Bailout's Passed - Now What?

The Ultimate Effectiveness Of The Historic Financial Rescue Plan Remains Unclear

(CBS/AP)  Getting the financial rescue through Congress may have been the easy part. Getting it to work may prove the tougher task.

"The consensus of economists that I've talked to are saying we are now at the beginning of what is probably going to be a deep recession for the next six months," said CBS News correspondent Anthony Mason. "This bill had to pass to put a tourniquet on that - to hold it from getting worse - but the economy is going to go through a really rough ride."

Along with the bailout came news of the worst monthly job loss in five years, as employers shed 159,000 workers.

After two weeks of anguishing debate, Congress passed and President George W. Bush signed the enormous plan to save the financial industry and prop up the economy in hopes of avoiding an unthinkable free fall with Election Day just a month away.

Now the pressure's on Treasury Secretary Henry Paulson, who has just 45 days to figure out how to spend it, reports CBS News correspondent Kimberly Dozier. But Paulson's already admitted he doesn't have enough people to do it, so he plans to outsource the job to experts on Wall Street - essentially the folks who created the problem, reports Dozier.

Treasury Secretary Henry Paulson, at a meeting last month, had shocked congressional leaders into action by warning of pending economic collapse without immediate federal intervention. After the climatic House vote on Friday, he said aides already were working out details and lining up advisers from outside the government so the money could start flowing. The goal is to unfreeze credit markets.

The immediate response to the 263-171 vote was not promising. Wall Street, which plunged a record 778 points after the House initially rejected the bill last Monday, fell 157 points. More economic bad news - a jump in job losses - outweighed the good news from Capitol Hill.

"Congress took a big step in the direction of at least giving us the tools necessary to bring some stability into the marketplace," Bush said Saturday while visiting Midland, Texas, his boyhood hometown.

Earlier, in his weekly radio address, Bush spoke cautiously about the economy's future. "My administration will move as quickly as possible, but the benefits of this package will not all be felt immediately. The federal government will undertake this rescue plan at a careful and deliberate pace to ensure that your tax dollars are spent wisely," he said.

Bush acknowledged that people are worried about their personal finances. "I'm confident by getting our markets moving, we will help unleash the key to our continued economic success: the entrepreneurial spirit of the American people," he said.

House Republican leader John Boehner of Ohio said lawmakers knew that if they failed to act, the crisis probably would worsen and "put us in a slump the likes of which most of us have never seen." The bailout, said House Speaker Nancy Pelosi, a California Democrat, is intended to help address "the real pain felt by Mr. and Mrs. Jones on Main Street."

The Bush administration gained broad authority to buy up toxic mortgage-related investments and other distressed assets from shaky financial institutions. The hope is it will restore confidence in markets and thaw a near-freeze in credit availability that has begun to affect the ability of banks to lend, businesses to obtain money for payrolls and investments, and individuals to gain credit to buy a home or a car.

In an attempt to aid smaller banks with serious liquidity problems, the measure raises the ceiling on federally insured deposits from $100,000 to $250,000. It increases federal oversight over Wall Street transactions and assures that chief executives whose companies benefit from the bailout do not leave with huge golden parachute payoffs.

Last Monday, despite pleas from Bush and his financial advisers and the support of congressional leaders, the House voted 228-205 to reject the rescue plan. Stock markets around the world plunged, then recovered somewhat as economists warned that the U.S. was facing its gravest economic threat since the Great Depression.

But the 95 Democrats and 133 Republicans who voted against the bill were responding to a deluge of calls and messages from constituents demanding defeat of the plan. Many saw it as a $700 billion giveaway to Wall Street when average people were getting no help.

Shortly before recessing for the election, senators stepped in and approved legislation Wednesday that linked the rescue to the extension of popular tax breaks for research and development, renewable energy and victims of natural disasters. The $110 billion in additions included benefits parity for people with mental health problems. The Senate also added the boost in the ceiling for bank deposits.

Those extras were enough to sway some House members who voted "no" the first time around. Others were swamped by calls from business and political leaders warning of the possible consequences of inaction.

