NEWS: Replicrat RESCUE PLAN Accord Reached.

[MegalosSkylaki]

BREAKING NEWS

updated 4 minutes ago
WASHINGTON - Warned that time was running short to bolster the distressed economy, congressional Republicans and Democrats reported agreement in principle Thursday on a $700 billion bailout of the financial industry, and said they would present it to the Bush administration in hopes of a vote within days.
Emerging from a two-hour negotiating session, Sen. Chris Dodd, D-Conn., said, “We are very confident that we can act expeditiously.”
“I now expect that we will indeed have a plan that can pass the House, pass the Senate (and) be signed by the president,” said Sen. Bob Bennett, R-Utah.
The bipartisan consensus on the general direction of the legislation was reported just hours before President Bush was to host presidential contenders Barack Obama and John McCain and congressional leaders at the White House for discussions on how to clear obstacles to the unpopular rescue plan.
Key lawmakers said at midday that few difficulties actually remained.
“There really isn’t much of a deadlock to break,” said Rep. Barney Frank, D-Mass, chairman of the House Financial Services Committee.
Bush told the nation in a televised address Wednesday night that passage of the package his administration has proposed is urgently needed to calm the markets and restore confidence in the reeling financial system. His top spokeswoman, Dana Perino, had told reporters earlier Thursday that “significant progress” was being made.
Financial markets were mixed in early trading; the Dow Jones industrial average rose more than 200 points on optimism about the deal but a credit market squeeze remained as doubts about the proposed plan’s effectiveness drove demand for short-term, safe-haven assets.
House Speaker Nancy Pelosi, D-Calif., said Bush’s agreement with Democrats on limiting pay for executives of bailed out financial institutions and giving taxpayers an equity stake in the companies cleared a significant hurdle.
The core of the plan envisions the government buying up sour assets of shaky financial firms in a bid to keep them from going under and to stave off a potentially severe recession.
Even as political figures haggled over the shape and price of the bailout, new economic indicators showed that orders for big-ticket manufactured goods plunged in August by the largest amount in seven months and that new applications for unemployment benefits were at their highest level in seven years.

Lawmakers: Deal on Wall Street rescue reached - Stocks & economy - MSNBC.com

What can I say?

[jokostel]

Cripes... why did they do this bullshit?
Yeah... lets create money out of thin air, devalue the dollar even more to fund these banks who have shitty management that do dirty deeds... that SHOULD fall flat on their face.


All they are doing is prolonging a failure that WILL happen.... probably even with more intensity than what what could have been without this.

[Theophylact]

"Replicrat" is perfect: they're mere facsimiles of actual legislators.

[MegalosSkylaki]

Nice Bailout. Now Pay For It!
How are we going to pay for Wall Street's $700 billion rescue?

