I've been watching the debate on CSPAN, and as of now, HR 3997 looks like it's just failed, unless this is some weird procedural vote I don't understand. Nays won 228 to 205, with 1 vote still uncounted. The markets just plunged, with the NASDAQ and the S&P both down more than 6%.
Democrats voted for it pretty narrowly -- 140 to 95. The Republicans shot it down 65 to 133. I find it hard to believe that they're voting their conscience; they're voting their electoral interest in November. I hope their constituencies enjoy the bank panic.
Actually, what I hope is that I'm wrong, we don't need a bailout, and after a period of liquidation, everything will settle down. If so, I will happily confess my error. But I'm very much afraid that I am not wrong, and things are about to get pretty grim.
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You may or may not be wrong regarding the need for A bailout, but that does not mean it was wrong to vote against THIS bailout.
Could Warren Buffet, Henry Karvis, Bill Gross, CALPERS, and a few others with large holdings in cash do what the governent is failing to do? (Unless there is enough arm twisting in the next hour or so to change the vote).
The idea is to stop the thing before it starts. Once it starts, the economic damage gets uglier and the bailout more expensive very rapidly. So this bailout was the bailout. It's somewhat unlikely we'll get a second chance. The markets have been holding on, waiting for the bill. I'm not sure how much longer they can hold out.
I'm kind of astonished at the medium term risk the GOP is taking on. If the Dow crashes and begins to trigger a broader economic crisis in the next 6 weeks, won't it be an election bloodbath for the Republicans?
I'm surprised that the Democrats went for it by a rather narrow margin.
As a follow-up to my previous remark, Megan, is it possible to ballpark a timeline for how this thing unfolds (or doesn't)? Particularly in an election context: will we know by Nov 4 which way this thing is going to go?
This just in: BUY GOLD NOW!
Yeah, if bailout doesn't pass things may get rough, but we'll still be living in the land of the free (not to mention home of the brave), which otherwise would not be the case.
I find it hard to believe that they're voting their conscience; they're voting their electoral interest in November.
I'm confused, aren't our representatives supposed to represent us? We still haven't seen much proof that the credit markets have indeed dried up. That business are not able to receive loans are at affordable interest rates. They have tightened, but since it was the loosening up of credit that has caused the problems, I'd be more nervous if they were currently loosening up.
I'm kind of astonished at the medium term risk the GOP is taking on. If the Dow crashes and begins to trigger a broader economic crisis in the next 6 weeks, won't it be an election bloodbath for the Republicans?
The House Republicans made a wise move, not just because this was a bad bill. Fact is almost no one understands why this crisis is happening or how the bailout would have helped. Basically it was a proposed confidence-boosting measure, which is to say, they were hoping that waving lots of money around would calm people down, a vain hope if ever there was one.
Plus, the Republicans are looking at a bloodbath anyway, what with the generalized hatred for Bush and its trickle-down effect. This won't change anyone's mind.
I think this failed in the House because they're supposed to vote according to the will of their constituents. The problem is that the constituents are largely uninformed about the implications of not passing this bailout.
It's interesting to watch what may come to be known Black Monday.
The last major piece of legislation that was a rush job was The Patriot Act, that hasn't turned out so well.
From what I can tell, most people hate the idea of a bail-out for Wall Street and not everyone, myself included, is convinced there isn't a better way to handle this that puts the taxpayer less on the hook without letting the entire financial structure crash and burn.
Maybe Republicans have returned to sanity and are back to being against huge government programs that nobody understands.
If there's no bailout and things turn out okay, who gets hurt the most?
Jeremy,
You have missed the central point of a republic. They are not supposed to vote according to the will of their constituents (though that is how it has come to be).
They are supposed to do what they believe is right for the country as a whole. If universal democracy was what we needed, we could just give everyone a TiVo and let them vote with the thumbs up/down buttons.
Andrew Bacevich is right, Congress has become an institution devoted to its own reelection.
"We still haven't seen much proof that the credit markets have indeed dried up. That business are not able to receive loans are at affordable interest rates."
That seems to be a distinction without a much of a difference.
"Basically it was a proposed confidence-boosting measure, which is to say, they were hoping that waving lots of money around would calm people down, a vain hope if ever there was one."
If you have a well capitalized buyer who has promise to buy assets, that should provide some confidence to potential buyers of those assets that they will be able to sell them if they need to.