California Gov. Arnold Schwarzenegger sent out a letter that said without a clear resolution to the crisis, his state and others "may be unable to obtain the necessary level of financing to maintain government operations and may be forced to turn to the federal Treasury for short-term financing."

The treasurer of Massachusetts, prompted by the state's inability to borrow from the short-term debt markets, has asked the federal government about lending Massachusetts money under the same favorable terms it has given banks and firms during the financial crisis.

Democrat presidential nominee Barack Obama spoke to many in the Congressional Black Caucus and helped persuade 13 to switch their votes. Nine freshmen Democrats also switched to "yes" votes after a conference call with Obama in which he promised an economic stimulus bill would be a top priority if he is elected.

Republican John McCain also lobbied for the measure, according to aides who declined to release a list of lawmakers he called.

All told, Democrats had 33 converts to the plan while 25 Republicans switched their vote, reports CBS News correspondent Bob Orr. In the end, 91 Republicans joined 172 Democrats to support the measure while 108 Republicans and 63 Democrats voted 'no."'

The global nature of the crisis was underscored by a hastily arranged European summit, which kicked off in Paris Saturday. British Prime Minister Gordon Brown called on his counterparts to do "whatever is necessary" to protect strong banks and restore stability.

But French President Nikolas Sarkozy announced that the EU will continue taking a country by country approach, though nations would try to coordinate efforts across borders so that actions in one country would not adversely effect another, reports CBS News correspondent Mark Phillips.

[random_radar]

Congress just gave Henry Paulson a blank check to spend 10 times more money than any human being in history has had at his disposal. Paulson is more powerful than anyone in the world now (at least anyone we are aware of). He can help his friends and destroy anyone he pleases with virtually no accountability.

What kind of people run our government? What kind of people would hand out vast amounts of money and power to their friends and make us pay the bills? No one I would want to have any authority in government.

We do not have a government of the people, for the people, or even acknowledging responsibility to the people. We have a tyranny imposing economic bondage on generations to come. America is becoming a gigantic slave labor camp.

[jerr11]

Just saw a clip of Paulson in March claiming that the economy is sound, the banks are sound.

Looks like he''s another Bush Liar.

O''Reilly said thet WAMU CEO Fishman must be investigated for misleading stockholders with phony data.

I say Paulson needs to be investigated for misleading Americans with phony data.

[marshall_nee]

Bailout''s Passed - Now What?

__________________________________________________

Pluuuuuuuuuuuuuunge!!!

[samthetvcat]

---"The hope is it will restore confidence in markets and thaw a near-freeze in credit availability that has begun to affect the ability of banks to lend, businesses to obtain money for payrolls and investments, and individuals to gain credit to buy a home or a car."---

You can''t look at the rate at which banks were lending in the period between when the bailout was announced and when it finally passed to gauge the success of the plan in unfreezing credit because you have to assume that for-profit corporations would have deliberately held out knowing they would be able to influence the passing of the bailout bill which would ultimately leave them better off.

The true test''ll be whether credit loosens up now in comparison from right before the bailout plan was announced . . . you wouldn''t expect it to because the trend of the market contracting and people losing jobs makes us collectively greater risks, right? Especially people who are already carrying a lot of debt.

And the plan''s ability to inspire confidence''ll be tied to that, won''t it?

The new ''hot'' word seems to be ''deleveraging'' . . . a complete opposite to the Paulson/Bernanke goal . . .

[trillion1]

I don''t see how this will restore any confidance when the same people who caused this fiasco will still be in charge, just richer. Thanks to all the people who have voted for the incumbents all these years.

[SiriusLuvr]

The "stock injection" option was the best improvement added to this bill. While it''s only an option, let''s hope the Secretary Paulson uses it!!

http://www.npr.org/templates/player/mediaPlayer.html?action=1&t=1&islist=false&id=95395712&m=95395093

[observantx]

I find that mixing KY jelly with about 1/3 Vaseline is making the *** I''m getting at least tolerable.

I hope I get at least a peck on the cheek when Paulson and Wall Street are done.

I hope the rest of you are doing better than me.


But it''s OK. I get my turn at the polls. Every incumbent who voted for this t*rd on toast is going to get royally shafted in return.

