Tuesday, September 30, 2008
Think about it...
This is America. We are a resilient & proud people. I do not think this will kill our nation. If anything it may be the reset of power that we may have been needing.
I do not believe our complex economy will come crashing down. I do believe if you live or run your business on credit, you will feel this. Maybe this is a good thing and will teach people to not live beyond their means.
Regular people who do not depend on credit to run their lives will be fine. It is the credit market that is suffering. The credit industry who pushed this "credit" on Americans are modern day loan sharks. That is all they are.
Look what they did when the chips were down. They threatened you by collapsing your economy if you did not give them the power and money they wanted. They resorted to the tactic that always aides them in getting what they want, fear mongering.
The fear mongering is even continuing today, even though stocks are up almost 200 points. bush came on television to scare the American people by saying "the failure of Congress to act will be painful and lasting". More fear mongering.
Bush is the only President in history, that when things look gloomy, he begins to scream, "THE SKY IS FALLING!".
Did we not learn the moral of the story of chicken little?
When you are in debt, the person you owe runs you till you repay your debt. They have taken this basic philosophy and tried to apply it to a much bigger scale. Why do most Americans work? Is it to live or to repay the debt they owe?
America does not need Wall Street. We have been fooled into believing how rich people live affects the poor people of this country. That the well being of the rich must be taken care of so that the poor can get the benefits of "trickle down economics".
When the money goes from tax payers back to the corporations in the form of a bail out or loans, is this not "trickle up economics"? And how does this benefit the tax payer? It does not. If anything, not only do these big corporations expect you to buy their "shiny stuff", but they also expect you to give them money for loans or a bail out when their business suffers because of their mistakes.
Seems to me that the rich corporations should deal with their own problems. I do not see any corporation stepping up and supplying the people with things they need like health care.
Wake up America.....big business rips you off!
The 15-nation currency also weakened against the British pound after Belgian Prime Minister Yves Leterme said Dexia, the world's biggest lender to local governments, will receive about $9.2 billion to shore up its capital. The dollar rose against the yen on speculation the U.S. Senate will salvage a $700 billion bank-bailout plan as early as tomorrow after Congress rejected it yesterday.
"The consensus is the U.S. banking system is a little bit further along in its exposure of its toxic assets," said Firas Askari, head currency trader at BMO Nesbitt Burns in Toronto. "It's a case of which is relatively worse. The dollar's going to benefit against the euro because Europe has more to expose."
The euro fell 2.5 percent to $1.4079 at 11:55 a.m. in New York, from $1.4434 yesterday. The euro also slid to 149.10 yen from 150.38. It earlier reached 148.55, the weakest since Sept. 16. The yen weakened to 1056.93 per dollar from 104.18, after earlier reaching 103.54, also the most since Sept. 16.
The capital infusion for Dexia comes two days after Belgium, the Netherlands and Luxembourg rescued Fortis, the largest Belgian financial-services company, Britain took control of Bradford & Bingley Plc, the country's biggest lender to landlords, and Germany bailed out Hypo Real Estate Holding AG.
Implied volatility on one-month euro-dollar options rose to 16.9575 percent, or the highest in almost eight years. On Sept. 18, it reached 15.55 percent, the same level that triggered the Group of Seven nations to buy euros in 2000 to halt the 27 percent slide from its 1999 debut.
The Conference Board said Tuesday that its Consumer Confidence Index is now at 59.8, up from a revised 58.5 in August. Economists surveyed by Thomson/IFR expected a reading of 55.5.
The level remains about half of what it was a year ago and near the lowest since the index registered 54.6 in October 1992 when the economy was coming out of a recession.
The cutoff date for responses to the survey was September 23 and doesn't capture Monday's stock market plunge that wiped away $1.2 trillion in the value of retirement funds, mutual funds and individual stock holdings.
The Presentation Index, which measures shoppers' current assessment of the economy, decreased to 58.8 from 65.0 in September. The Expectations Index, which measures consumers' outlook for the next six months, however, increased to 60.5 from 54.1 in August.