To spend is to tax, as capitalist deity Milton Friedman is said to have put it. If so, over the last several months, we've seen an orgy of tax increases, and potential increases. Time was, that prospect would have set off a revolution.
Consider the spree of actions that have the potential—directly and indirectly—to cost taxpayers money: the government accepting $30 billion of Bear Stearns drecky collateral for a $29 billion loan to JPMorgan; giving investment banks access to the Fed's discount window; assuming responsibility for Fannie Mae and Freddie Mac, guaranteeing money-market funds (up to $50 billion); making a big loan to AIG (up to $85 billion); and now proposing the mother of all bailouts—up to $700 billion.
It's difficult to quantify the costs of these activities for a few reasons. Even though the government has now formally agreed to guarantee the debt of Fannie and Freddie, the White House says it doesn't see the necessity—shock me!—to include the cost of doing so in the budget. In theory, Hank Paulson could drive a good bargain in buying hundreds of billions of dollars of distressed assets. As a result, the government could recoup a lot of the costs of the latest bailout proposal. And most of the other efforts are loans, which are designed to be paid back. To get a sense of how good the government thinks the credit risks are, the Federal Reserve is charging AIG (until last week a Dow component) an interest rate of three-month LIBOR plus 8.5 percent—about 11.4 percent. That's a lower rate than many credit-card customers pay, but a higher rate than most junk-rated companies pay. But it's almost certain that all these bailouts will cost taxpayers tens of billions, possibly hundreds of billions, of dollars. Unless the laws of mathematics are repealed, we will have to pay this money back in the form of higher taxes or lower government spending.
But have you heard anyone in authority asking about the $700 billion bailout: how do you propose to pay for it?
There seems to be a center-based consensus that some form of bailout is of vital importance to the nation's economy, to its image and to the global financial system. I agree. But important national projects are worth paying for. Especially when the projects in question are a sop to an industry that has asked for—and received—so much from Washington in the past decade. Think about everything Wall Street has been given since the late 1990s: cuts in the capital-gains tax, dividend tax and estate tax, cuts in marginal income tax rates, free-trade agreements, low interest rates, light regulation. The promise was that doing the bidding of the financial-services industry would deliver solid growth and boost incomes for everyone. It didn't. This business cycle, in which job growth was generally anemic, ended with median incomes about where they were at the end of the last business cycle. The S&P 500 is basically where it was 10 years ago. Sure, we got cheap mortgages, all the credit we could eat, and some higher corporate income-tax payments for a few years. But now Wall Street wants it all back in the form of bailouts.[MORE]

Who Pays for Wall Street’s $700 Billion Bailout? | Newsweek Voices - Daniel Gross | Newsweek.com

Remember when the President Vetoed a Child Health Insurance Bill which was going to be paid with a tax on cigerettes? Ah! Opposed to taxes...

[jokostel]

"Replicrat" is perfect: they're mere facsimiles of actual legislators.

Amen to that.

[MegalosSkylaki]

The "Paulson Plan" Cover Up:The IMMUNITY Clause..

--------------------------------------------------------------------------------

There is a Clause in the Paulson Plan that bears some scrutiny.


Quote:
Here's what the wonderful folks at the Treasury and the Federal Reserve proposed: "Decisions by the Secretary pursuant to the authority of this ACT are non-reviewable and committed to the agency discretion, and may not be reviewed by any court of law or any administrative agency." [emphasis added]

You've got to be kidding! Wall Street CEOs could lie to the Treasury, inflate the prices of their securities, fraudulently misrepresent what they were selling to taxpayers, and, if the Treasury decided to look the other way in order to get the markets back on their feet again, no one could take anybody to court, recover any damages or even hold a meaningful congressional hearing on the issue.

From:
Let's not rush to blow $700 billion - MSN Money

The Supreme Court should, no MUST declare this Law to be UnConstitutional.
This is Voting in a Dictatorship as was done in the film V for Vendetta

MegalosSkylaki

[SiliconJon]

Riddle me this: interest rates have steadily declined, yet home mortgages have not reaped the benefits of these interest rate decreases, and it is home mortgages we are told to be central to this issue. So why, when a 1.5% decrease on a home mortgage can make or break a family, are we bailing out firms that didn't even pass the savings down the chain in order to keep business going?

If something like this can be done why not screw us from both ends?

[Theophylact]

Riddle me this: interest rates have steadily declined, yet home mortgages have not reaped the benefits of these interest rate decreases, and it is home mortgages we are told to be central to this issue. So why, when a 1.5% decrease on a home mortgage can make or break a family, are we bailing out firms that didn't even pass the savings down the chain in order to keep business going?

Unfortunately, many of these mortgages couldn't be paid off with a zero percent loan. If you take out a no-down-payment loan on a $750,000 house for thirty years, you're still going to have to pay $2083 a month. In areas like mine, that would have been the minimum you'd pay for a three-bedroom place. If you make $50K a year, that's half of your pretax income. Toss in real-estate taxes and insurance and you're up to three-quarters. No soup for you.