New charitable interpretation of Rep. Pelosi's demand for 100 Republican votes--not merely to provide bipartisan cover, but because she knew she wouldn't be able to get enough of her own troops to toe the line to pass a bill she thought necessary.
Plus, the Republicans are looking at a bloodbath anyway, what with the generalized hatred for Bush and its trickle-down effect. This won't change anyone's mind.
If Walter and Thelma in Nebraska see their 401k evaporate and their kid can't get a student loan, they might just be less inclined to think about this in the abstract. And if the general sentiment in the media at that time is that this legislative failure was Katrina moment, those who voted nay aren't going to be able to pin this on Bush.
If there's no bailout and things turn out okay, who gets hurt the most?
Posted by Mike
Wall street and U.S. banks and financial companies, because it will be evident that they are not as important to the economy as anyone thinks.
The Democrats have a majority in both houses, so, I don't see any realistic way this can be pinned on the Republicans.
I have tried to give Pelos and Reid the benefit of the doubt given Republican obstructionism, but really, the truth is, they're both hacks, like 98% of the rest of their Congressional bretheren.
The Democrats want a quick deal so they won't be blamed for the meltdown....I can't see why any Republican would vote for a bill unless they really supported it given the current political climate.
If they vote for the bailout and it fails, it will be Bush's fault, if they vote for the bailout and it succeeds, it will be because the Democratic Congress stepped in to fix "Bush's" mess...not a lot of incentive there.
Yep only 60% percent of Dems voted for it.
This was a bipartisan rejection and I am glad they did it.
There won't be a bank panic if the govt oversees an orderly asset liquidation, and stops creating moral hazard by continuing to either a) imply a bail-out is imminent or b) seize companies and firesale their assets. A process for orderly liquidation exists. It's called Chapter 11 restructuring. More companies would use it quicker, and potential investors would signal their intentions to make deals if the govt weren't meddling.
The markets are down because $700B isn't headed their way and they now have to try to figure out how to handle this on their own. That's a good thing. Bailout is a delaying tactic. It will only make matters worse.
What happened to your principles, Jane Galt!
Doesn't opportunity cost apply here? There's a lot of ways to spend $700 billion. My understanding is that when the Japanese government poured money into financial institutions after their bubble collapsed, the financial institutions just sat on it (ie invested in safe instruments, like Treasuries) — thus, solving nothing.
Instead of the current bailout, the US government could pour several hundred billion into FDIC as a backstop to prevent a run on secured bank deposits and to prepare for more insolvencies. Financial institutions that fail can be put into conservatorship or receivership, their management fired, and then they can be re-capitalized and re-privatized or have their assets sold off. This worked for the Swedes in the 1990's.
How does pouring $700 billion into financial firms insure that they will start lending again. Working in construction, I'm directly hit by the current crisis. But I don't think the banks & thrifts, even after a bailout, are going to start lending freely again.
Why not take the billions that Bush/Pelosi/Reid are willing to borrow from China, et al., and give every family a voucher for energy-efficient improvements to their homes? — energy efficient hot water heaters, new windows, solar panels, geothermal heating, solar panels, etc. The vouchers can be redeemable only for the actual product (not labor), to cut down on fraud, but it will reinvigorate construction, while also helping people save on energy bills, which puts money back into people's pockets. Make the voucher expire a year after issuance (issuance could be staggered to prevent a bottleneck in buying product), to prevent people from sitting on them.
There's lots of ways to spend $700 billion that would spur the economy, but dumping it into failing financial institutions seems like a good way to throw good money after bad.
Here's what all you idiots get for your radicalism. Just posted on dkos by thedaybeforeyesterday:
"We work with 30 large auto dealer groups across the country. All
credit applications are now being denied. One dealer, a huge Dodge
dealer in Georgia was just told by 2 major lenders that the
"window" is now closed. Another large dealer group in the southwest
has been told not to forward any more applications as of Noon today
by their largest lenders.
My bank, a large midwest independent instructed all officers to
stop taking any type of applications for loans in the auto/
mortgage fields.
I know the auto and mortgage business. Was in them for 25 and 11 years
respectively. This is a major meltdown that I have never seen before.
Credit is being cut off to 50% of the economy (autos and homes) so it
looks like the credit crunch is hitting.
I would look for more credit outlets to get even tighter as the
week and month goes on. Remember this quarter ends and many companies
were expecting a horrible fourth quarter.
