Best guess on if the Bill will pass Congress Sunday nite?

[Bestwifeever]

Ha, I completely agree that we need Congress and the Admin to be the grownups and get this in place and stop worrying about CYA, since virtually everyone there seems to agree there needs to be a strategic response to what's going on in the economy. As someone said this morning on Good Morning CBS Today, the longer it takes to get a plan in place the more people will wonder if there's something even worse going on than what we already know about, and perception imho has a big effect on action.

In a human sidenote, a few months ago I heard Paul Krugman in a phone-in bipartisan group discussion about the primaries on a late night radio show and all of a sudden there was the cutest sound of a small dog barking at his end of the conversation. You could hear his embarrassment in his answer to the question but it really was adorable....

 

[brewer12345]

Even Uncle Warren is weighing in: Buffett: 'Heaven help us' if bailout fails - Yahoo! News

 

[harley]

Repubs 1, Dems 0 on the political maneuvering. The plan was crafted by a Republican administration, it was a blank check for $700 billion. The house dems input reduced the initial cost and put in some safeguards. But the resistance from congressional republicans allows them to go to their home district and scream about "bloated dem budget busters!" and win in November. Dems are scrambling to figure out how they got checked so bad by this. They are in a complete no win situation.

They are the majority. They wanted to be in the majority, instead of sniping from the sidelines. They are in a position to take action. If they don''t take action, the American public is not going to blame a small group of minority members. "Leading" means that you take responsibility.

I think the problems the Dems have is that they agree with the Bush plan. However, the Bush plan isn't a Republican plan, because Repubs (supposedly) don't believe in massive gov't intervention. This is just proof of what I've been saying all along, Bush is a Dem in Republican clothing.

If the dems back up Bush without Republican support, they will be as good as admitting that his method of dealing with problems is legit, which is the opposite of what they've been claiming for 8 years.

Truthfully, I agree with the cautious repubs on this issue, which is not my usual tendency. Once they do this thing, it will never get undone (see Patriot Act, et al). I think something needs to be done, but I suspect that taking a little time to carefully craft a solution will send a calming message to the markets and the world, and things will go into a slowdown while a decision is being made. As Rep. Mike Pence (R -IND) said,
"I must tell you, there are those in the public debate who have said that we must act now. The last time I heard that, I was on a used-car lot," said Rep. Mike Pence, R-Indiana. "The truth is, every time somebody tells you that you've got to do the deal right now, it usually means they're going to get the better part of the deal."

Added into all that is my general feeling that the federal gov't doesn't make things better, only worse. They never admit to having heard of the Law of Unintended Consequences.

 

[haha]

Why Are the Best Plans Coming From Non-Governemntal Sources

The Public Deserves a Better Deal - WSJ.com

The Treasury plan to buy illiquid financial assets has been widely criticized as being unfair to taxpayers, who will have to bear losses ahead of shareholders of the institutions that will be bailed out.

There is a better alternative to stabilize the markets: Invest the $700 billion of taxpayer money in senior preferred stock of the troubled financial institutions that pose systemic risks. Let's call this the "Preferred plan." In fact, it is the Fannie Mae and Freddie Mac model -- which the Treasury Department has already endorsed and used in practice. It is also the approach Warren Buffett used for his investment in Goldman Sachs.
There are major problems with the Treasury plan. First, by buying banks' worst assets at above-market prices, taxpayers take an immediate economic loss -- while transferring wealth to shareholders and executives of the very institutions that brought on the financial crisis.

By John Paulson, New york Hedge Fund manager who made a huge wad buying Credit Default Swaps at the beginning of this swoon.

Clearly Paulson knows how to do this- he did it with FRE/FNM. And this program wold be much easier to sell to teh public. WHy is it not being done?

Are they perhaps afraid of stocks in companies that would have their equity wiped out crashing?

Ha

 

[ziggy29]

I think the problems the Dems have is that they agree with the Bush plan. However, the Bush plan isn't a Republican plan, because Repubs (supposedly) don't believe in massive gov't intervention. This is just proof of what I've been saying all along, Bush is a Dem in Republican clothing.

If the dems back up Bush without Republican support, they will be as good as admitting that his method of dealing with problems is legit, which is the opposite of what they've been claiming for 8 years.

I think Bush knows he's a lame duck and he doesn't want to go out as the next Hoover. He doesn't want the Second Great Depression as part of his enduring legacy.

And frankly, I think the Dems could pass it and say that (a) it shows a willingness to work with the president in a bipartisan way when it makes sense -- which is what Reid and Pelosi pledged when they became the majority party in Congress -- and (b) they still showed leadership despite obstructionist GOP opposition in the House. If this is a good bill -- if they truly believe this is necessary -- then this would seem like a glorious opportunity for them to rise to the occasion and do it.

 

[brewer12345]

The Public Deserves a Better Deal - WSJ.com

The Treasury plan to buy illiquid financial assets has been widely criticized as being unfair to taxpayers, who will have to bear losses ahead of shareholders of the institutions that will be bailed out.

There is a better alternative to stabilize the markets: Invest the $700 billion of taxpayer money in senior preferred stock of the troubled financial institutions that pose systemic risks. Let's call this the "Preferred plan." In fact, it is the Fannie Mae and Freddie Mac model -- which the Treasury Department has already endorsed and used in practice. It is also the approach Warren Buffett used for his investment in Goldman Sachs.
There are major problems with the Treasury plan. First, by buying banks' worst assets at above-market prices, taxpayers take an immediate economic loss -- while transferring wealth to shareholders and executives of the very institutions that brought on the financial crisis.

By John Paulson, New york Hedge Fund manager who made a huge wad buying Credit Default Swaps at the beginning of this swoon.