As Atrios says,

While I've long thought that there was no way that housing prices could continue to appreciate based on the very simple fact that not enough people in this country make enough money to afford those prices, I certainly didn't have perfect foresight about everything. I didn't know that lending standards had gotten so bad. I didn't know that financial institutions were making such leveraged bets on big shitpile.

The other thing I didn't know was the magnitude of HELOC abuse, by both borrowers and lenders. Truly amazing.

[SiliconJon]

Oh, I don't mean zero percent. Maybe I'm missing something, but the average mortgage interest rate hasn't budged much, at least not in relative value, while the fed rates have. And if I am missing something there, the question I still wish to ask is: If a $150k loan has a payment of ~$948 at 6.5% and a payment of ~$760 at 4.5% both at 30 years, does it not follow a business model similar to the rest of the market to lower interest rates in turn to allow homeowners a more affordable house payment in exchange for continuing business, and still profitability since the fed has lowered the rate to them as well?

One thing I don't buy is the charging more interest for increased risks when it comes to loans, particularly in a situation like we have today. If someone is having a hard time with their budget - and even a well laid budget can hit disaster when fuel prices skyrocket, food and energy costs steadily climb, wages sink in relative to even the fake inflation, and the stupidest of things on your credit report can cause your ARM to hyperinflate - since when does it make sense to charge them more?

I don't know if I'm getting my point across very well. I'm pretty agitated with this whole thing. Maybe I need to think on it for a short while...

[Toadman]

Dear Friends:

The financial meltdown the economists of the Austrian School predicted has arrived.

We are in this crisis because of an excess of artificially created credit at the hands of the Federal Reserve System. The solution being proposed? More artificial credit by the Federal Reserve. No liquidation of bad debt and malinvestment is to be allowed. By doing more of the same, we will only continue and intensify the distortions in our economy - all the capital misallocation, all the malinvestment - and prevent the market's attempt to re-establish rational pricing of houses and other assets.

Last night the president addressed the nation about the financial crisis cause behind much of the instability in our markets." Care to take a guess at whether the Federal Reserve and its money creation spree were even mentioned?

We are told that "low interest rates" led to excessive borrowing, but we are not told how these low interest rates came about. They were a deliberate policy of the Federal Reserve! As always, artificially low interest rates distort the market. Entrepreneurs engage in malinvestments - investments that do not make sense in light of current resource availability, that occur in more temporally remote stages of the capital structure than the pattern of consumer demand can support, and that would not have been made at all if the interest rate had been permitted to tell the truth instead of being toyed with by the Fed.

Not a word about any of that, of course, because Americans might then discover how the great wise men in Washington caused this great debacle. Better to keep scapegoating the mortgage industry or "wildcat capitalism" (as if we actually have a pure free market!).

Speaking about Fannie Mae and Freddie Mac, the president said: "Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk."

Doesn't that prove the foolishness of chartering Fannie and Freddie in the first place? Doesn't that suggest that maybe, just maybe, government may have contributed to this mess? And of course, by bailing out Fannie and Freddie, hasn't the federal government shown that the "many" who "believed they were guaranteed by the federal government" were in fact correct?

Then come the scare tactics. If we don't give dictatorial powers to the Treasury Secretary "the stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet." Left unsaid, naturally, is that with the bailout and all the money and credit that must be produced out of thin air to fund it, the value of your retirement account will drop anyway, because the value of the dollar will suffer a precipitous decline. As for home prices, they are obviously much too high, and supply and demand cannot equilibrate if government insists on propping them up.

It's the same destructive strategy that government tried during the Great Depression: prop up prices at all costs. The Depression went on for over a decade. On the other hand, when liquidation was allowed to occur in the equally devastating downturn of 1921, the economy recovered within less than a year.

To combat a depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about in the first place! Because we are suffering from a misdirection of production, we want to create further misdirection - a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end... It is probably to this experiment, together with the attempts to prevent liquidation once the crisis had come, that we owe the exceptional severity and duration of the depression.


The only thing we learn from history, I am afraid, is that we do not learn from history.

