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Bush asks Congress for $700 billion bailout
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| Krypton |
The free-market hypocrites strike again!
| quote: | Bush team, Congress negotiate $700B bailout
By JULIE HIRSCHFELD DAVIS and DEB RIECHMANN, Associated Press Writers
9 minutes ago
WASHINGTON - The Bush administration asked Congress on Saturday for the power to buy $700 billion in toxic assets clogging the financial system and threatening the economy as negotiations began on the largest bailout since the Great Depression.
The rescue plan would give Washington broad authority to purchase bad mortgage-related assets from U.S. financial institutions for the next two years. It does not specify which institutions qualify or what, if anything, the government would get in return for the unprecedented infusion.
Congressional aides and administration officials tried to fill in the details of the proposal. The White House hoped for a deal with Congress by the time markets opened Monday; top lawmakers say they would push to enact the plan as early as the coming week.
"We're going to work with Congress to get a bill done quickly," President Bush said at the White House. Without discussing specifics, he said, "This is a big package because it was a big problem."
But lawmakers digesting the eye-popping cost and searching for specifics voiced concerns that the proposal offers no help for struggling homeowners or safeguards for taxpayers' money. Democrats say it must include mortgage help so borrowers facing foreclosure can stay in their homes.
Sen. Chuck Schumer, D-N.Y., called the plan "a good foundation," but said it was missing "some kind of supervisory authority, and some kind of protection for homeowners and taxpayers."
Still, he said such measures shouldn't slow the package down. "If we wait too long, the floor could come out and everything could crash down," Schumer said.
The proposal would raise the statutory limit on the national debt from $10.6 trillion to $11.3 trillion to make room for the massive rescue.
"The American people are furious that we're in this situation, and so am I," the House's top Republican, Ohio Rep. John A. Boehner, said in a statement. "We need to do everything possible to protect the taxpayers from the consequences of a broken Washington."
Signaling what could erupt into a brutal fight with Democrats over add-on spending, Boehner said "efforts to exploit this crisis for political leverage or partisan quid pro quo will only delay the economic stability that families, seniors, and small businesses deserve."
Bush said he worried the financial troubles "could ripple throughout" the economy and affect average citizens. "The risk of doing nothing far outweighs the risk of the package. ... Over time, we're going to get a lot of the money back."
He added, "People are beginning to doubt our system, people were losing confidence and I understand it's important to have confidence in our financial system."
Democratic Sen. Max Baucus of Montana, the Senate Finance Committee chairman, said he would push to add measures "that keep the burden of this bailout off taxpayers, mostly by making reasonable requirements of the companies asking for this emergency help."
Neither presidential candidate took a position on the proposal. GOP nominee John McCain said he was awaiting specifics and any changes by Congress. "This financial crisis requires leadership and action in order to restore a sound foundation to financial markets, get our economy on its feet, and eliminate this burden on hardworking middle-class Americans," McCain said in a statement.
Democratic rival Barack Obama used the party's weekly radio address to call for help for Main Street as well as Wall Street.
"We need to help people cope with rising gas and food prices, spark job creation by repairing our schools and our roads, help states avoid painful budget cuts and tax increases, and help homeowners stay in their homes," Obama said. "And we must also ensure that the solution we design doesn't reward particular companies, or irresponsible borrowers or lenders, or CEOs, some of whom helped cause this mess."
Their language reflected a tricky balance that politicians in both parties are trying to strike, just six weeks before Election Day: Back a plan that doles out hundreds of billions to companies that made bad bets and still identify with the plight of middle-class voters.
Besides mortgage help, Democrats are considering attaching additional middle-class assistance to the legislation despite a request from Bush to avoid adding controversial items that could delay action. An expansion of jobless benefits was one possibility.
Bush sidestepped questions about the chances of adding such items, saying that now was not the time for posturing. "I think most leaders would understand we need to get this done quickly, and you know, the cleaner the better," he said about legislation being drafted.
The draft does not specify which financial institutions would be eligible for the help, leaving open the question of whether hedge funds or pension funds could qualify. Congressional aides said that omission appeared to be by design, as the question of who could get help under the bailout is still up for negotiation.
The proposal does not require that the government receive anything from banks in return for unloading their bad assets. But it would allow the Treasury Department to designate financial institutions as "agents of the government," and mandate that they perform any "reasonable duties" that might entail.
The government could contract with private companies to manage the assets once it purchased them.
Treasury Secretary Henry Paulson says the government would in essence set up reverse auctions, putting up money for a class of distressed assets — such as loans that are delinquent but not in default — and financial institutions would compete for how little they would accept.
