Taking Stock Of The Wall Street Bailout

A Look At What Washington's Economic Rescue Plan Will Mean, And Why It Was Deemed Necessary

(CBS)  With word of agreement on a Wall Street rescue package, Rita Braver examines what it took to get to this point on Capitol Hill, while from New York Anthony Mason reports on what's at stake for Wall Street - and Main Street.

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After days and nights of wrangling, negotiators finally emerged to announce a breakthrough in the wee hours of this morning.

House Speaker Nancy Pelosi says the hard work has been done "to stabilize the markets, [and] most importantly to protect the U.S. taxpayers."

Democrats got salary limits for executives of companies that get bailed out, and Congressman Barney Frank said there were many reasons to be pleased:

"The good news is that it is entirely likely that within a few days - and I hope no one will be offended - I won't have to speak to almost any of the people who are now here. All of them! All of them!"

"How thankful we are for that, Barney!" laughed Senator Chris Dodd.

It was Republican House leaders like Roy Blunt who slowed the deal down over the last few days, and he was still sounding a cautious note, saying he wants to see the agreement in writing.

"These are difficult issues and everybody showed lots of patience," Frank said.

And if you've wondering why the president had so much trouble getting his own party on board, well, he may be asking himself the same thing:

"Do you think the administration just underestimated what their own Republican base would say about this idea?" Braver asked Jim Vandehei, executive editor of Politico.com.

"Clearly, I mean, you gotta remember the mindset of President Bush for the longest time he could just snap his fingers - they did what ever he wanted."

But Vandehie says those days are long gone.

"They think it's good politically to do the opposite of what George Bush does," he said. "He is unpopular. His popularity rate is below freezing. That's not good in politics."

"I think this is the most significant financial crisis of the post-war period of the United States," Fed chairman Ben Bernanke told Congress this week, "and has in fact a global reach."

So along with the $700 billion of federal money that administration officials say is necessary to shore up the nation's financial system, sources say that conservatives got a version of the government-backed insurance program they wanted financial companies to buy into, in order to cover some of the bad debts.

Political analyst Stuart Rothenberg told Braver, "They believe they're trying to take back their party from the people who are working with the Democrats, who bought into the big government argument, and so there is this division within the party."

Rothenberg says that both Republicans and Democrats are worried about how voters will view any deal:

"They're probably going to argue that they were able to nibble around the edges to improve the package. They'll take credit for it, they'll say, 'Oh, we protected the taxpayer and without us it would have been worse.'"

Though John McCain made a brief attempt to get involved in the process, and both presidential candidates went to the White House this past week, neither wanted to talk about details at Friday night's debate - or even acknowledge the obvious.

Is the bailout going to limit what the next president will be able to do, Braver asked.

"Unquestionably," Rothenberg said. "The spending that's already in the pipeline for Iraq, maybe additional spending for Afghanistan, combined with this huge domestic package, I think it will be very difficult for the next administration coming in to propose big spending programs."

Now that there is a deal, the public will have to be persuaded that it was the only way to head off an economic melt down.

And considering the angry calls and e-mails pouring into Capitol Hill (at one Congressman's office, running nine to one against), that might not be so easy.

"There is a big sales job to go out there and pitch this," Vandehie said. "If they end up buying these assets that are not worth anything, you are essentially asking every single person in this country to kick in a couple of thousand dollars. Well, if I wasn't irresponsible with my mortgage, if did the right thing, well, then you're gonna be pretty darn irritated if you're the one who's asked to pick up the tab."

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Wall Street whipsawed through another week, waiting for a bailout deal. Uncertainty was keeping the markets anxious, said veteran trader Ted Weisberg:

"We need to see confidence and transparency returned to our financial markets. It's as simple as that."

But by Friday, bad mortgage loans had brought down another blue chip bank. Washington Mutual, the nation's largest savings & loan, was seized by the government and sold to JPMorgan Chase, at a bargain basement price.

Ashton Tyler said of the week's events, "We'll all remember this. Twenty, 30 years from now our kids will be talking about what happened just like we do with our grandparents now."

The FDIC assured depositors that they are protected. But WaMu's stockholders lost everything.

Alfred Trope, a Washington Mutual customer, told CBS News, "If these banks keep failing, we are going to be in a depression."

The "D" word.

Wall Street utters it uneasily. But even Fed chairman Ben Bernanke, a student of the Great Depression, called the situation "grave," as the crisis in the credit markets only deepened.