What goes around, comes around as they say in my neck of the woods.

[stupidrules3]

But the 95 Democrats and 133 Republicans who voted against the bill were responding to a deluge of calls and messages from constituents demanding defeat of the plan. Many saw it as a $700 billion giveaway to Wall Street when average people were getting no help.


If it walks like a duck and quacks like a duck.......

Our representatives in the Senate and House have caved in to the scare tactics of the administration and the ill effects will start as soon as the money hits the street. If I am an overseas investor, I see the US government firing up the printing press to print money and flood the market with dollars. Everything tied to the dollar just went down in value, so it is now an investment to be avoided. I also like the part where they are telling us that we are still going to have a rough time in the upcoming months. Next is the part where they tell us,"but it could have been so much worse."

[sjc_1]

This is Fear Factor II. It works with terrorism and it will work with finance. It is real, but if you exaggerate it and make it seem dire, you can get people to do what you want.

[samthetvcat]

I think Paulson''s got something of a God complex - if the market trend is to ''deleverage'' because we''re overleveraged, what kind of person thinks they single-handedly turn that tide?

And Bernanke keeps analogizing this situation to The Great Depression, but was the Great Depression caused by excessive debt levels? Wasn''t the lack of confidence there caused by stuff like the lack of an automatic shut-off to the stock market, lack of FDIC insurance? The difference being that more credit might be the solution to a lack of confidence when credit levels aren''t an issue - here maybe that ''solution'' isn''t truly viable . . .

In which case Paulson/Bernanke just went and made the situation worse. wtg :(

[stupidrules3]

This bill allows the Federal government to buy bad loans which they plan to repackage and sell to private sources thus generating a repayment of the money they use to bail out the market. I''d like to see the people who will line up to take it off the government''s hands. What a sales pitch this is going to be,"hey, I''ve got this package of turds, wanna buy it? You can be the proud owner of a large quantity of overfinanced homes."

[marshall_nee]

Our economic landscape looks much like Mussolini''''s Corporate Nation, just before it imploded.

Posted by curse914 at 06:57 PM : Oct 04, 2008

Will the trains run on time though?

[jesusface]

%u201CCongress passed and President George W. Bush signed the enormous plan to save the financial industry and prop up the economy.%u201D

Isn%u2019t it typical for Bush that the economy is in second place%u2026

[marshall_nee]

Some of these institutions were leverage out to 37 : 1 per liquidity. It used to be law that they could not leverage past 9 : 1, but as soon as the markets were deregulated these guys setup a pyramid scheme. It appears the Freimanite myth of markets policing themselves is just that, a Myth.

Posted by curse914 at 07:01 PM : Oct 04, 2008

LOL. If you think we''re bad, take a look at some of the Yurupean banks for leverage.

http://tinyurl.com/4zpqnp

[marshall_nee]

. Every house ya buy is at least 100 years old.

Posted by donnie7945 at 07:15 PM : Oct 04, 2008

I currently live in Yurup and my house was built in only 1936

[marshall_nee]

1,000 years old.. heck in France there''''s a whole underground city. What used to be the old sewer system. Land over there is like living on eggshells.

Posted by donnie7945 at 07:17 PM : Oct 04, 2008

Creepy those catacombs, walked down one in Edinburgh.

[marshall_nee]

Wow. You got a new house.

Posted by donnie7945 at 07:21 PM : Oct 04, 2008

Tell that to the dry rot.

[brianbwb-2009]

Posted by curse914

Spot on analysis, except for the fact that when Nixon was forced to sell the treasury gold on the open market, because the war profiteers stole $13 trillion from us during our South East Asia military mistake, (1956 to 1972) Nixon used wage and price controls to prevent hyperinflation, but in truth the economy was on it''s last legs back then.

Now the "unregulated capitalism" supporters have run out of tricks and lies to maintain the illusion, as I said when this latest "crisis" was announced, the bailout plan simply won''t work, we have only made $810 billion of the last drops available for the crooks to wring out of us.

[marshall_nee]

37 to 1 isn''''t bad. I used to think a 6 year car loan was crazy, but they offer them now too.