If enacted, the plan would give the treasury secretary broad power to buy, manage and sell the mortgage-related investments without any additional involvement by lawmakers. It would, however, require that the congressional committees with oversight on budget, tax and financial services issues be briefed within three months of the government's first use of the rescue power, and every six months after that. |
http://news.yahoo.com/s/ap/20080920...ancial_meltdown |
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| Q5echo |
| i heard this could be the greatest buy of all time. |
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| Krypton |
| The current leadership has run this country into the ground. Our current government is a corrupt piece of ... |
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| Fir3start3r |
| quote: | Originally posted by Krypton
The current leadership has run this country into the ground. Our current government is a corrupt piece of ... |
I'm confused; you're blaming the government for saving free market entities? :conf: |
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| Trancer-X |
| quote: | Originally posted by Fir3start3r
I'm confused; you're blaming the government for saving free market entities? :conf: |
Hey Firestarter, you haven't read G. Edward Griffin's Creature from Jekyll Island, have you?
I'm assuming that's a "NO" so I'm going to go dig it up and find some good quotes which might help to shed some light on this whole situation. |
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| DJ Shibby |
This is getting ridiculous.
It's almost too conveniently timed. |
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| Krypton |
| quote: | Originally posted by Fir3start3r
I'm confused; you're blaming the government for saving free market entities? :conf: |
Well if the government controls them, they aren't so free are they? The government encouraged this disaster. But of course, I don't expect you to give anything but the benefit of the doubt for this horrible government. |
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| Fir3start3r |
| quote: | Originally posted by Krypton
Well if the government controls them, they aren't so free are they? The government encouraged this disaster. But of course, I don't expect you to give anything but the benefit of the doubt for this horrible government. |
Certainly not my government lol ;) |
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| Fir3start3r |
| quote: | Originally posted by Trancer-X
Hey Firestarter, you haven't read G. Edward Griffin's Creature from Jekyll Island, have you?
I'm assuming that's a "NO" so I'm going to go dig it up and find some good quotes which might help to shed some light on this whole situation. |
Bring it :) |
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| Krypton |
| quote: | Originally posted by Krypton
Well if the government controls them, they aren't so free are they? The government encouraged this disaster. But of course, I don't expect you to give anything but the benefit of the doubt for this horrible government. |
No, not your government. The United States has been mismanaged for years by radical right wing ideologues who've thrown our constitution out the window in favor of their authoritarian agenda. I can't believe some people give this government the benefit of the doubt...I view such people as simply, "authoritarian followers", or people who give unquestionable loyalty to authority. This sentiment is more dangerous than Al-Qaida ever was...It's great for Al-Qaida because they watch as we descend into the very thing we preach we are not. Authoritarians. |
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| Shakka |
| quote: | Originally posted by Krypton
The current leadership has run this country into the ground. Our current government is a corrupt piece of ... |
This is hardly a political matter. One could just as easily argue that the Community Reinvestment Act passed under the Clinton administration helped pave the way for the subprime fiasco that set off the credit domino rally we've been seeing. Get your head out of your ass and try to be a part of the solution, not a part of the problem and the constant finger-pointing and blaming that is going on.
Or perhaps you can explain to me how George Bush personally went about extending reckless amounts of credit to people who were not worthy of it and were too irresponsible to handle it? No, we couldn't possibly assign just the smallest bit of blame to people who took advantage of the system. We couldn't possibly spread a little blame around to everyone involved. We must always place all of the blame squarely at the feet of George Bush. To do otherwise would actually require a broader understanding of what has actually happened here. |
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| jerZ07002 |
i'm going to keep reposting this until you guys get it; we have no idea if we we foot the bill, we could actually profit from the deal
| quote: |
The Financial Crisis: A Big Unknown: Cost of Bailouts --- Profit Is Possible For Government If Firms Do Well
By Sudeep Reddy and John D. McKinnon
1245 words
18 September 2008
The Wall Street Journal
A3
English
(Copyright (c) 2008, Dow Jones & Company, Inc.)
The federal government, now in control of a trio of giant U.S. companies, faces the challenge of managing the troubled firms while trying to protect American taxpayers from losses.
Even as the financial crisis deepened Wednesday, government officials tried to figure out the implications of their $85 billion loan to American International Group Inc., a move that came 10 days after the federal takeover of mortgage giants Fannie Mae and Freddie Mac.
The financial consequences of the government actions will depend on how the companies ultimately perform. Fannie and Freddie are expected to be overhauled and subject to new regulations and oversight. AIG is expected to sell off several business lines, with its ultimate fate uncertain.
When the White House budget office releases its budget proposal early next year, the short-term budget impacts from the bailouts of Bear Stearns Cos., Fannie and Freddie, and AIG could range from zero to tens of billions of dollars, administration officials said. In the context of a 2009 budget deficit that already is projected to reach $500 billion, even big losses could look relatively insignificant. Over the longer term, the government could make money, particularly on the AIG deal.