Ira Jersey of Credit Suisse, one of the world's biggest banks, says the situation is not getting any better now, and told Anthony Mason that the credit markets have virtually frozen.

"'When you say the credit markets are 'frozen up,' what does that really mean?" Mason asked.

"It basically means that no one can really get any type of credit, any type of loan," Jersey said.

Because banks have lost trust even in each other.

"The worry right now is that banks not being willing to lend to each other," Jersey said. "Not being willing to lend to anyone creates the risk of just a market-wide failure."

How serious is it? Think of credit as the oil in the engine of the economy. It's what allows entrepreneurs to start a company and hire workers. It's what allows most of us to buy a house or get a car. And just like a car, take the oil out of the economy's engine and the engine blows up.

"Well, you know there's this little historical event called the Great Depression, and we don't know that left unchecked this would produce another Great Depression," Princeton University economist and New York Times columnist Paul Krugman told Mason. "But there's a family resemblance between what's going on now and the banking crisis that was the real cause of the Great Depression."

Krugman warns that even if Congress comes up with a rescue plan, our problems will be far from over.

"I think we can probably expect to see the credit markets return to their previous, mildly stressed condition," he said. "It's going to be unlikely that you'll see things return to normal.

"It's basically still the patient is running a fever of 101° - but not a fever of 104°.

The deal is a big step towards restoring confidence in the banks and getting credit moving again. In New York, Washington and around the world, everyone is hoping it will take the U.S. economy off the critical list.

[jeffsa1261]

I am utterly tired of being a slave to a materialistic, egocentric society irresponsibly run for the benefit of corporations.

[tbuckl]

Thomas Jefferson was so right when he said the following, I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by all future generations, under the name of funding, is but swindling the state of being yet to come on a large scale. Now the American banking system and its Barbaric CEOs have taken the American people to the clearers. Thomas Jefferson correctly used the word SWINDLING when writing his thoughts about banks and aristocratic tyrants that would infect our soceity. He knew these aristocratic tyrants would infest our soceity just like they did so many centuries ago. I wish he had been wrong, because I am starting to think something else he said may also be true. "The tree of liberty must from time to time be refreshed with the blood of patriots and tyrants. It is its natural manure."

[jeffsa1261]

I am utterly tired of being a slave to a materialistic, egocentric society irresponsibly run for the benefit of corporations.

[kuei12]

It is good that we can always count on our politicians to do the wrong thing. They are very dependable in this aspect. You can always predict what action they will take.

[tincup356]

i hope this serves as a wake up call to all the party liners in America, are you still convinced your party is representing you? If you STILL believe that there is no hope for you , you will go down , losing everything while proudly backing your party as they lie cheat and steal everything they can.while you sit and blame the other party.Theses parties are like the crypts and the bloods , the have different names but both are nothing more than criminals, the only difference is in Washington the wear suits and ties.VOTE to cut the hideous cancer that affects us all, "Your Incumbent Congressman"

[tincup356]

I cant believe congress can sit back and ignore the very loud clear word of the people that put them in office , that they don''t want this bailout.But then again congress has never addressed the needs of the people just the wants of the rich and the lobby dollar.I pray that this will be enough to make the honest people of this country start our new "surge" in which we by great numbers,register the masses to vote, go to the polls starting with Novembers election and vote these people out and WE will stay the course until each and every one responsible for this mess is criminally prosecuted and restitution paid. The monies are not gone just stashed in some thieves pocket and we can follow paper trails to find out where there needs to be an investigation but not by the government ...they are LIARS

[tincup356]

now congress lays in bed this morning, with the wall street pervs, smoking a cig. and saying " Was it as good for you as it was for me"?

[bigwig51]

by the way the government is trillions of dollars in debt. they''ve already stolen the Social security trust fund and given is away to the rich folks who have supported their campaigns. This bailout will be paid for buy our children and grandchildren.

[bigwig51]

I''m not aware of Obama paying any Fannie may lobbyist for advice but I can tell you Mccain is paying his Fannie adviser 20,000 a month and Fannie was paying this same lobbyist 15,000 a month until August of this year to "advise" McCain. Get over Obama being black at least he''s not a crook like the Republican Administration. Four more years of this kind of financial abuse and all working class people will be slaves.

[airboatboy1]

Bail out Wall Street so we can all borrow money again. What am I missing here?

[oneworldusa]

Let Wall Street fail. Let Wall Street fail. No BAILOUT! This is NOT a bailout for taxpayers and we will never, ever see one red cent of any return.