Consumer spending represents about two-third of all economic activity.
"September's increase in the Consumer Confidence Index was due solely to an improvement in the short-term outlook," said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement. "However, these results did not capture all of the tumultuous events in the financial sector this month, and until the dust settles a bit more, we will not know the full impact on consumers' expectations."
Franco added that shocks such as the 1987 stock market crash "generally tend to have a temporary adverse effect on confidence, lasting on average two to four months unless they result in significant job losses."
"Just as noteworthy, consumers' assessment of current conditions continues to indicate that the current economic environment remains quite weak," she said.
This bailout was a terrible idea. Here's why.
The current mess would never have occurred in the absence of ill-conceived federal policies. The federal government chartered Fannie Mae in 1938 and Freddie Mac in 1970; these two mortgage lending institutions are at the center of the crisis. The government implicitly promised these institutions that it would make good on their debts, so Fannie and Freddie took on huge amounts of excessive risk.
Worse, beginning in 1977 and even more in the 1990s and the early part of this century, Congress pushed mortgage lenders and Fannie/Freddie to expand subprime lending. The industry was happy to oblige, given the implicit promise of federal backing, and subprime lending soared.
This subprime lending was more than a minor relaxation of existing credit guidelines. This lending was a wholesale abandonment of reasonable lending practices in which borrowers with poor credit characteristics got mortgages they were ill-equipped to handle.
Once housing prices declined and economic conditions worsened, defaults and delinquencies soared, leaving the industry holding large amounts of severely depreciated mortgage assets.
The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.
The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.
Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.
In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.
Thoughtful advocates of the bailout might concede this perspective, but they argue that a bailout is necessary to prevent economic collapse. According to this view, lenders are not making loans, even for worthy projects, because they cannot get capital. This view has a grain of truth; if the bailout does not occur, more bankruptcies are possible and credit conditions may worsen for a time.
Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.
Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.
The costs of the bailout, moreover, are almost certainly being understated. The administration's claim is that many mortgage assets are merely illiquid, not truly worthless, implying taxpayers will recoup much of their $700 billion.
If these assets are worth something, however, private parties should want to buy them, and they would do so if the owners would accept fair market value. Far more likely is that current owners have brushed under the rug how little their assets are worth.
The bailout has more problems. The final legislation will probably include numerous side conditions and special dealings that reward Washington lobbyists and their clients.
Anticipation of the bailout will engender strategic behavior by Wall Street institutions as they shuffle their assets and position their balance sheets to maximize their take. The bailout will open the door to further federal meddling in financial markets.
So what should the government do? Eliminate those policies that generated the current mess. This means, at a general level, abandoning the goal of home ownership independent of ability to pay. This means, in particular, getting rid of Fannie Mae and Freddie Mac, along with policies like the Community Reinvestment Act that pressure banks into subprime lending.
The right view of the financial mess is that an enormous fraction of subprime lending should never have occurred in the first place. Someone has to pay for that. That someone should not be, and does not need to be, the U.S. taxpayer.
The U.S. Congress's rejection of a bank rescue plan tore nearly 9 percent off the broad S&P 500 on Monday but European shares and many Asian stock markets clawed back from early losses on hopes the U.S. plan would eventually go through.
U.S. stock index futures also pointed to a higher opening, suggesting belief that Monday's selloff was over-done.
"It's certainly my working assumption that there (will be) some sort of agreement reached in the U.S. and based on that I would expect the market to recover quite strongly from yesterday's sell-off," said Darren Winder, equity strategist at Cazenove.
Angst over the battered financial sector continued, nonetheless, with Belgian-French financial services group Dexia
getting a 6.4 billion euro ($9.18 billion) capital boost from public shareholders to help it fight the global credit crisis.
Ireland also offered to guarantee all bank deposits for two years to improve banks' access to funds on international markets. It also guarantees covered bonds, senior debt and dated subordinated debt.
