What Will The Largest Government Bailout Of Private Industry In US History Look Like?
A bailout of some kind is coming, but no one seems to know what it will look like and who it will help. The Wall Street Journal says that Senate Banking Committee Chairman Christopher Dodd of Connecticut has some ideas that might not go over too well with the Treasury Department.
The WSJ says that Dodd wants the government to receive shares in the firms that are dumping their questionable debt on taxpayers, as well as a provision to help distressed homeowners, whereas the White House is calling for a "clean" bailout that would allow the Treasury to grant "nearly unfettered powers" to its Secretary. The New York Times says that the Bush plan, "could prove to be the largest government bailout of private industry in the nation’s history."
CNN reports that most of the regular people that they've talked to are extraordinarily pissed about the bailout and think that, while ignoring the problem may not be practically possible, that Wall Street doesn't deserve any help:
"Companies, like individuals, should be held responsible for their decisions," wrote Jorge from El Paso, Texas. "This buyout does not address the other problems in the pipeline such as personal credit default and market slowdowns in most industries. No new jobs will be created."
"It is time for the financial institutions of this country to be called to the mat. We should be expecting and demanding responsible and ethical business practice, not rewarding it at the expense of taxpayers."
And John from Springfield, Va., said the government action actually hurts the people it is intended to help.
"The government does not have $700 billion dollars. WE have $700 billion, and it is being taken from us. If this is passed then the next administration and the next will be extracting this one from the people who are supposedly being protected by this bailout."
Other consumers vowed to get rid of any politician that supported a bailout:
"I will be watching to see which of our representatives vote for this bailout," said R. Kidd in Troy, N.C. "Let the American people see how many we can fire come election time."
And many readers, including Danny from Texas said we should stop typing and start dialing the lawmakers who are prepared to give the OK to the bailout.
"Call your Congressman. Stop blogging, posting comments, and call your congressman. This is the patriotic thing to do. Let them hear your opinion, show them this is still America and that you will not stand for this!!"
President Bush took today as an opportunity to ask Congress not to tack on any unnecessary nonsense to the bailout, and politely asked them to hurry:
Americans are watching to see if Democrats and Republicans, the Congress and the White House, can come together to solve this problem with the urgency it warrants. Indeed, the whole world is watching to see if we can act quickly to shore up our markets and prevent damage to our capital markets, businesses, our housing sector, and retirement accounts.
Failure to act would have broad consequences far beyond Wall Street. It would threaten small business owners and homeowners on Main Street.
Everyone recognizes that it's not easy to write a bill of this magnitude in a timely manner, and all those who have worked so hard over the weekend and continue this morning deserve the thanks and appreciation of every American. Working together, I am confident we can enact the legislation necessary to prevent lasting damage to our economy and meet the unique challenge facing us today.
President Bush's Statement [NYT]
Dodd's Bailout Draft Could Give Companies' Shares to Government [WSJ]
Mad as hell - taxpayers lash out [CNN]
(AP Photo/Ron Edmonds)
Post a comment
Comments:
Would you vote for this?
Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
It's insanity to ask Congress write a check to the Treasury for $700,000,000,000 with no strings attached and perfunctory oversight. Should we just call him Comissar Paulson from here forward?
And lest anyone forget, this is still the Bush Administration we're talking about. "Trust us, we know what we're doing." is a laughable proposition coming from these people.
it will look like...
a mistake in retrospect?
a rush job?
a landslide for Obama?
It will look like shooting yourself in your foot.
Only the largest bailout in US history? I can't think of any larger bailouts in the history of the world. Anyone know of a bigger one abroad?
they are bailing everyone out here. just the companies that are "essential" to keep others companies around.
if a body has an injured limb -- you try to save that limb for the good of the body.
no one is rewarding bad decisions here. they are just scrambling to save our butts. even other foreign banks are making US dollars available to save the economy. its not just the US that thinks it's a good idea.
@spyz88: I can live with the comments - but I still hate those quick-link stories at the top of the page.... which push the real stories 1/2 way off the monitor making me have to automatically scroll down my screen just to start reading any story. Now those are retarded!
