http://www.nytimes.com/2008/10/04/business/economy/04bailout.html?th=&emc=th&pagewanted=print
All,
Imagine trying to stop the massive flooding of New Orleans after Hurricane Katrina with a hundred buckets and we had to collectively pay for all the damage of the flooding that was not absorbed or stopped by the buckets--that's what this utterly contemptible bailout plan is actually akin to. The simple fact of the matter is that the worse is yet to come and it will be far sooner than anyone presently thinks....
Kofi
October 4, 2008
Bailout Plan Wins Approval; Democrats Vow Tighter Rules
By DAVID M. HERSZENHORN
New York Times
WASHINGTON — After the House reversed course and gave final approval to the $700 billion economic bailout package, President Bush quickly signed it into law on Friday, authorizing the Treasury to undertake what could become the most expensive government intervention in history.
But even as Mr. Bush declared that the measure would “help prevent the crisis on Wall Street from becoming a crisis in communities across our country,” Congressional Democrats said that it was only a first step and pledged to carry out a sweeping overhaul of the nation’s financial regulatory system.
The final tally in the House was 263 to 171, with 91 Republicans joining 172 Democrats in favor. That was a wider bipartisan majority than vote-counters in both parties had expected, completing a remarkable turnabout from Monday, when the House defeated an earlier version of the bill by 228 to 205.
The financial markets, however, were not enthusiastic. Already weighed down by another round of bleak economic data, including a report showing that 159,000 jobs were lost in September, the Dow fell 157 points to close at 10,325, or nearly 818 points lower than when the week began, before the House’s initial rejection of the bailout.
Some measures of the credit markets improved after the bill was approved, but only modestly. Analysts said it was too soon to tell whether borrowing rates — the interest rates banks charge each other for loans, and a key indicator of the flow of credit — would fall.
The change in course by the House was prompted by fears of a global economic meltdown, and by old-fashioned political inducements added by the Senate: a portfolio of $150 billion in popular tax provisions, including credits for the production of solar, wind and other renewable energy, and an adjustment to spare middle-class families from paying the alternative minimum tax.
In the end, 33 Democrats and 24 Republicans who had voted no on Monday switched sides on Friday to support the plan. Both Mr. Obama and his Republican rival, Senator John McCain, voted for the measure when the Senate approved it on Wednesday, and both hailed Friday’s outcome.
Mr. McCain said that lawmakers had acted “in the best interests of the nation,” while Mr. Obama warned that “a long and difficult road to recovery” might still lie ahead.
In a sign of the urgency surrounding the economic rescue effort, Congressional staff rushed the newly printed legislation into a news conference where Democratic leaders gathered after the vote. Speaker Nancy Pelosi, of California, signed it at 2 p.m., and it was sent to the White House for Mr. Bush’s signature.
Appearing in the Rose Garden, Mr. Bush praised Congress for acting just two weeks after the Treasury secretary, Henry M. Paulson Jr., requested the emergency bailout legislation with a warning that the American economy was at risk of the worst economic collapse since the Depression.
“We have shown the world that the United States will stabilize our financial markets and maintain a leading role in the global economy,” Mr. Bush said.
But it was a hollow victory for the administration, which after long favoring a hands-off approach toward the financial industry has found itself interceding repeatedly this year to avert one calamity after another.
Ms. Pelosi and other Democrats, who expect to widen their majority in Congress in the November elections, said they intended to tighten controls.
“High-fliers on Wall Street will no longer be able to jeopardize that personal economic security of Americans,” Ms. Pelosi said, “because of the bright light of scrutiny, accountability and the attention given under regulatory reform.”
Representative Barney Frank, Democrat of Massachusetts and chairman of the Financial Services Committee, said: “We will be back next year to do some serious surgery on the financial structure.”
The Republican leader, Representative John A. Boehner of Ohio, had urged his colleagues to vote yes. “We know if we do nothing this crisis is likely to worsen and put us in an economic slump the likes of which we have never seen,” he said. “I am going to vote for this bill because I think it’s in the best interests of the American people.”
Opponents of the bailout called it a costly Band-Aid that did not address the core problems in the financial system. “Some things have changed in this bill but taxpayers will still be picking up the tab for Wall Street’s party,” said Representative Marilyn Musgrave, Republican of Colorado. “I am voting against this today because it’s not the best bill. It’s the quickest bill. Taxpayers for generations will pay for our haste and there is no guarantee that they will ever see the benefits.”
Among House Democrats as well as Republicans, many lawmakers facing the toughest challenges for re-election remained in the no column. Those with easier races were more likely to switch.
Many said they agonized over the decision amid a torrent of calls from constituents. Several who switched to yes cited a provision added by the Senate increasing the amount of savings insured by the Federal government to $250,000 per account, from $100,000.