Posted by donnie7945 at 07:27 PM : Oct 04, 2008

Fractional reserve banking isn''t bad, it''s dangerous.

[marshall_nee]

You need to get over your anti socialist BS. You do realize we have had a functioning and successful mixed socialist / capitalist economy for 70 years, right?

Posted by curse914 at 07:25 PM : Oct 04, 2008

It went bankrupt in the 1970''s.

[marshall_nee]

10 Day long bank holiday imminent, so that we can''t get our bailout money back!

[marshall_nee]

Posted by PAINBSLAPU at 07:39 PM : Oct 04, 2008

Who are you and what is your motivation?

[marshall_nee]

Posted by curse914 at 07:39 PM : Oct 04, 2008

Reagan just tested the waters, then Bush caused the meltdown.

[sjc_1]

PAINBSLAPU,

I reported you to CBS. They are coming with the coat and thorazine...hold tight.

[marshall_nee]

Posted by curse914 at 07:39 PM : Oct 04, 2008

BTW; that graph isn''t pretty, but hardly surprising.

[x-republican]

"Senator Obama and his allies in congress infused unnecessary partisanship into the process. Now is not the time to fix the blame." Senator John McCain, September 29, 2008

This pathetic hypocrite has the nerve to utter those two sentences in the same breath and wants us to give him the highest office in the land. No thanks, John.

[x-republican]

"Senator Obama and his allies in congress infused unnecessary partisanship into the process. Now is not the time to fix the blame." Senator John McCain, September 29, 2008

Of course not, John, you and your buddies in congress have been drunk on deregulation for the last 8 years. Let''s hold off on fixing the blame until after the election, right, John? Get real.

[x-republican]

Welcome to the United Socialist States of America! Brought to you by the greedy republicans who have suddenly decided, now that they are losing money, that we are all in this together. Republicans are roaches.

[greeneyes222]

No McCain wasn''t right - but neither were Pelosi, Reid, and most of all Obama. The Democrats are every bit as bad as the Republicans. They had a chance to show us what they were made of - unfortunately, they did.

[bunchofchemi]

The short term necessity was this bailout. The medium term necessity is growing the economy so people have money to spend that will lift the value of the houses that are the reason for the problem. This is more likely under a Democrat, since 1929 the Democrats have presided over real growth in GDP per capita five times greater than Republicans (3.8% vs. 0.7%, see Professor Elliot Parker''s analysis).

The long term solution is restoring adequate regulation of the financial markets, again a Democratic strength. The permanent solution is for the Republicans to abandon their ideology of deregulation so no future generation will have to face this again.

I, for one, am glad Bernake is an expert on the causes of the Great Depression. He may have saved us from a far worse outcome. The other nice thing is that in 1929, the voters had to wait 3 years to throw out the Republicans, but this time we only have to wait a month.

[jmurrieta11]

And just a few short months ago, the Republican Retards were trying to force Social Security to put its money (er--our money) into the Stock Market!

Can you just imagine where we''d be if we''d been so stupid as to listen to the Republicans?

You betcha!!--BROKE!!

And McCain/Palin are more of the same old SHEEYIT!

[jmurrieta11]

Was there anything funnier than Sarah "Bomb Chucker" Palin trying to quote Ronald Reagan "there you go again" in her debate line!

What she was afraid of was that someone might actually examine the record of the Repug Party over the last 8 years!

But--OH NO-- that would be NEGATIVISM!

She wants to leave a steaming turdpile on the kitchen floor and get a dog biscuit for it!!

No no Sarah, bad doggy!

[kellyanne5]

Why is Bush acting like he did such a great thing? He caused this whole mess. If you agree he needs to be brought up on charges, join us. www.theseriouspolice.com

[indiana_gal]

watch fox news. They have the REAL story

[indiana_gal]

This whole thing started with Clinton. Then escalated. Barack Obama helped this whole crisis get worse.

[x-republican]

The greedy repiglicans have suddenly become socialists! When times were good, it was every one for himself and screw the poor and the middle class. Now that times are bad, repiglicans want us all to be a team and pull together. Repiglicans have no shame.