We have some serious problems happening...someone needs to step
forward very soon."
Bank panic? I wired $50K to the broker yesterday. It's a buying opportunity for stocks and houses! Carmax was still offering $20K car loans at 7% yesterday, so maybe cars won't be cheap this week. But there's always next week!
Of course, I've been wrong before. But not usually by betting against a Democratic congress.
"Maybe Republicans have returned to sanity and are back to being against huge government programs that nobody understands."
Awful convenient now that they aren't in the majority.
It's too bad that a good thing like listening to the constituencies (that is, the American citizen) has denigrated into a partisan, finger-pointing orgy.
The Republicans claim it was Pelosi's fault that this did not go through as she gave a 'partisan' speech on the floor which turned republicans against the bill. Why can't they just admit that all round, this was NOT the right bill at this time and that there simply needs to be some critical fine-tuning before any sich financial rescue is passed?
Stop blaming the other guy across the floor and get the right bill passed that wiil revive lenders' faith in other lenders and Americans' faith in our elected leaders.
Come on Megan, I would hope that you of all people would not buy into the panic fallacy. Yes, in the short term there is going to be a pretty crazy stock market... but most people don't depend on the short term and instead invest in the long term.
There is time to come up with a better solution... one that is better than simply "throw a ton of money at the problem" and hope that nothing worse is caused by it.
Why THIS solution, when A, nobody wants it, and B, plenty of very smart people are also propsoing much less substantial solutions that may help us even more in the long term?
KevDog,
As I understand it, the difference between the votes of a Senator and the votes of a Congressman is that the Senator, though representing the people, votes his own will. On the other hand, Congressman represent the people and are supposed to vote according to their will. Can anyone vouch for this idea or am I misremembering this principle from PoliSci 101?
Whatever. I'm not interested in my tax dollars being used to prop up a financial system that is, er, banking on my willingness to bail it out whenever it screws up. If we get a new Depression, it's our just desserts for the financial profligacy of the past several decades. Yes, it will suck, but that's a good thing. We have forgotten why we put in regulations and strict oversight over the marketplace, and we have lost sight of the ethic that debts owed are debts that should be repaid as quickly as possible. We have been due for a wake-up call, and perhaps this is it. Also, just maybe this will alert people to the need for transparency and oversight of ALL markets, not just the stock market. The existence of this largely-unregulated "shadow financial system" has been a horrific discovery, at least for me.
Back to plain livin' and high thinkin' for a while, as my Dad says.
lampwick: That's called a knee-jerk, panic reaction and it coincides with the market dropping 500 points due to the news.
Will it remain that way a week or two from now? Possibly not and probably not... there were no assurances (positive or negative) in either direction but there was plenty of scare tactic, doomsday "maybe" scenerios to help push it.
I've never heard "may" and "might" used so many times to describe the bad things that "could" happen to "Main Street". Talk about a con job.
So sure, loans may be tough to get for a few days and the market may take a week or two to shake off a cold but the odds of the market taking care of itself are just as good as the odds of this bailout "fixing" things.
Besides, if we really wanted to fix the problem we've be dumping the 700B into fixing the opposite end which then gives the securities value (because they can/will be paid) but... that makes too much sense to consider. Gotta love American politics and Wall Street puppets.
The key... Relax
Why THIS solution, when A, nobody wants it, and B, plenty of very smart people are also propsoing much less substantial solutions that may help us even more in the long term?
Because no plan that doesn't start flushing taxpayer cash into the system ASAP will let hedge funds unwind their leverage before sky high risk spreads wipe them out. They need money in the system NOW. If something happens 60 or 90 days from now, it'll be to late for them. They'll already be broke.
Congresscritters are caught between two implaccable masters, enraged taxpayer-voters as a class and terrified millionaire investors as a class. What we saw in the vote was each congressman being forced to declare which class had his or her primary loyalty. Or maybe just which class each feared the most.
Wow, you mean that people will have to save some money Before spending.
I agree with Ned Ludd, There lots of ways to spend $700 billion and improve the economy.
Let some more institutions fail then Wall Street and Main Street will relearn that there is no such thing as good debt." There is debt but it should be considered the evil that it is.
Holy ****. I said before that it felt weird that libertarians are now agreeing with liberals on major economic issues, but now, look at what liberalrob just said:
Despite the fact that he and I always disagree, his reasoning right here is pretty much exactly what I think.