Clearly Paulson knows how to do this- he did it with FRE/FNM. And this program wold be much easier to sell to teh public. WHy is it not being done?

Are they perhaps afraid of stocks in companies that would have their equity wiped out crashing?

Ha

If they did this I think it would effectively preclude any affected firm raising new equity capital, which is exactly what the system needs and the economy requires in order to grow. We are in a downward spiral of economic activity because of credit contraction - to resume the upward trajectory of growth we need credit extension to starthappening again in a major way. Sine the shadow banking system is in shambles, most of this will have to come from the banking system. Well guess what: banks require significant capital to grow their credit exposures, more than can be done with retained earnings. So if you toast the ability of the banks to raise equity capital you permanently impair the ability of the system to reume credit growth. And oh yeah: you also lose the ability to do the sort of thing that was done with WM, since there is no way JPM could have raised $10 billion in a drive-by if everyone was worrying about a super preferred being stuck ahead of them in the capital structure.

 

[haha]

If they did this I think it would effectively preclude any affected firm raising new equity capital, which is exactly what the system needs and the economy requires in order to grow. We are in a downward spiral of economic activity because of credit contraction - to resume the upward trajectory of growth we need credit extension to starthappening again in a major way. Sine the shadow banking system is in shambles, most of this will have to come from the banking system. Well guess what: banks require significant capital to grow their credit exposures, more than can be done with retained earnings. So if you toast the ability of the banks to raise equity capital you permanently impair the ability of the system to reume credit growth. And oh yeah: you also lose the ability to do the sort of thing that was done with WM, since there is no way JPM could have raised $10 billion in a drive-by if everyone was worrying about a super preferred being stuck ahead of them in the capital structure.

I see. Thanks for making very helpful observations. This is a complicated matter!

Ha

 

[Canadian Grunt]

The Public Deserves a Better Deal - WSJ.com

The Treasury plan to buy illiquid financial assets has been widely criticized as being unfair to taxpayers, who will have to bear losses ahead of shareholders of the institutions that will be bailed out.

There is a better alternative to stabilize the markets: Invest the $700 billion of taxpayer money in senior preferred stock of the troubled financial institutions that pose systemic risks. Let's call this the "Preferred plan." In fact, it is the Fannie Mae and Freddie Mac model -- which the Treasury Department has already endorsed and used in practice. It is also the approach Warren Buffett used for his investment in Goldman Sachs.
There are major problems with the Treasury plan. First, by buying banks' worst assets at above-market prices, taxpayers take an immediate economic loss -- while transferring wealth to shareholders and executives of the very institutions that brought on the financial crisis.

By John Paulson, New york Hedge Fund manager who made a huge wad buying Credit Default Swaps at the beginning of this swoon.

Clearly Paulson knows how to do this- he did it with FRE/FNM. And this program wold be much easier to sell to teh public. WHy is it not being done?

Are they perhaps afraid of stocks in companies that would have their equity wiped out crashing?

Ha

Research I have read in a study from the IMF on bank bailouts and costs to governments suggests the bailout will cost the public 82% of the bailout costs.

The Fed should have moved quickly to declare survivors and buy an equity stake in each survivor and let the others fail. That would provide the liquidity and solve the problem of moral hazard. Obvious survivors would include JP Morgan, Bank of America, and Citibank.

Here is a link to check costs of previous bank bailouts.

Bailout Aftermaths - ProPublica

 

[Gone4Good]

Well, it now looks like McCain will do the debate even though there's no deal on the bailout-so HE blinked, too. Dang!

I'd couch it a bit differently.

It seems he figured he would parachute in for a signing ceremony, take credit for "Leadership" and get some cheap credibility on the economy.

But then the House Republicans rebelled and the plan blew up in his face (so much for leadership). According to the NYT he wasn't even really participating in the discussions at the White House and wasn't involved afterward in trying to broker a deal.

At the bipartisan White House meeting that Mr. McCain had called for a day earlier, he sat silently for more than 40 minutes, more observer than leader, and then offered only a vague sense of where he stood . . . there was no evidence that he was playing a major role in the frantic efforts on Capitol Hill to put a deal back together again.

So having jumped into the middle of a mess he clearly doesn't understand, being either unable or unwilling to play a constructive roll in bringing about reconciliation between the two sides, having no clue about what a reasonable alternative to Paulson's plan might look like, he figures that he might as well declare victory and get out of dodge before too many people see him sitting alone in a corner twiddling his thumbs.

 

[samclem]

According to the NYT . . .

Well, there you go. Did the NYT have a reporter in the room? If not, then they are depending on a source with some tie to how this al turns out. Did they name their source? Does anyone believe that the NYT would ever print, 40 days before this election, that McCain had played a constructive role?

Might as well tune in Rush Limbaugh to find out if Obama helped in the negotiations . . .

 

[Gone4Good]

Might as well tune in Rush Limbaugh to find out if Obama helped in the negotiations . . .

Saw that coming. You're right, the NYT = Rush Limbaugh.

 

[Grep]

If anything, it would have been hastily done at the urging of the administration to put a sense of urgency on Congress.

That is what I meant. Sorry. But it's probably just baseless suspiciousness on my part.

 

[Finance Dave]

Better fasten your seat belts when the markets open tomorrow...

Markets pretty flat until the last hour.

 

[chinaco]

It is sad. Both parties are jockeying for positions of self interest.

I hope they get something going... mainly because of the fear that has been generated by the dooms-day message that was put out.

I am 100% in favor of oversight and sweeping regulatory changes that would remove CEO and top tier officers' compensation from the boards hands. It should take a shareholder vote on their compensation package. The board can only recommend. The shareholder vote would need allow shareholder to change compensation on a yearly basis.

Unfortunately stock options have led to Officer and Board incentives to take risk to increase share price taking inordinate risk.