[bunchofchemi]

The next step after the bailout is to hand a landslide loss to the Republicans whose deregulation and deficit spending led to this burst asset bubble. Check the money supply growth over the last several years of the Bush administration: it was way too fast. That was due to the big tax cuts for the wealthy under Bush and the Republican Congress. The government had to borrow more and lots of folks did the same. The financial system, stripped of prudent regulation by the Republicans, from the local mortgage office to the big Wall Street firms, loved the orgy of purchases of vast numbers of overpriced houses. The next step is to bring in Obama-Biden with a Democratic Congress to grow the economy and enact effective regulations.

[jmurrieta11]

MCCAIN SON QUITS FAILED BANK

The rats leaving the ship McCain helped sink!

Candidate''s son involved with failed bank--bailout sure to follow!

Read on!


July 29, 2008 (Reuters):
Andrew McCain, son of presumptive Republican nominee, John McCain, has resigned today from Silver State Bank''s Board of Directors.

Sept. 5, 2008 (FDIC):
FDIC Information for Silver State Bank, Henderson, NV

On September 5, 2008, Silver State Bank, Henderson, NV was closed by the Nevada Financial Institutions Division. Subsequently the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.

[t_barr]

Now What?
Now the 1-2 QUADRILLION Dollars of Derivatives Unwind and We all find out that the 3+ TRILLION of Bailouts done last month, trying to avoid the meltdown, only put US further in Debt. The 0.7T Paulson just Stole won''t do Squat. Hold on, is the best advise available at this point.

Moment of truth for Default Derivatives
www.independent.co.uk/news/business/news/moment-of-truth-for-default-derivatives-949823.html

''The credit derivatives market, worth some 54 TRILLION, began its biggest test yesterday as an unprecedented round of settlement operations on derivatives contracts began,including those covering the debt of Lehman Brothers, Fannie Mae and Freddie Mac.

At stake is how much will be paid out on credit default swaps (CDS) %u2013 a type of insurance contract against acompany defaulting on its debt which is sold by investment banks and major insurers such as AIG.

Freddie and Fannie will be settled on 6 Oct, with Lehman on 10 Oct and Washington Mutual on 23 Oct.''

[bozworth4]

Why can''t I just have my slice of the 700 billion? I could put lots of people to work and start the economy going in my town. But noooooo I get $300 of my money back in a bogus stimulus package. WHOPEE!!!
Give me my slice of this money and I won''t care if banks are loaning money or not. Won''t need them. I think I heard my share of this money would be somehere around $475,000. But then this might just enpower us common folks and we all know the policitians don''t want that. No republican or democrats only politicians that would pimp their mothers for a dollar, euro, or yen.

[txgrouch2006]

The next step is to bring in Obama-Biden with a Democratic Congress to grow the economy and enact effective regulations.
Posted by BunchofChemi at 09:30 PM : Oct 04, 2008

Obama is no Democrat. Hillary Clinton is a Democrat. Bill Clinton is a Democrat. Ted Kennedy is a Democrat.

Obama is a new leaf. He ran as a Democrat because running as in Independent wouldn''t have worked. Hillary was foolish enough to mess up her own campaign, which gave Obama the chance he needed.

Down with the Republicans. Down with the Democrats. Up with Obama and the new direction I hope he''ll bring.

Now let''s all finish the job by VOTING OUT ALL INCUMBENTS FROM CONGRESS on Election Day.

[txgrouch2006]

Bush acknowledged that people are worried about their personal finances. "I''m confident by getting our markets moving, we will help unleash the key to our continued economic success: the entrepreneurial spirit of the American people," he said.
----------------------------------------------

OK, here''s the deal on "trickle down." It works only if the money actually TRICKLES DOWN.

It doesn''t work when executives are busy STUFFING ALL THE MONEY INTO THEIR OWN POCKETS and the workers are getting replaced by H1B visa holders, or the job is being sent out of the country.

You see, "trickle down" meant trickle down to THE PEOPLE. Not into the fat cats'' pockets.

THAT''S what went wrong...

[bozworth4]

In the picture above, where is King George II left arm and hand? Controlling his puppet???