A slowdown in tax revenue in 2009 could do more damage than the bailouts, a senior administration official said. "The much larger effect is what's going on with the overall economy and the effect on receipts," the official said. "It traditionally has gone up or down by hundreds of billions" based on swings in the economy. "That's what we're most concerned about anytime we estimate."
Calculating the longer-term outlook for Fannie and Freddie, in particular, is "like throwing darts in a dark room," said Sen. Judd Gregg of New Hampshire, the top Republican on the Senate Budget Committee. "No one has any idea what the cost is." He said the new president will face tight fiscal restraints on any new proposals in any case, and those could be made much worse by Fannie and Freddie.
The government interventions are the latest in a series of historic moves to resolve financial crises. The biggest was the government bailout of the savings-and-loan industry that began in 1989 and ultimately cost almost $500 billion. Other rescues led to profits, including a $250 million loan guarantee to Lockheed Aircraft Corp. in 1971; $1.2 billion in loan guarantees to Chrysler Corp. in 1979; and more than $6 billion in cash and loans to airlines in 2001.
"In individual company interventions in the modern era, the federal government generally did not lose money," said Roger Altman, a top Treasury official in both the Clinton and Carter administrations and an architect of the 1979 Chrysler loan. "They were structured very well, and the government's interest was well protected."
Mr. Altman said the structure of the AIG agreement could protect the federal government in a similar fashion. While the U.S. is in a "dangerous financial-market environment," he said, "it is entirely possible that after this interim period the federal government ultimately is repaid."
Key questions and complications remain. Treasury Secretary Henry Paulson installed a new chief executive at AIG; Mr. Paulson's level of involvement, and that of his successor come January, isn't clear. Federal Reserve Chairman Ben Bernanke and other top officials presumably will be forced to spend considerable time overseeing the AIG loan while also handling monetary policy. And the exit plan for the government, and the taxpayer, is unknown.
Treasury and Fed officials "are doing what they have to do to keep the dominos from falling, and I support it," said Rep. John Spratt, the chairman of the House Budget Committee. "But the outlays are getting pretty big."
He said recurring federal-budget deficits already have raised alarms with foreign investors; that is one reason the government had to move decisively.
The Fed and Treasury devised the AIG loan package, which provides as much as $85 billion to the insurance giant, with only a couple of days of planning. They rushed to avert potentially disastrous consequences in financial markets. In return, the Fed took an equity stake of nearly 80% and is charging the company a high interest rate -- 8.5 percentage points above the London Interbank Offered Rate. The loan is designed to allow AIG to finance itself while selling off businesses.
The term of the loan -- two years -- indicates that the government designed the package to force the insurer to liquidate as quickly as possible, said Tom Gallagher, an analyst at ISI Group in Washington. "The risk is higher the longer-term the arrangement is," he said.
The government's role in handling the two mortgage giants is likely to be more political. Lawmakers are discussing how to protect some homeowners by modifying mortgage loans and minimizing foreclosures.
Fannie and Freddie own or guarantee more than $5 trillion of mortgages, underpinning the nation's housing market. The government's actual cost of bailing out the mortgage titans could be relatively small next year if the housing market doesn't deteriorate significantly.
But lawmakers also are mulling over worst-case scenarios from some analysts who say the government's exposure might be as much as $300 billion if the housing market fails to recover -- an amount that could damage the government's finances just as the fiscal pressure from baby-boomer retirements begins.
Given the uncertainties surrounding the bailouts, "this is a coin flip," said Robert Reischauer, who was director of the Congressional Budget Office during the savings-and-loan crisis in the late 1980s and early 1990s.
This time around, doubts arise from the economic outlook, as well as the actions of the federal government, international investors and other players. "There's obviously a lot more uncertainty about who's going to step in and backstop the system," said Mr. Reischauer, president of the Urban Institute, a Washington think tank. "There was no question with the S&L's." This crisis could be worse, he said, especially if international investors decide to pull back.
The reason for some optimism over the AIG deal is that the $85 billion loan is backed by some strong collateral: AIG's insurance businesses. It also carries a high interest rate. The government's 79.9% equity stake could turn a profit if the company rebounds.
In the case of the Bear Stearns bailout in March, the government accepted less-robust mortgage-backed securities as collateral for the $30 billion it offered to facilitate Bear's takeover by J.P. Morgan Chase & Co. Those assets could perform well, depending on the strength of the economy and the housing market over the next several years. In addition, J.P. Morgan is on the hook for the first $1 billion in losses, softening the blow to the government if the mortgage assets don't do well.
For a second straight day, President George W. Bush kept a low profile on the crisis.
"There are times, believe it or not, when policy makers actually need to, like, work on making some policy," said White House press secretary Dana Perino, explaining Mr. Bush's public silence. Mr. Bush sought to reassure the public Monday, but his comments appeared to have little effect on markets.
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