Money markets remained on life support with benchmark rates continuing to climb, albeit distorted by the final day of the third quarter.
European stocks fell as much as 2 percent in early trading and Japan's Nikkei closed 4.12 percent lower after the deep losses on Wall Street in the wake of Congress's failure to agree a $700 billion plan to buy up toxic debt from the financial industry.
Globally, MSCI's main world stock index, a benchmark for many leading investors, was down 0.7 percent, adding to a 6.84 percent loss on Monday that saw the index's market capitalization plunge $1.73 trillion.
But the FTSEurofirst 300 index of top European shares recovered to gain 0.6 percent.
"No one really expected a no vote (in Washington), but it's encouraging that they're clearly going to vote on this again," said one equities trader in Europe.
Earlier, the Nikkei average hit a three-year closing low, shedding 483.75 points to 11,259.86, the lowest finish since June 2005. It earlier lost nearly 5 percent.
Other Asian stocks recovered, however. Hong Kong's Hang Seng index closed 0.8 percent higher, while South Korea's KOSPI pared losses to end down 0.6 percent. Both had fallen more than 5 percent early in the day.
Another European bank, Dexia, had to be rescued and shares went through another roller coaster ride after the House of Representatives voted 228-205 against the rescue on Monday.
European leaders led the calls for action by President George W. Bush who called close advisors into emergency talks after the defeat and was to make a statement on Tuesday.
"The US must take its responsibilities in this situation, must show statesmanship for the sake of their own companies and for the sake of the world," European Commission spokesman Johannes Laitenberger said.
German Chancellor Angela Merkel called for another vote on the plan this week to restore market confidence.
British Prime Minister Gordon Brown said he had sent a message to the White House to underline "the importance that we attach to taking decisive action". New Japanese premier Taro Aso said: "We should not let the world financial system collapse."
Australian Prime Minister Kevin Rudd said that he and other US allies would press Washington to take action.
US Treasury Secretary Henry Paulson warned US lawmakers they had to act fast after his plan was dramatically rejected Monday.
"Markets around the world are under stress," said Paulson, architect of the proposal to buy up the mountains of bad mortgage-related debt behind a wave of home foreclosures and spectacular bank failures.
"We need to get something done," he added. "This is much too important to simply let fail."
Central banks again poured money into markets an attempt to revive the global banking system but stocks rallied slightly in Europe after an initial slump following the lead set by Wall Street and Asian markets.
London shares dropped initially, but later showed a slight gain of 0.22 percent, Paris was up 0.21 percent but Frankfurt was down 0.75 percent after a 4.1-percent fall in Tokyo, and losses in Asia except in Hong Kong which gained 0.8 percent.
The Dow Jones Industrial Average sank 777.68 points or 6.98 percent on Monday, in a record points fall amid panic after the House vote.
Hiroichi Nishi, equities chief at Nikko Cordial Securities in Tokyo, said: "The market is exploring where the bottom is now."
French-Belgian bank Dexia was rescued by the French, Belgian and Luxembourg governments which put in 6.4 billion euros (9.2 billion dollars). Governments also had to step in to save Dutch-Belgian bank Fortis and Britain's Bradford & Bingley this week.
French President Nicolas Sarkozy called a pre-dawn meeting of key advisors and after talks with top bankers promised measures before the end of the week. A senior official in his office said. "Banks are in trouble in Germany, Belgium and Great Britain. We feel a bit surrounded."
France and Ireland reassured people with deposits in banks that their money was safe, echoing similar statements across Europe.
The euro fell again, to 1.4376 dollars in London from 1.4432 in New York because "credit worries are deepening over the European financial system," said Saburo Matsumoto at Sumitomo Trust Bank.
"The euro may fall further," he said. "We fear the credit worries may spread into emerging economies."
A vacuum of fear is causing a desperate shortage of funds in the interbank system, despite infusions from central banks, and is a critical factor in pressures that have brought down many top names in US and European banking.