[txgrouch2006]

His only problem was that he was wrong. He said $85 billion spread among 200 million people would give each of us $425,000. If you do the math, the correct answer is $425.
Posted by Toss_em_all at 10:14 PM : Oct 04, 2008

So he was off by only A FACTOR OF A THOUSAND or so.

Speaking as one of the many displaced high-tech workers who attempted to teach math at a public high school, only to throw up my hands and walk out in disgust AT THE GROWNUPS who didn''t want the students to learn anything - I''M NOT THE LEAST BIT SURPRISED.

80% of the population can''t calculate a percent. When a typical news item quotes statistics, they have no clue what they mean.

BTW, to those of us who KNOW math, we realize that the statistics MEAN NOTHING. The typical news item is "Group A increased by an average of 13,000, while group B increased by 27% overall." Which group increased more? YOU CAN''T TELL. The sentence doesn''t give enough information to solve the problem.

But the average person doesn''t understand percents anyway, so THEY CAN''T TELL the the news statistics are gibberish. And to the REALLY stupid, this is good because THEY GET TO PRETEND IT MEANS WHATEVER THEY WANT.

Which is the desired outcome of all journalism. Sell the same story to both sides of the issue and make BOTH sides think you''re on their side.

I''m rambling. But what''s the use. No matter what you do, the jackholes in Washington DC are busy *** us all over again anyway.

[t_barr]

www.webofdebt.com/articles/its_the_derivatives.php

''Credit default swaps are bets between two parties on whether or not a company will default on its bonds. Typically, the ''protection buyer'' gets a large payoff from the ''protection seller'' if the company defaults within a certain period of time, while the ''protection seller'' collects periodic payments from the ''protection buyer''. CDS thus resemble insurance policies, but there is no requirement to actually hold any asset or suffer any loss, so CDS are widely used just to increase profits by gambling on the market. The premiums are free money %u2013 free until the bond actually goes into default.

What if the hedge fund doesn''t have the Money? The fund''s corporate shell or limited partnership is put into bankruptcy; but both parties are claiming the derivative as an asset on their books, which they now have to write down. Players who have hedged their bets by betting both ways cannot collect on their winning bets; and that means they cannot afford to pay their losing bets, causing other players to also default on their bets.

The dominos go down in a cascade of cross defaults that infects the whole banking industry and jeopardizes the global pyramid scheme. The potential for this sort of nuclear reaction was what prompted Warren Buffett to call derivatives ''weapons of financial mass destruction.'' It is also why the banking system cannot let a major derivatives player go down, and it is the banking system that calls the shots.''

[txgrouch2006]

Banks will take all the money and still tell regular Americans "sorry, can''''t loan you any money" That''''s it. We were all screwed.
Posted by proisrael at 09:34 PM : Oct 04, 2008

Yes, exactly. Now that they''re all off the hook and getting away scott free for their recklessness that has collapsed our economy, they''re keeping their money in their pockets from now on.

Credit will be VERY hard to get. Unless you have a high income and a spotless credit record, they won''t even accept your application.

But thanks to the past eight years, NOBODY has a high income and a spotless credit record anymore.

BTW, were you planning to sell a house? GOOD LUCK...

[starleo146]

I tell you I just don''t like that smirk on there faces, It says to me GOTCHA AGAIN

[txgrouch2006]

Percent? Just move the decimal two places.. Its easy.
Posted by donnie7945 at 10:26 PM : Oct 04, 2008

LOL! Try telling that to the average classroom of public high school students.

Half the room will say "I don''t get it I don''t get it I don''t get it what''s he talking about he''s not making any sense what''s a decimal I''m gonna tell my Mom to complain to the principal he''s a BAD TEACHER nobody can understand anything he says..."

Then the sarcastic girl raises her hand and says "Can I have a pass to the guidance counselor? I want to change my schedule and get a different math teacher."

Say, donnie7945, where are you from?

[txgrouch2006]

I tell you I just don''''t like that smirk on there faces, It says to me GOTCHA AGAIN
Posted by starleo14672 at 10:33 PM : Oct 04, 2008

That''s not smirking. Paulson is BEAMING like a new Daddy at the maternity ward.

Bush is just grimacing. He''s thinking, "Dad is NEVER gonna let me hear the end of this."