Fears about the economy also motivated support. “Nobody in East Tennessee hates the fact more than me that I am going to vote yes today after voting no on Monday,” Representative Zach Wamp, a Republican, said.
“Monday I cast a blue-collar vote for the American people,” he continued. “Today I am going to cast a red, white and blue-collar vote with my hand over my heart for this country, because things are really bad and we don’t have any choice.”
Several Democrats in the Congressional Black Caucus said they were persuaded to support the bill by Mr. Obama.
Representatives Elijah E. Cummings and Donna F. Edwards, both of Maryland, said they had each spoken to Mr. Obama who helped persuade them to support the bill, in part by assuring them that he would work to achieve a goal that Democrats gave up during negotiations: a change in bankruptcy laws to let judges modify first mortgages.
Mr. Obama, speaking in Abington, Pa., said he had urged lawmakers from both parties to “not make the same mistake twice.” But he warned that passage of the measure should be just “the beginning of a long-term rescue plan for our middle class.”
Mr. McCain, speaking in Flagstaff, Ariz., warned that the bill was not perfect and there was more to be done. “It is an outrage that it’s even necessary,” Mr. McCain said. “But we must stop the damage to our economy done by corrupt and incompetent practices on Wall Street and in Washington.” Mr. McCain said he spoke to House Republicans before Friday’s vote and urged them to approve the bill.
Friday’s vote capped an extraordinary two-week final stretch for the 110th Congress. Lawmakers, eager to get home for the fall campaign season, had intended to wrap up by adopting a budget bill to finance government operations through early March.
Instead, after dealing with the budget, they found themselves still in Washington, just five weeks before Election Day, facing the most important vote of the year — the most important vote of their lives, many lawmakers said — and under extreme pressure by the White House, the presidential nominees, and Congressional leaders of both parties to make a quick decision.
Supporters said the bailout was needed to prevent economic collapse; opponents said it was hasty, ill conceived and risked too much taxpayer money to help Wall Street tycoons, while providing no guarantees of success. The rescue plan allows the Treasury to buy troubled securities from financial firms in an effort to ease a deepening credit crisis that is choking off business and consumer loans, the lifeblood of the economy, and contributing to a string of bank failures.
Officials say the final cost of the bailout will be far less than $700 billion because the government will resell the assets that it buys.
The final agreement disburses the money in parts, with Congress able to block the second $350 billion. It also provides for tighter oversight of the program by two boards, and requires the government to do more to prevent home foreclosures. Lawmakers also included efforts to restrict so-called golden parachute retirement plans for some executives whose firms seek help, and a provision allowing the government to recoup any losses after five years by assessing the financial industry.
Reporting was contributed by Robert Pear and Carl Hulse in Washington; Steven Lee Myers in Abington, Pa.; and Michael Cooper in Flagstaff, Ariz.
All,
Imagine trying to stop the massive flooding of New Orleans after Hurricane Katrina with a hundred buckets and we had to collectively pay for all the damage of the flooding that was not absorbed or stopped by the buckets--that's what this utterly contemptible bailout plan is actually akin to. The simple fact of the matter is that the worse is yet to come and it will be far sooner than anyone presently thinks....
Kofi
October 4, 2008
Bailout Plan Wins Approval; Democrats Vow Tighter Rules
By DAVID M. HERSZENHORN
New York Times
WASHINGTON — After the House reversed course and gave final approval to the $700 billion economic bailout package, President Bush quickly signed it into law on Friday, authorizing the Treasury to undertake what could become the most expensive government intervention in history.
But even as Mr. Bush declared that the measure would “help prevent the crisis on Wall Street from becoming a crisis in communities across our country,” Congressional Democrats said that it was only a first step and pledged to carry out a sweeping overhaul of the nation’s financial regulatory system.
The final tally in the House was 263 to 171, with 91 Republicans joining 172 Democrats in favor. That was a wider bipartisan majority than vote-counters in both parties had expected, completing a remarkable turnabout from Monday, when the House defeated an earlier version of the bill by 228 to 205.
The financial markets, however, were not enthusiastic. Already weighed down by another round of bleak economic data, including a report showing that 159,000 jobs were lost in September, the Dow fell 157 points to close at 10,325, or nearly 818 points lower than when the week began, before the House’s initial rejection of the bailout.
Some measures of the credit markets improved after the bill was approved, but only modestly. Analysts said it was too soon to tell whether borrowing rates — the interest rates banks charge each other for loans, and a key indicator of the flow of credit — would fall.
The change in course by the House was prompted by fears of a global economic meltdown, and by old-fashioned political inducements added by the Senate: a portfolio of $150 billion in popular tax provisions, including credits for the production of solar, wind and other renewable energy, and an adjustment to spare middle-class families from paying the alternative minimum tax.