[cncrndctzn]

So the government seizes all these assets, sells them to JPMorgan, then comes up with a deal that will allow JPMorgan to quickly sell off these bad assets at a profit. I would love to see who''s friends with who in JPMorgan and the people that drafted this bailout program. And the one part of the bailout they couldn''t agree with:

"They failed in an effort to give judges the power to modify mortgage terms for people who have filed for bankruptcy and Democrats were unable to get approval for part of any profits the government might receive to go to help people facing mortgage defaults."

So the people who are really suffering from this get no help. Once again, government takes care of their rich cronies and screws the average American. AND...with this absurd amount of money, plus the almost equal amount of money just earmarked for Iraq, the incoming President won''t be able to do much of anything to help. Bush''s administration is sabotaging things in the last weeks of his administration. Who would have expected less from this corrupt and self-serving administration? Jeez!

[leonard312]

I loved the segment on "CBS Sunday Morning" About negative african american images and collecting Black banks,,,etc...that really opened my eyes!!!!
This collector displayed so many shocking images of black americans that i have never seen. Who collects these things and why??? I wanted to hear and see more about this topic of black collectables. I also wanted my children to know what lessons can be taken from these images. especially now during this political season when skin color and race is so important in deciding our next president.

[random_radar]

If you have been paying your bills, that''s great, because now you need to pay your bills and everyone else''s bills too.

Responsible, hardworking people of America: the bankers, losers, and irresponsible spendthrifts need your help! Pay your bills and pay your taxes so everyone can live happily ever after--on your backs!

[papoubill]

We "may" get an FDIC type insurance program that uses an actuarial analysis.

And there is a FORECLOSURE MITIGATION authorization to the Secretary saying he SHALL implement a plan and MAY use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures (Hillary Clinton%u2019s idea that she has been pushing for a few years).

And FOREIGN financial authorities or banks assets are in.

But EXECUTIVE COMPENSATION LIMITS only apply to the top five persons as disclosed in filings under current SEC rules, and then they only apply if the auction purchases have transferred $300 million of assets to the Secretary from that financial institution. The only restriction is that those five may not get any %u201Cgolden parachute%u201D, but the Secretary can demand their compensation be limited to %u201Cappropriate standards for executive compensation and corporate governance%u201D for any %u201Cnew%u201D contract. That $400,000 salary limit did not last long.

But we can pretend that a financial institution is OK by using assets values that are higher than current market.

[pepperwood2]

It was Republican House leaders like Roy Blunt who slowed the deal down over the last few days, and he was still sounding a cautious note, saying he wants to see the agreement in writing.

"These are difficult issues and everybody showed lots of patience," Frank said.

Barney - Roy just doesn''t want anybody being caught with their pants down again while Wall Street & You Liberals give us another ***.

[sjc_1]

The problem with the "plan" is there are no conditions that any credit be extended to consumers nor businesses. We are buying bad mortgages and giving money to them, but no assurances that they will make any loans. They could play the Asia high yield markets.

There is also no assurance that they will not dump stocks and bonds anyway, which was the real reason for the "plan". If they dump, the markets crash and that is what they are really trying to stop.

[merde1-2009]

DEAR 60 MINUTES,THE BAIL OUT OF WALL STREET IS SOCIALISM NOT CZARISM AS STATED BY MS.PELOSI.US MIDDLE CLASS AMERICANS SHOULD BE RIOTING IN THE STREETS BECAUSE OF THESE ATROCIOUS DEMANDS,OF COURSE IF WE PROTEST THE MEDIA WILL NOT PUT US ON THE NEWS MORE SOCIALISM.PAULA SCALZO.

[nolalou]

I could not have said it better, so I quote from an editorial in the NY Times:
"Indeed, it was in the Bush years that antiregulation and deregulation found full expression, fueled by an ideology that markets know best, government hampers markets, and problems will magically fix themselves.

The nation is now painfully relearning that the opposite is true. Christopher Cox, chairman of the Securities and Exchange Commission, admitted on Friday that his agency%u2019s %u201Cvoluntary regulation%u201D of investment banks was a failure that contributed to the current crisis."

Over the years, especially with Reagan and now G.W. Bush, regulations put in place since the depression were undone, with nothing to replace them except to trust the market to regulate itself! Remember McCain supported most of those proposals!

Stop giving money to this Commander and Thief!
Every appointment, every decision, every dollar should be recalled. Legal action against this entire administration should be initiated!