The very people who have spent the past several years assuring us that the economy is fundamentally sound, and who themselves foolishly cheered the extension of all these novel kinds of mortgages, are the ones who now claim to be the experts who will restore prosperity! Just how spectacularly wrong, how utterly without a clue, does someone have to be before his expert status is called into question?

Oh, and did you notice that the bailout is now being called a "rescue plan"? I guess "bailout" wasn't sitting too well with the American people.

The very people who with somber faces tell us of their deep concern for the spread of democracy around the world are the ones most insistent on forcing a bill through Congress that the American people overwhelmingly oppose. The very fact that some of you seem to think you're supposed to have a voice in all this actually seems to annoy them.

-Ron Paul

[MegalosSkylaki]

Well it isn't in Austria.
It's in Auburn, Alabama.
Home of Div.I Football.


The Idiocy of Wall Street: Applauding Its Own Demise - Don A. Rich - Mises Institute

Understanding the Crisis - Llewellyn H. Rockwell, Jr. - Mises Institute

Can the Rescue Plan Fix the US Economy? - Frank Shostak - Mises Institute


Austrian Scholars Conference 2009

Now regarding the Self-Bailout by the Replicrat doing the bidding of those who ran this Country's financial system into the ground, there seems to be a Glitch.

Good.

Meanwhile a group of House Republican lawmakers circulated an alternative that would put much less focus on a government takeover of failing institutions' sour assets. This proposal would have the government provide insurance to companies that agree to hold frozen assets, rather than have the U.S. purchase the assets.
Inside the White House session, House Republican leader John Boehner announced his concerns about the emerging plan and asked that the conservatives' alternative be considered, said people from both parties who were briefed on the exchange. They spoke on condition of anonymity because the session was private

Look at the deal Warren Buffet was able to extract from Goldman Sachs includinga 10% dividend and the Government's No Review Scheme.

Look at what Milton Fiedman said that "to spend is to tax".

Look at the Social Security Administration going "upside down" and oweing more in Benefits that it takes in in Social Security payroll taxes in less that 3-5 years and needing to turn to Treasury for the difference.

Is the Treasury -which already is more than 1.5 $Trillion in the hole on "special issue notes" it issued for Social Securty money it's been spending planning to default on those "notes"?

Was it ever going to pay them --without raising taxes, increasing the Payroll tax, or cutting benefits?

**By the way, this practice of collecting more in FICA Payroll taxes and then spending it while issueing to the SSA those "special issue securities" [funny money] was itself part of a RESCUE PLAN....the Social Security "Rescue Plan" .**

Ah! Replicrats !
Do they know no shame ?

MegalosSkylaki

"The defence of Liberty requires eternal vigilance." - Thomas Jefferson

[Creatures]

hm Marx was right, i guess, capitalism will fall

Creatures

[aldtech]

Oh, I don't mean zero percent. Maybe I'm missing something, but the average mortgage interest rate hasn't budged much, at least not in relative value, while the fed rates have. And if I am missing something there, the question I still wish to ask is: If a $150k loan has a payment of ~$948 at 6.5% and a payment of ~$760 at 4.5% both at 30 years, does it not follow a business model similar to the rest of the market to lower interest rates in turn to allow homeowners a more affordable house payment in exchange for continuing business, and still profitability since the fed has lowered the rate to them as well?

One thing I don't buy is the charging more interest for increased risks when it comes to loans, particularly in a situation like we have today. If someone is having a hard time with their budget - and even a well laid budget can hit disaster when fuel prices skyrocket, food and energy costs steadily climb, wages sink in relative to even the fake inflation, and the stupidest of things on your credit report can cause your ARM to hyperinflate - since when does it make sense to charge them more?

I don't know if I'm getting my point across very well. I'm pretty agitated with this whole thing. Maybe I need to think on it for a short while...

Interesting point and I do get as I am living it, credit wise that is. Your comments bring up an interesting suggestion.