We are truly in the twilight zone.
Can you tell me what constitutional authority the congress has to take taxpayer money and help some financial institutions? What was the purpose of giving money to a left wing group like acorn? And why blame the Republicans? The leadership couldn't get 13 more Democrats to vote for the bailout.
Jeremy,
I think you have confused the method by which Representative and Senators are apportioned amongst the states with how they are supposed to behave when they get to D.C.
I fully expect my elected reps to vote the way the majority of their district desires. Thats why we sent him (her) not to do what they feel is best for the country. I wants whats best for us. Now if the majority in the country feel otherwise, I agree to abide by the total vote. Thats democracy - get with the program. My reps not some genius - just some guy who is a great politician.
No chance you conceed that there is a problem but the \bail-out is just a really crappy way of handling it, eh? Either you're right or you're right.
Big relief out here in flyover land - West Texas - we will support this "bailout" when we see Dodd's and Frank's scalp on the local fence post - we are not stupid enough to allow them to claim to have the answer's when they are in fact the cause.
Bring up a bill that terminates the CRA, removes Dodd and Franks from ANY legislative position with regard to Commerce or Banking, and any others with shaky loan deals, as well as those with contributions more that 2 standard deviations above the mean from the financial industry - and then we will talk turkey for the financial industry.
Pete Stark would hang a physician for any conflict of interest such as the average Congressperson seems to delight in - why should we accept that??
With apologies to The Simpsons (Episode 3F23, "You Only Move Twice"):
Hank Paulson: Good afternoon, gentlemen. This is Hank Paulson. I have the doomsday device. You have 72 hours to deliver the $700B or you face the consequences. And to prove I'm not bluffing, watch this...
Congressmember: Oh, my God! Wachovia!
American Public: Maybe it just collapsed on its own.
Congressmember: We can't take that chance.
American Public: You always say that. I want to take a chance!
Scary.
I'll second the scary notion that I find myself agreeing with liberalrob.
You can only make a house of cards so tall, and we've about hit the limit. I'm cautiously optimistic that the bailout failed as my current opinion is that it only would have prolonged and not averted the final day of reckoning.
Since there is an actual crisis, it behooves people who opposed the bailout plan to say what they would do instead. Some of the commenters above seem to be saying "let it burn" - the government should just let insolvent firms go bankrupt, and deal with the consequences.
Ned Ludd above proposes putting the money behind the FDIC, and spending some on energy efficiency. That's better, and may be sufficient, especially if the FDIC insurance limit is raised. (Consider how small a company will still need to have $100,000 in one checking account to make a biweekly payroll. What happens when the bank fails the day the paychecks go out?)
I propose a different bailout. It will reduce treasury revenues, but it should not reduce them by $700 billion. It's also a temporary measure to reduce the panic in the markets and allow an orderly winding-down of the distressed banks and other financial firms. First, suspend mark-to-market and those parts of Sarbanes-Oxley which are contributing to the crisis through 20 April 2009. Second, suspend the tax on debt-forgiveness through 15 April 2009. The timetable is deliberate - the first part gives the next president and congress 3 months to figure out what needs to be done in the longer term, and it gives the financial industry not quite 7 months to clean up their books. The suspension of the debt-relief tax gives borrowers an incentive to accept offers from banks to rewrite their loans without being a complete giveaway to imprudent borrowers.
Did you know many of the fat cats who circulate from board to board and from job to job throughout the financial industry, are also members of the Bilderberg Group and or the Trilateral Commission? When someone takes your money and steals your car, it makes an impression. When they belong to such secret political cliques, it leaves an indelible impression. Many elected officials even belong to these cabals. When Bill Clinton eased banking restrictions, he dished out $8-billion dollars for community reinvestment loans. When the financing schemes fell through, as is their wont whenever 30-million Mexican nationals buy inflated properties and default, it left banks in the lurch. Hillary Clinton counted on the loan giveaways to buy votes. Interestingly enough, had Hillary secured the nomination; she, instead of Barack Obama would preside over the bailout. So, where’s that $8-bilion plus dollars? The Global Initiative people (code speak for car thieves) took my money; they stole my car. If you or I did half the things these people have done, we’d be serving consecutive life sentences. Wise up, get angry, and let the bubble burst. Gentlemen, I want my money back: http://theseedsof9-11.com