A Bailout Deal Has Been Reached

By Justin Gardner | Related entries in Economy, Legislation

House Republicans could still try to blow it up because lawmakers want EVERYBODY to support it. Something tells me that those politicians in the House won’t pass ANYTHING, though, so Dem and Repubs in the Senate may just have to bite the bullet.

The good news? Both Obama and McCain say they’ll probably support it. So that’s enough “bi-partisan” support the majority party may need.

From WSJ:

Those present said the bailout plan still needs to be drafted in its final form, a process staff members were expected to continue throughout the night in what one aide called a “marathon drafting session” in Speaker Pelosi’s office just off the rotunda in the Capitol building. A formal announcement is scheduled for some time Sunday, though an exact time and location was not immediately available.

A summary of the tentative agreement released by Speaker Pelosi’s office said the plan “gives taxpayers an ownership stake and profit-making opportunities with participating companies; puts taxpayers first in line to recover assets if a participating company fails; (and) guarantees taxpayers are repaid in full — if other protections have not actually produced a profit.”

The $700 billion would be available in phases. The first $250 billion will be “immediately available” to the Treasury Secretary, and $100 billion available “upon report to Congress,” and $350 billion “available only upon Congressional action,” according to a summary from the office of House Minority Whip Roy Blunt (R., Mo.), the No. 2 House Republican who was at negotiations.

A summary from Speaker Pelosi’s office said the final deal included “cutting in half the administration’s initial request for $700 billion and requiring Congressional review for any future commitment of taxpayers’ funds.”

The Dems do have the votes to go it alone, but again…they don’t want to do that because this thing will be hung around their neck if it fails. And let’s face it, this isn’t a great solution, but there are no great solutions. We saw what happened the last time we did nothing (The Great Depression), so these House Republicans are actually acting incredibly irresponsibly right now, regardless of what the American public thinks about it in polls.

More as it develops…


This entry was posted on Sunday, September 28th, 2008 and is filed under Economy, Legislation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

3 Responses to “A Bailout Deal Has Been Reached”

  1. BenG Says:

    Yea, you said that right, ‘incredibly irresponsible’ especially if you know what their alternative plan calls for. The things I’ve read about this insurance policy plan that the House Repubs are offering is just frightening. I really don’t know all of the intricacies, but how someone can be offering insurance for Co’s who hold mortgage securities that have either already FAILED, have no buyers for, or have no current worth, I just can’t understand.

    What I do understand is that there can be a huge potential for fraud involved in underwriting insurance for securities, which pay off when the debt has failed and the policy holder can collect huge sums of money on worthless debt. The Republicans want to set up the American tax payers to be the insurance issuers responsible to pay off failing banks? I just don’t get it. Oh, and then there’s the obligatory Repub demand to lower cap gains taxes for the Co’s to keep more capitol. that one I know is BS, since this is not an equity crisis, but a credit crisis.

  2. Gaucho Politico Says:

    i am not an economist but a number of economists dont alike the plan as it is currently constructed, even after dodd revisions. this is the take i found most compelling from Roubini,

    “The Treasury plan (even in its current version agreed with Congress) is very poorly conceived and does not contain many of the key elements of a sound and efficient and fair rescue plan. Like in my 10 step HOME plan many other economists and commentators (Charles Calomiris, Raghu Rajan, Kotlikoff and Mehrling, Luigi Zingales, Martin Wolf, Barry Ritholtz, Chris Whalen and twenty others whose views have been featured this week in the RGE Monitor group blogs) have presented ideas that would have minimized the cost to the US taxpayer of a resolution of this financial crisis. It is a disgrace that no professional economist was consulted by Congress or invited to present his/her views at the Congressional hearings on the Treasury rescue plan.

    Specifically, the Treasury plan does not formally provide senior preferred shares for the government in exchange for the government purchase of the toxic/illiquid assets of the financial institutions; so this rescue plan is a huge and massive bailout of the shareholders and the unsecured creditors of the firms; with $700 billion of taxpayer money the pockets of reckless bankers and investors have been made fatter under the fake argument that bailing out Wall Street was necessary to rescue Main Street from a severe recession.

    The Treasury plan is a disgrace: a bailout of reckless bankers, lenders and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the US taxpayer. And the plan does nothing to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown.”

  3. George Marek Says:

    Trust the American People with Their Money

    Why not give the $700B to the American people to deposit in the banks as time deposits that the banks can then lend out?

    How about this idea for calming the current financial liquidity crisis?

    Instead of handing money over to financial institutions directly, return the money to each and every American in a manner similar to the recent income tax prebates.

    However, this time the money is required to be put in the form of time deposits in banks, much like CDs.

    This way the money enriches the American people who are required to keep the money on deposit in banks for a proscribed term. The minimum term can be set to provide the needed market stability and minimize inflationary affects.

    The banks in turn enjoy increased liquidity and are able to lend the deposits out for commerce and industry.

    * The banks quickly receive much needed liquidity,

    * The banks keep and manage their bad loans,

    * Every American holds a note that they can redeem someday for their own enrichment,

    * Business prospers and Americans keep their money.

    Make the deposits tax free and require the banks to pay interest, also tax free.

    This could be done quickly using direct deposit for most tax payers. Others can receive a certificate by mail that they can take to the bank of their choice and deposit.

    Call it the Finance American Savings Trust Account or F.A.S.T. Account for short.

    It needs to happen fast and should be appreciated by the American people more than the current bailout bill described in the media.

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