(Put them on the left hand side or something - not the top of the page. Webpage design 101 is get the information out as quickly and easily as possible - don't hide the important stories 1/2 way down a page so you can put up page headers........ )
I really dont think they should bailing out these companies. I will definitely be watching to see what politicians vote for it and when they do, my vote will be to vote them out. We need to take the power back with our vote!!!
Other acts this administration has urged congress to rush include the Patriot Act and the latest FISA act. I, for one, would like congress to take a little time to do this right.
@JiminyChristmas: Are you kidding? I can't believe they're going to do something like this, its the patriot act all over again.
Remeber the last time we heard these phrases (roughly):
"nearly unfettered powers"
"acting quickly and decisively"
and this one:
2008:
"The risk of doing nothing far outweighs the risk of the package"
2001:
"The risks of doing nothing, the risks of assuming the best from Saddam Hussein, it's just not a risk worth taking."
and remember how that one turned out? I can't believe people still listen to a word that windbag says, and then actually agree with him! Unbelievable. But go ahead, give the markets more power and a bin full of money, with no oversight or provisions, and do it as quickly as possible. Trust us. right.
@JiminyChristmas: Exactly- Deregulation/lack of rules/lack of enforcement was one of the causes of this mess. So now the administration comes to us and essentially says, "We completely screwed this up, but give us money with no strings attached or it will be all your fault."
I hope the spineless Dems don't cave on this.
Either we don't bail them out at all. Or, we bail them out and put in the regs and oversight we needed long ago.
@moore850: How could it be a landslide for Obama, when he has taken a ton of cash from one of the main causes for this crisis, Fannie & Freddie. They were the first domino to fall & cause this mess, and Dodd, Frank, Obama, and etc failed to act in 2005 to stop it before it became this huge issue.
This is unfortunately one of those things where we have to bite the bullet and bail-out these companies (which I hate the concept of), because of how much worse it will be if we don't. This all could have been saved if we would have acted earlier, though.
@JiminyChristmas: I sure as hell wouldn't! This is bigger bullshit than giving retroactive immunity to Blackwater. I was just about to donate to Obama's campaign, but I think I'll wait and see his vote on this.
Also, Commissar doesn't do him justice; Fuhrer has a much better ring to it.
@JiminyChristmas: Yup. The same party that got us into this mess is now asking for dictatorial powers un-reviewable by courts or Congress to make sure that, say, Halliburton (or their Wall Street equivalent) isn't getting billions from our pockets for free. It's crazy and nonsensical and can only come from a group that is living in a bubble.
One of the key provisions that alarms me to no end is that US taxpayer wages would go to foreign companies, without review or explanation. So we're supposed to hock our and our children's paychecks so that foreign investment bankers receive a sweet, sweet 2009 bonus? It's bad enough if any US firms' execs get this, but foreign ones? Can't Chinese i-bankers rape their own working people, and leave us alone?
The whole situation is one large cluster fuck. There seems to be no good answers and right now it seems that the bailout is the only option to take. You may not like it, but I don't see any better way. It is unfortunate though.
The most annoying thing about this is that they're not even addressing the real problem - the credit rating agencies. They're the ones who rated all those sub-prime mortgage securities like they were platinum. No, no, these are Republicans. If we just throw money at it, it'll go away.
Time to buy a house in Ontario.
brain hurts...
This is the time to make our voices heard...
Call up your Rep and let him have it, they work for us not the other way around.
@nicemarmot617: Actually, if you want to blame it on a party, it's the Democrats who forced banks to lend money to risky (sub-prime) lenders in order to ensure more poor people & minorities got loans. Most times, these risky borrowers didn't even have to provide proof of employment / income!
Republicans actually tried to get *more* regulation on Fannie & Freddie in 2005, but were blocked on a party-line vote. Fannie & Freddie going under drug all these other companies with them.
There are currently 183m US Tax Payers, $700bn = $5,072.46 PER TAX PAYER!
In 2007 there were 2.2 Million foreclosures in the US; divided by $700bn = $318,000!
The Median Home Price in 2007 was $218,900..
Yes, they could have bought and paid for every single Home that was in foreclosure in 2007, and a most of 2008 with that money!
Instead you have potentally 2.2m People/Families out of their homes in 2007, and many more in 2008, and the damn bankers get all of the money?!?!