Some analysts now suggest there could be concerted central bank action to cut interest rates because likely economic slowdown, even recession, arising from the crisis would sharply cut inflationary pressures.
"Central banks emergency cuts: if not now, when?" asked Citi analysts in London. But some other analysts doubted that there would be a pan-European initiative.
Around the world officials and commentators used the language of disaster and despair to describe the possible impact of further delay in US action on the world economy and especially the interbank lending system.
In London, a leading global financial centre along with New York, The Guardian newspaper said: "This has become a crisis of confidence in the banking system as a whole, which is unprecedented in modern times."
The Times wrote: "The collapse of the plan threatens all of Main Street, in America and further afield."
Central banks again pumped out huge sums to keep global banking liquid with the European Central Bank renewing one-day loans of 30 billion dollars (20.8 billion euros). It also allocated 190 billion euros under a regular arrangement which once again revealed great tension on short-term bank interest rates.
The Japanese central bank injected 3.0 trillion yen (28.8 billion dollars).
Former World bank chief economist and Nobel economics prizewinner Joseph Stiglitz, forecasting that the crisis would ensure that Democrat candidate Barack Obama would win the presidential election.
"We will have other dramatic failures of financial institutions. The American economy is headed into a long recession."
A snapback of some degree wasn’t unexpected as carnage on Wall Street often attracts bargain hunters. Still, questions remain about how Wall Street will proceed without a bailout plan in place to absorb soured mortgage and other debt from banks’ balance sheets and restore confidence in lending.
While U.S. political leaders have vowed to revisit the issue, it could be several days before lawmakers could reconvene.
In the meantime, investors likely will proceed cautiously. On Tuesday, economic readings could help shape sentiment. A reading of the Chicago Purchasing Managers’ index, which measures business conditions across Illinois, Michigan and Indiana, is due shortly after the opening bell, as are figures on consumer confidence.
But it’s likely Wall Street will remain focused on Capitol Hill and the prospects for resurrecting the government’s bailout effort, which was backed by leaders of both parties.
Advocates for the rescue plan say it is necessary to jump-start moribund credit markets, which are where businesses turn to finance their day-to-day operations. But fears of bad debt have made banks and other financial houses nervous about lending.
It has become more expensive and difficult to borrow for businesses and consumer alike, a headwind for the economy.
Dow Jones industrial average futures rose 200, or 1.91 percent, to 10,674 after falling more than 777 points, or 6.98 percent, Monday. It was the blue chips’ largest point drop and 17th largest percentage drop.
Standard & Poor’s 500 index futures rose 31.60, or 2.82 percent, to 1,150.10, and Nasdaq 100 index futures rose 32.25, or 2.13 percent, to 1,544.25.
Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.68 percent from 3.58 percent late Monday. The dollar was mixed against other major currencies, while gold prices rose.
The “sell” orders that swept across Wall Street on Monday spread to Asia. Japan’s Nikkei stock average fell 4.12 percent. But Hong Kong’s Hang Seng index rose 0.76. In morning trading, Britain’s FTSE 100 rose 0.27 percent, Germany’s DAX index fell 1 percent, and France’s CAC-40 slipped 0.02 percent.
Let me cut to the chase. The biggest robbery in the history of this country is taking place as you read this. Though no guns are being used, 300 million hostages are being taken. Make no mistake about it: After stealing a half trillion dollars to line the pockets of their war-profiteering backers for the past five years, after lining the pockets of their fellow oilmen to the tune of over a hundred billion dollars in just the last two years, Bush and his cronies -- who must soon vacate the White House -- are looting the U.S. Treasury of every dollar they can grab. They are swiping as much of the silverware as they can on their way out the door.
No matter what they say, no matter how many scare words they use, they are up to their old tricks of creating fear and confusion in order to make and keep themselves and the upper one percent filthy rich. Just read the first four paragraphs of the lead story in last Monday's New York Times and you can see what the real deal is:
"Even as policy makers worked on details of a $700 billion bailout of the financial industry, Wall Street began looking for ways to profit from it.
