
    by ruffian on Sun Sep 28, 2008 at 06:40:13 AM EST
    these same politicians who hammered out this deal and are so sure it is the right thing to do NOW, right away, no time to lose....

    Had NO IDEA any of this was needed.  All it took was bankers threatening to stop loaning money to a populace already so deep in debt that the economy could fail from that alone.

    Mostly this same  Congress gave us the Patriot Act, the Iraq war, the FISA bill, and on and on...and we are trusting them to get this right?  In a week?

    I'm sorry I only get to vote against one Congress-sucker this year.


    It Well Turn Out . . . (5.00 / 1) (#27)
    by Doc Rock on Sun Sep 28, 2008 at 07:06:38 AM EST
    . . . to be a windfall for the Giuliani's of this world who have nothing at stake, but who'll pick over the bones and drain off funds from those with a dog in the fight.  It'll turn out into another Iraq with billions disappearing.

    This part (none / 0) (#1)
    by andgarden on Sun Sep 28, 2008 at 01:37:58 AM EST
    the government would receive stock warrants in return for the bailout relief, giving taxpayers a chance to share in financial companies' future profits.
    would appear to satisfy Krugman.

    They have to do it now, because it looks very much like the financial crisis is going global.

    I'm sorry, but . . . (5.00 / 1) (#7)
    by nycstray on Sun Sep 28, 2008 at 01:45:42 AM EST
    why do I find this funny?

    giving taxpayers a chance to share in financial companies' future profits.

    that sounds good (none / 0) (#2)
    by Jeralyn on Sun Sep 28, 2008 at 01:39:04 AM EST
    Assuming there are future profits.

    But does it really help homeowners facing foreclosure now?


    The Times reports: (none / 0) (#3)
    by andgarden on Sun Sep 28, 2008 at 01:41:35 AM EST
    it requires the government to use its new role as owner of distressed mortgage-backed securities to make more aggressive efforts to prevent home foreclosures.


    Do I have any idea what that really means? No.


    that's the language problem (none / 0) (#8)
    by Jeralyn on Sun Sep 28, 2008 at 01:45:43 AM EST
    I have with it. "make more aggressive efforts."
    Most of the laws I deal with tell people what they can do, can't do and will do. Very few say "try your best." But again, it's not my field.

    "try your best." (none / 0) (#11)
    by nycstray on Sun Sep 28, 2008 at 01:50:43 AM EST
    after listening to Bush whine "It's haaard work!" for the past 7 yrs, not real inspiring.

    Without aggressive attempts to straighten out Main Street built in, I don't see things turning around. What's going to change aside from the fact we literally bought WS some time?


    Thinking good thoughts is not enough (none / 0) (#26)
    by JSN on Sun Sep 28, 2008 at 07:01:26 AM EST
    they have to become "good deed doers".

    It means (none / 0) (#10)
    by Steve M on Sun Sep 28, 2008 at 01:48:45 AM EST
    something along the lines of HOLC, although who knows how far it goes.

    And how long it takes to put something (none / 0) (#13)
    by nycstray on Sun Sep 28, 2008 at 01:52:32 AM EST
    in place. Aren't they all going "home" now?

    Hope so (none / 0) (#14)
    by andgarden on Sun Sep 28, 2008 at 01:54:33 AM EST
    And of course, by the time we see the legislative language, the House will already be voting on the rule.

    I think the belief herre, is that (none / 0) (#31)
    by Radix on Sun Sep 28, 2008 at 10:06:46 AM EST
    since the government is going to purchase these defaulting loans, they automatically be able to do as they see fit with them. That is to say, the congress then can restructures those that can be restructured when practicable.

    Apparently this whole process is operating... (none / 0) (#18)
    by EL seattle on Sun Sep 28, 2008 at 02:45:56 AM EST
    ...strictly on a need to know basis.   And the public doesn't need to know, I guess.

    House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.) said the deal still had to be "committed to paper,"a process that will continue throughout the night, with an eye toward a formal announcement Sunday.

    Okay, I understand that they want to hold off on the "official release" until all of the details are properly spelled out.  But why can't they release/post an official statement about what the proposal contains?  