Oh, that's right.
Since I bust my ass and make more than Sen. Obama feels is appropriate, I can shoulder more of the burden for bailing these idiots out than the rest of the U.S. citizens...who are also getting boned.
This is an outrage. I am not responsible for the ineptitude of these firms. Let them figure a way to pay it.
This is not what Americans are working for.
@Counterpoint: Obama didn't take money from Fannie & Freddie. These claims are ludicrous, since it's illegal for a company to donate to a political candidate. Obama received money from employees of Fannie & Freddie acting as private citizens. Here's some hard data from CNN.
Corporate bailouts, yes! Free healthcare, no!
@thebluepill: Dammit. When I pointed that out in April on a similiar discussion I took a lot of shit for wanting to bail out people who borrowed what they shouldn't have. That bailout would have stabilized this problem and let people keep their houses. This bailout does nothing as a long term solution. Stock market's still gonna fall, credit markets are still gonna slow. And anyone who thinks this stops at anything short of a trillion, well, we might just be greeted as liberators, too.
And I agree, if you haven't already called your representative on this, please put down the internet...
@Counterpoint: I think there is more than enough blame to go around for both parties. Yes, the democrats started it, but if the republicans were so worried about things, they should have tried harder and sooner to fix things.
Also, Fannie & Freddie going belly up is just the tip of the iceberg. [freakonomics.blogs.nytimes.com] Check out this article for the best explanation so far on the whole mess.
i'm from the government and i'm here to help.
@Darklighter: Ah yes, good ole objective CNN. Almost as credible as if I used Fox News for a source on my side.
Let's through political contributions out of the discussion then. Do you deny that Democrats opposed & voted down a 2005 bill that would have regulated Freddie & Fannie and helped stop a lot of the reckless lending that is causing this mess? Or that McCain was one of the cosponsors of bill S.190 ([thomas.loc.gov]) and was on the right side of the issue way back then?
@ThickSkinned: I hate these new comments... seems you have to talk about things in different areas since things float to the top, it's not really threaded, etc...
Anyways, there isn't much the minority party in Congress can do to pass laws if the majority party votes the down in party-line votes. Republicans tried to pass regulation, most notably in 2005 but were defeated by Democrats. (as I've unfortunately had to post way too much)
@Counterpoint: Obviously meant "throw" for word #2 in paragraph #2... new comments and no edit button still?
@coan_net:
1. Use Firefox
2. Install the Stylish add-on (it's like Greasemonkey, but for CSS rather than Javascript).
3. Use this CSS snippet I wrote to get rid of that annoying page header:
@-moz-document domain(consumerist.com) {
#header { display: none !important;}
#container { top: -21em !important;}
}
@coan_net: Totally agree about the quick links. They're too bulky, they look like ad boxes, and they swallow up the site logo. Not pretty.
Has anyone heard any rationale behind the "may not be reviewed" clause in this bailout? I mean, seriously? They didn't even try to hide it in legal jargon; it's just right out in the open, bold as day. Aside from the proposition itself, I can't think of a bigger slap in the face or a larger red flag for unapologetic mismanagement. Not only do the irresponsible crooks get a second chance to play with our money, but their congressional cronies who cover the tracks get to write in their own no-accountability clause? This is the kind of stuff that makes me lose hope. We are all openly treated like doormats while our futures and securities are being stolen right out from under us. America the Beautiful.
Damn Red States. All your fault for letting that loser into office.
Why does everyone get bailed out except me! I haven't even gotten my stupid stimulus check yet!
@hankrearden: Wow you must be in the top 1% then, since that is the only bracket Obama will be raising taxes on.
With an income like that you probably won't feel any pain or suffering in a great depression or a world war, much less for any contemporary issues. That explains your attitude.
@hankrearden: If you are in the top 1% (the income level where Obama is raising taxes)then you won't feel a great depression or a world war, what to speak of any contemporary issues that pertain to 99% of America.
And a provision to help distressed homeowners.
BULLCRAP!!!-you mean help someone who 'desired' to live in home,over paying 2-3 times it ACTUAL value and taking a BS loan that if they would have READ it would've known your interest is going to increase.