In the end, 33 Democrats and 24 Republicans who had voted no on Monday switched sides on Friday to support the plan. Both Mr. Obama and his Republican rival, Senator John McCain, voted for the measure when the Senate approved it on Wednesday, and both hailed Friday’s outcome.
Mr. McCain said that lawmakers had acted “in the best interests of the nation,” while Mr. Obama warned that “a long and difficult road to recovery” might still lie ahead.
In a sign of the urgency surrounding the economic rescue effort, Congressional staff rushed the newly printed legislation into a news conference where Democratic leaders gathered after the vote. Speaker Nancy Pelosi, of California, signed it at 2 p.m., and it was sent to the White House for Mr. Bush’s signature.
Appearing in the Rose Garden, Mr. Bush praised Congress for acting just two weeks after the Treasury secretary, Henry M. Paulson Jr., requested the emergency bailout legislation with a warning that the American economy was at risk of the worst economic collapse since the Depression.
“We have shown the world that the United States will stabilize our financial markets and maintain a leading role in the global economy,” Mr. Bush said.
But it was a hollow victory for the administration, which after long favoring a hands-off approach toward the financial industry has found itself interceding repeatedly this year to avert one calamity after another.
Ms. Pelosi and other Democrats, who expect to widen their majority in Congress in the November elections, said they intended to tighten controls.
“High-fliers on Wall Street will no longer be able to jeopardize that personal economic security of Americans,” Ms. Pelosi said, “because of the bright light of scrutiny, accountability and the attention given under regulatory reform.”
Representative Barney Frank, Democrat of Massachusetts and chairman of the Financial Services Committee, said: “We will be back next year to do some serious surgery on the financial structure.”
The Republican leader, Representative John A. Boehner of Ohio, had urged his colleagues to vote yes. “We know if we do nothing this crisis is likely to worsen and put us in an economic slump the likes of which we have never seen,” he said. “I am going to vote for this bill because I think it’s in the best interests of the American people.”
Opponents of the bailout called it a costly Band-Aid that did not address the core problems in the financial system. “Some things have changed in this bill but taxpayers will still be picking up the tab for Wall Street’s party,” said Representative Marilyn Musgrave, Republican of Colorado. “I am voting against this today because it’s not the best bill. It’s the quickest bill. Taxpayers for generations will pay for our haste and there is no guarantee that they will ever see the benefits.”
Among House Democrats as well as Republicans, many lawmakers facing the toughest challenges for re-election remained in the no column. Those with easier races were more likely to switch.
Many said they agonized over the decision amid a torrent of calls from constituents. Several who switched to yes cited a provision added by the Senate increasing the amount of savings insured by the Federal government to $250,000 per account, from $100,000.
Fears about the economy also motivated support. “Nobody in East Tennessee hates the fact more than me that I am going to vote yes today after voting no on Monday,” Representative Zach Wamp, a Republican, said.
“Monday I cast a blue-collar vote for the American people,” he continued. “Today I am going to cast a red, white and blue-collar vote with my hand over my heart for this country, because things are really bad and we don’t have any choice.”
Several Democrats in the Congressional Black Caucus said they were persuaded to support the bill by Mr. Obama.
Representatives Elijah E. Cummings and Donna F. Edwards, both of Maryland, said they had each spoken to Mr. Obama who helped persuade them to support the bill, in part by assuring them that he would work to achieve a goal that Democrats gave up during negotiations: a change in bankruptcy laws to let judges modify first mortgages.
Mr. Obama, speaking in Abington, Pa., said he had urged lawmakers from both parties to “not make the same mistake twice.” But he warned that passage of the measure should be just “the beginning of a long-term rescue plan for our middle class.”
Mr. McCain, speaking in Flagstaff, Ariz., warned that the bill was not perfect and there was more to be done. “It is an outrage that it’s even necessary,” Mr. McCain said. “But we must stop the damage to our economy done by corrupt and incompetent practices on Wall Street and in Washington.” Mr. McCain said he spoke to House Republicans before Friday’s vote and urged them to approve the bill.
Friday’s vote capped an extraordinary two-week final stretch for the 110th Congress. Lawmakers, eager to get home for the fall campaign season, had intended to wrap up by adopting a budget bill to finance government operations through early March.
Instead, after dealing with the budget, they found themselves still in Washington, just five weeks before Election Day, facing the most important vote of the year — the most important vote of their lives, many lawmakers said — and under extreme pressure by the White House, the presidential nominees, and Congressional leaders of both parties to make a quick decision.
Supporters said the bailout was needed to prevent economic collapse; opponents said it was hasty, ill conceived and risked too much taxpayer money to help Wall Street tycoons, while providing no guarantees of success. The rescue plan allows the Treasury to buy troubled securities from financial firms in an effort to ease a deepening credit crisis that is choking off business and consumer loans, the lifeblood of the economy, and contributing to a string of bank failures.