    The various media reports aren't just making up all of the details here (I hope), so there must be an "official statement" or "talking point list" that's going out to the press.  Doesn't the public deserve to get a complete copy of that statement?  So they can read it for themselves, like, right away?  Something that's a bit more complete and direct than a busy reporter's selective money quotes and general paraphrases?

    I think so, anyway.


    Looks like the mortgage cram-down lost. Surprise. (none / 0) (#20)
    by clio on Sun Sep 28, 2008 at 05:19:16 AM EST
    And who defines "reasonable limitations" on executive salaries?  Me or them?

    Sounds like the same ol', same ol'
    Steak for the fatcats, scraps for the rest of us.
    And I'll bet the majority of House Republicans, not to mention McCain, will still vote against this, blaming the Dems for a Wall Street give-away.

    The executive (none / 0) (#22)
    by Ga6thDem on Sun Sep 28, 2008 at 06:05:51 AM EST
    salary part looks like it has huge loopholes. Only the ones that went bankrupt? I guess if you're company is just on the verge of bankruptcy you can still collect your golden parachute?

    The same people who've always (none / 0) (#32)
    by Radix on Sun Sep 28, 2008 at 10:08:55 AM EST
    defined CEO's salaries, of course, the CEO's.

    Jeralyn (none / 0) (#21)
    by Ga6thDem on Sun Sep 28, 2008 at 06:04:09 AM EST
    I'm with you on this. The language sounds like weak tea to me. They only have to "try" to do something. Heck, IMO, that means that they can make contact once and put it down that they "tried".

    Since I have absolutely NO faith in Pelosi and her ability to stand up for anything I have to wonder if this bill will really do anything at all.

    So we have these folks (none / 0) (#23)
    by alsace on Sun Sep 28, 2008 at 06:09:55 AM EST
    who lost their depositors' money, and their shareholders' money. The "plan" is to give them taxpayers' money. Third time's the charm, I suppose...

    The theme song from "The Sting" (none / 0) (#24)
    by ruffian on Sun Sep 28, 2008 at 06:23:21 AM EST
    keeps playing in my head.  And it's not because Paul Newman died.

    I wonder. . . (none / 0) (#28)
    by LarryInNYC on Sun Sep 28, 2008 at 07:34:27 AM EST
    The money should help troubled lenders make new loans and keep credit lines open.

    why it's believed that new loans and open credit lines will be a natural result of the bailout.

    If I were the (new) management of these companies I'd be extraordinarily shy of lending any money to anyone.  Certainly it would be a while before I got near anything with the word "mortgage" attached to it.

    Exactly (none / 0) (#29)
    by ruffian on Sun Sep 28, 2008 at 08:54:53 AM EST
    New home loans will start being written when the price of homes and the income of people who want to buy them get back in line, and not before.  And that is as it should be.  Are we bailing out banks so they can write more bad loans?

    Thoughts? I have some (none / 0) (#33)
    by Romberry on Sun Sep 28, 2008 at 07:09:27 PM EST
    First and foremost, this STINKS! Once again Bush says "Jump!" and Dems response is "How high?"

    This "bailout" is nothing of the sort and just like every other "last emergency measure to end this crisis" which has been taken over the course of the last year, it will not work.

    The "deal" calls for taxpayers to be on the hook not just for mortgages but for "mortgage related assets". (Hmmm....weapons of mass destruction related programs sounds sort of familiar, yes?) What is a "mortgage related asset"? Well...that's a good question, isn't it?

    As has been pointed out time and again, the only way this plan can "help" at all is through recapitalizing the banks. And the ONLY way this plan can recapitalize the banks is to OVERPAY for mortgages and "mortgage related assets" far beyond what these "assets" are worth on the open market.

    We have just been screwed. And Dems went along with it. Again.

    What next? Well, we'll get a month (or three or six) of "relief" before the very fundamental nature of the problem takes over and the crisis comes back bigger and stronger than before. And now that the precedent has been set for taxpayers to frickin bail out Wall Street...well...they'll be back.

    Wall St, Dems and Republicans are using taxpayers as a lifeboat. Everyone in the water! There are rich people we need to keep dry!