If as you say the interest rates have been falling and yet seem to have not been passed along to the mortgage holder, why? And if it is because the loans are too risky in the first place then maybe, as part of the bail out package the government should include a mandate that all interest rates be lowered to a fixed rate retroactively, without having to go through a loan re-application. I hope that is making sense.

/al

[SiliconJon]

Yes, that's right along the lines of what I was thinking. As Toadman highlighted in Ron's speech, that may be too similar to what created the problem, though I don't see such an action to be nearly as destructive or risky compared to the coup d'etat being pushed through as we type.

[aldtech]

Yes, that's right along the lines of what I was thinking. As Toadman highlighted in Ron's speech, that may be too similar to what created the problem, though I don't see such an action to be nearly as destructive or risky compared to the coup d'etat being pushed through as we type.

Well then why not lower interest rates? If we are going to bail out the banks and give them a free ride to dump their "bad mortgages" then maybe the government should mandate an across the board mortgage interest rate drop to lets say 4.0%, or less? This could be the golden parachute for those who have mortgages. The banks will still be making money and hopefully most of the mortgages will be saved which in turn would stabilize the housing market.

Sounds like a good plan to me. Why not?

/al

[MegalosSkylaki]

Well then why not lower interest rates? If we are going to bail out the banks and give them a free ride to dump their "bad mortgages" then maybe the government should mandate an across the board mortgage interest rate drop to lets say 4.0%, or less? This could be the golden parachute for those who have mortgages. The banks will still be making money and hopefully most of the mortgages will be saved which in turn would stabilize the housing market.

Sounds like a good plan to me. Why not?

/al

I'd have to give that some thought..
But--
Part of the problem is that "risk" has been underpriced, through a variety of exotic non-investment-grade vehicles that were , nevertheless rated Investment-grade by hireling Rating Companies like Moody's, etc.

In fact, those mortgages should have born much higherinterest. This would have prevented people from getting mortgages they couldn't pay.
Yet from a practical view at this point, an underpaying mortgage is better than a defaulted one.

In the meantime , read [emphasis suplied] this:

The world economy has just been subjected by its central bankers (including Bernanke as vice chair under Greenspan and encouraged by Paulson at Goldman Sachs) to the largest credit bubble in history.

Not only residential real estate, but also corporate, developing market, and nonsecured debt security and loans have been priced at absurd valuations because the central banks of the world kept interest rates at absurdly low levels during the early part of the decade.

The consequence of this "open the floodgates" monetary-policy-induced credit bubble was to induce the entire financial services industry to distort the process assessing risk and reward in the allocation of capital on a system-threatening scale — hence the events of earlier this week..........[Snipped]
…… and a type of central-bank-induced yield-chasing drop in risk differentials that pervades the world capitalist system due to the actions of people like Greenspan, Bernanke, and Paulson. (Paulson should not be allowed to escape the fact that, as CEO of Goldman Sachs during this period, he had plenty of chances to speak up, and said nothing.)

The resulting central-bank-induced disequilibrium relationships between price and risk is bound to generate massive movements in the prices of debt instruments back to their equilibrium relationship [in other words, next to worthles-DOOG], a process that in its infancy has already destroyed the capital of the world's private-banking systems.

Why is anyone listening to the central bankers and Bernanke and Paulson if they caused the problem in the first place?

The biggest obstacle to correct action going forward is that no one in the financial industry or press is asking the right questions.

The federal government — through the Department of the Treasury and the Federal Reserve — is now committed to assuming the entire credit risk of the financial-services industry of the United States, and quite possibly much of the industrialized world. The US government itself is already insolvent in an intertemporal sense, with a budget deficit over time of $30 trillion in present discounted-value terms. How the federal government's assumption of the American and world financial systems' risks is supposed to be credible on a long- or even medium- and short-term basis is totally unclear.

The Idiocy of Wall Street: Applauding Its Own Demise - Don A. Rich - Mises Institute

MegalosSkylaki

[MegalosSkylaki]

WASHINGTON - Congressional leaders and the Bush administration reached a tentative deal early Sunday on a landmark bailout of imperiled financial markets whose collapse could plunge the nation into a deep recession.
House Speaker Nancy Pelosi announced the $700 billion accord just after midnight but said it still has to be put on paper.