Officials say the final cost of the bailout will be far less than $700 billion because the government will resell the assets that it buys.
The final agreement disburses the money in parts, with Congress able to block the second $350 billion. It also provides for tighter oversight of the program by two boards, and requires the government to do more to prevent home foreclosures. Lawmakers also included efforts to restrict so-called golden parachute retirement plans for some executives whose firms seek help, and a provision allowing the government to recoup any losses after five years by assessing the financial industry.
Reporting was contributed by Robert Pear and Carl Hulse in Washington; Steven Lee Myers in Abington, Pa.; and Michael Cooper in Flagstaff, Ariz.
http://www.nytimes.com/2008/10/03/opinion/03krugman.html?em
All,
The very grim reality...and it's only going to get worse...
Kofi
October 3, 2008
OP-ED COLUMNIST
Edge of the Abyss
By PAUL KRUGMAN
New York Times
As recently as three weeks ago it was still possible to argue that the state of the U.S. economy, while clearly not good, wasn’t disastrous — that the financial system, while under stress, wasn’t in full meltdown and that Wall Street’s troubles weren’t having that much impact on Main Street.
But that was then.
The financial and economic news since the middle of last month has been really, really bad. And what’s truly scary is that we’re entering a period of severe crisis with weak, confused leadership.
The wave of bad news began on Sept. 14. Henry Paulson, the Treasury secretary, thought he could get away with letting Lehman Brothers, the investment bank, fail; he was wrong. The plight of investors trapped by Lehman’s collapse — as an article in The Times put it, Lehman became “the Roach Motel of Wall Street: They checked in, but they can’t check out” — created panic in the financial markets, which has only grown worse as the days go by. Indicators of financial stress have soared to the equivalent of a 107-degree fever, and large parts of the financial system have simply shut down.
There’s growing evidence that the financial crunch is spreading to Main Street, with small businesses having trouble raising money and seeing their credit lines cut. And leading indicators for both employment and industrial production have turned sharply worse, suggesting that even before Lehman’s fall, the economy, which has been sagging since last year, was falling off a cliff.
How bad is it? Normally sober people are sounding apocalyptic. On Thursday, the bond trader and blogger John Jansen declared that current conditions are “the financial equivalent of the Reign of Terror during the French Revolution,” while Joel Prakken of Macroeconomic Advisers says that the economy seems to be on “the edge of the abyss.”
And the people who should be steering us away from that abyss are out to lunch.
The House will probably vote on Friday on the latest version of the $700 billion bailout plan — originally the Paulson plan, then the Paulson-Dodd-Frank plan, and now, I guess, the Paulson-Dodd-Frank-Pork plan (it’s been larded up since the House rejected it on Monday). I hope that it passes, simply because we’re in the middle of a financial panic, and another no vote would make the panic even worse. But that’s just another way of saying that the economy is now hostage to the Treasury Department’s blunders.
For the fact is that the plan on offer is a stinker — and inexcusably so. The financial system has been under severe stress for more than a year, and there should have been carefully thought-out contingency plans ready to roll out in case the markets melted down. Obviously, there weren’t: the Paulson plan was clearly drawn up in haste and confusion. And Treasury officials have yet to offer any clear explanation of how the plan is supposed to work, probably because they themselves have no idea what they’re doing.
Despite this, as I said, I hope the plan passes, because otherwise we’ll probably see even worse panic in the markets. But at best, the plan will buy some time to seek a real solution to the crisis.
And that raises the question: Do we have that time?
A solution to our economic woes will have to start with a much better-conceived rescue of the financial system — one that will almost surely involve the U.S. government taking partial, temporary ownership of that system, the way Sweden’s government did in the early 1990s. Yet it’s hard to imagine the Bush administration taking that step.
We also desperately need an economic stimulus plan to push back against the slump in spending and employment. And this time it had better be a serious plan that doesn’t rely on the magic of tax cuts, but instead spends money where it’s needed. (Aid to cash-strapped state and local governments, which are slashing spending at precisely the worst moment, is also a priority.) Yet it’s hard to imagine the Bush administration, in its final months, overseeing the creation of a new Works Progress Administration.
So we probably have to wait for the next administration, which should be much more inclined to do the right thing — although even that’s by no means a sure thing, given the uncertainty of the election outcome. (I’m not a fan of Mr. Paulson’s, but I’d rather have him at the Treasury than, say, Phil “nation of whiners” Gramm.)
And while the election is only 32 days away, it will be almost four months until the next administration takes office. A lot can — and probably will — go wrong in those four months.
One thing’s for sure: The next administration’s economic team had better be ready to hit the ground running, because from day one it will find itself dealing with the worst financial and economic crisis since the Great Depression.
Copyright 2008 The New York Times Company