If you help these pretend homeowners out are you going to help them out when their insurance goes up,when their taxes go up,when they buy a big screen too many or when they need simple basic maintenance and repairs?
FREE MARKET-prices will fluctuate DUH.Then I hear alledgedly professional TV media saying 'oh we got to get the price of the houses back up'-BACK UP TO WHAT-the artificial prices created by FRAUD.
If you ever bought generics,bought on sale,clipped coupons,paid off credit cards or used a 10-15 year old TV,or bought like a Ford Focus before it was stylish or simply waited until you could actually afford it you should be INSULTED by this.
@Counterpoint: Interesting- so what you're suggesting is that in 2005, a year in which the Democrats controlled NONE of the 3 branches of government, they somehow voted down a bill ALONG PARTY LINES?
@Counterpoint: Republicans were the majority party in 2005. There was no way the Dems could defeat them except thru filibuster.
@ARP: Dems made it clear that it would come down to a partisan vote, and Dodd, Clinton, et. al worked to render it useless. It thusly died in committee.
@u1itn0w2day: The people who bought overpriced homes and/or took out "equity" loans on imaginary, inflated equity are indeed culpable in this whole thing, but I am here to tell you that a lot of people involved in the crash of the real estate market did none of those things.
I owned a home that was purchased at a reasonable price after a lot of looking around to find someone who hadn't jacked the price of their house up to ridiculous levels. I owned more than half of that house at closing, based on the (reasonable for the location and size of the house) closing price. I didn't take out any other loans against that equity. I own my (fuel-efficient) car. I'm careful where this stuff is concerned, and I could see that holding more debt than necessary on my most expensive investment was a silly thing to do.
Then we had to move, and had to (try to) sell the house. I am competing with a market flooded with foreclosures and in a world where banks suddenly are terrified to approve anything but the most scrupulously qualified buyers. Even with the flexibility to drop my price because of how much of the house I owned, it's still been on the market nearly a year with little hope in sight.
The crap housing market is hurting EVERYONE, even people who kept their heads and then got very unfortunately lodged right in the middle of this mess despite doing everything "right".
So yes, people who took out second and third mortgages or equity loans on houses with inflated values that are now crashing are mostly responsible (along with the banks and realty market that facilitated it) but please remember that the ripple effect from their screwups is belching onto reasonable people too.
The ignorance on the subject is quite impressive...
1. For the people who are against the "bailout" are you aware of the ramifications of just letting Fannie/Freddie + AIG fail?
2. 700 bn is the number being thrown around but th gov't isn't writing a check for this amount, it will be whats avaiable if needed
3.Bush, Mccain nor Obama are the right people to solve this problem but hopefully whoever is in office will surround themselves with the people who know enough about finance/econnomics to make the right decision
I'm glad to see I have lots of company in my revulsion with the Bush administration's preferred bailout plan. I'll say it again: remember who we're dealing with.
For instance, try this lede from a March 2007 story in the NYT.
Responding to criticism from many corporate executives and business groups that rule changes in the wake of the Enron scandal had gone too far, Treasury Secretary Henry M. Paulson Jr. suggested on Tuesday that the administration was considering a more business-friendly approach to regulation.
Paulson, et al. are hoping we all have short memories and sit down and shut up while they act like they are the grown-ups in charge. Also, let's not forget what Sec. Paulson did to make ends meet before his Treasury gig: He was CEO of Goldman Sachs, where he amassed personal wealth of over $700,000,000. Gee, might he have a small personal stake in how this whole bailout thing works?
@kathyl: I emphasize but no matter what the cause sometimes you just have to take your losses and run which I've had to do.
Have you considered renting or trying an alternate solution to moving?Otherwise you just have to wait it out.We just had a house in our neighborhood take over 2 years to sell,just sold in August before Wall Street's troubles.There's another house less than 100 ft away that has also been on the market 2 years plus.(Both were on the market before the meltdown became mainstream news).
I've worked for companies affected by business cycles-I've been layed off several times or on the verge of being layed off for years.They say good things come to those who wait.
@bilups: Thanks, but hat still doesn't make sense because if it came to a partisan vote, Republicans would still win as they controlled Congress. They would also win in any committee since they were the controlling party, they can set the agenda and have more votes.
I'm sorry but these new comments are retarded...