"We've still got more to do to finalize it, but I think we're there," said Treasury Secretary Henry Paulson, who also participated in the negotiations in the Capitol.
"We worked out everything," said Sen. Judd Gregg, R-N.H., the chief Senate Republican in the talks.

Congressional leaders hope to have the House vote on the measure Monday. A Senate vote would come later.

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.

[Does this mean the good stuff goes to Insider's friends and cousins]-DOOG

At the insistence of House Republicans, some of the program's $700 billion 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. [Supplied].......Snip

[But Treasury decides what's "reasonable...by people from and to the Industry ??]

The proposed legislation also calls for the financial sector to help make up the difference if the government does not recoup its investment in five years, the official said, but details were unclear.

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

[Anyone expect to see accounting Profits go to Taxpayers ?]

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

{Did anyone consider this in first place?? -DOOG]

[Snipoo.]

At the insistence of House Republicans, who threatened to sidetrack negotiations at midweek, the insurance provision was added as an alternative to having the government buy distressed securities. House Republicans say it will require less taxpayer spending for the bailout.

But the Treasury Department has said the insurance provision would not pump enough money into the financial sector to make credit sufficiently available. The department would decide how to structure the insurance provisions, said Sen. Kent Conrad, D-N.D., one of the negotiators.

Money for the rescue plan would be phased in, he said. The first $350 billion would be available as soon as the president requested it. Congress could try to block later amounts if it believed the program was not working. The president could veto such a move, however, requiring extra large margins in the House and Senate to override. [Supplied]

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.

By AP, from MSNews

No mention of the IMMUNITY CLAUSE that gives dictatorial power to Treasury nabobs. But the way I see it, the principle reasson for this plan is to avoid scrutiny of what was done to our Financial System and where the money went...through the Front door and through the Back door. Now taxpayer Money is to replenish the Till.

What happens in a few years when Social Security goes "upside down" and takes in less money than it pays out? Will this "Bailout be the PRE-Text for not paying out the 1.5 $TRILLION Dollars that Treasury owes to Social Security, having spent it??

MegalosSkylaki

[Disley]

McCain threw a spanner in the works at the last minute, not for any good reasons like talking a bit of sense in to the parties about throwing good money after bad to compulsive gamblers, but to grandstand and try to score political points from the give away of the century.
The republicans want the bailout to go ahead, but they want to be able to blame the democrats if it doesn't work. So they want the democrats to pass the bill using their numbers in congress.
Al Jazeera English - Americas - The end of US bipartisanship?

It is not that the house Republicans do not want that package to pass - they just do not want to vote for it.

Even though it is Bush's package, they want to shift responsibility to the Democrats.

John Boehner, the house Republican leader, said on Friday that because Democrats have majorities in the house and senate they could pass the bill anytime.

But then Republicans would campaign against them - saying Democrats had allowed fat-cat Wall Street executives to scoop up billions of the taxpayers' hard earned dollars.

Alternatively, if the Democrats decline to bring the package to a vote, the markets fall, credit seizes up, and all the dire warnings about the economy come true, the Republicans can blame the wreckage on the Democratic majority in congress.

[RayH]

A few YEARS ago someone (it skips my mind) was noting that a high percentage (25% at that time) of mortgages were ARMS. That if the trend continued, who would be repurchasing the homes at inflated values. Even Greenspan started to note these things in 2005, but he did nothing about it.

[Toadman]

Well then why not lower interest rates? If we are going to bail out the banks and give them a free ride to dump their "bad mortgages" then maybe the government should mandate an across the board mortgage interest rate drop to lets say 4.0%, or less?

Rates have been kept artificially low for a decade. This is what happens when you have the Federal Reserve in bed with financial institutions instead of letting the market adjust rates accordingly. Even Big Oil understands this.