"Financial firms were lobbying to have all manner of troubled investments covered, not just those related to mortgages.
"At the same time, investment firms were jockeying to oversee all the assets that Treasury plans to take off the books of financial institutions, a role that could earn them hundreds of millions of dollars a year in fees.
"Nobody wants to be left out of Treasury's proposal to buy up bad assets of financial institutions."
Unbelievable. Wall Street and its backers created this mess and now they are going to clean up like bandits. Even Rudy Giuliani is lobbying for his firm to be hired (and paid) to "consult" in the bailout.
The problem is, nobody truly knows what this "collapse" is all about. Even Treasury Secretary Paulson admitted he doesn't know the exact amount that is needed (he just picked the $700 billion number out of his head!). The head of the congressional budget office said he can't figure it out nor can he explain it to anyone.
And yet, they are screeching about how the end is near! Panic! Recession! The Great Depression! Y2K! Bird flu! Killer bees! We must pass the bailout bill today!! The sky is falling! The sky is falling!
Falling for whom? NOTHING in this "bailout" package will lower the price of the gas you have to put in your car to get to work. NOTHING in this bill will protect you from losing your home. NOTHING in this bill will give you health insurance.
Health insurance? Mike, why are you bringing this up? What's this got to do with the Wall Street collapse?
It has everything to do with it. This so-called "collapse" was triggered by the massive defaulting and foreclosures going on with people's home mortgages. Do you know why so many Americans are losing their homes? To hear the Republicans describe it, it's because too many working class idiots were given mortgages that they really couldn't afford. Here's the truth: The number one cause of people declaring bankruptcy is because of medical bills. Let me state this simply: If we had had universal health coverage, this mortgage "crisis" may never have happened.
This bailout's mission is to protect the obscene amount of wealth that has been accumulated in the last eight years. It's to protect the top shareholders who own and control corporate America. It's to make sure their yachts and mansions and "way of life" go uninterrupted while the rest of America suffers and struggles to pay the bills. Let the rich suffer for once. Let them pay for the bailout. We are spending 400 million dollars a day on the war in Iraq. Let them end the war immediately and save us all another half-trillion dollars!
I have to stop writing this and you have to stop reading it. They are staging a financial coup this morning in our country. They are hoping Congress will act fast before they stop to think, before we have a chance to stop them ourselves. So stop reading this and do something -- NOW! Here's what you can do immediately:
1. Call or e-mail Senator Obama. Tell him he does not need to be sitting there trying to help prop up Bush and Cheney and the mess they've made. Tell him we know he has the smarts to slow this thing down and figure out what's the best route to take. Tell him the rich have to pay for whatever help is offered. Use the leverage we have now to insist on a moratorium on home foreclosures, to insist on a move to universal health coverage, and tell him that we the people need to be in charge of the economic decisions that affect our lives, not the barons of Wall Street.
2. Take to the streets. Participate in one of the hundreds of quickly-called demonstrations that are taking place all over the country (especially those near Wall Street and DC).
3. Call your Representative in Congress and your Senators. (click here to find their phone numbers). Tell them what you told Senator Obama.
When you screw up in life, there is hell to pay. Each and every one of you reading this knows that basic lesson and has paid the consequences of your actions at some point. In this great democracy, we cannot let there be one set of rules for the vast majority of hard-working citizens, and another set of rules for the elite, who, when they screw up, are handed one more gift on a silver platter. No more! Not again!
P.S. Having read further the details of this bailout bill, you need to know you are being lied to. They talk about how they will prevent golden parachutes. It says NOTHING about what these executives and fat cats will make in SALARY. According to Rep. Brad Sherman of California, these top managers will continue to receive million-dollar-a-month paychecks under this new bill. There is no direct ownership given to the American people for the money being handed over. Foreign banks and investors will be allowed to receive billion-dollar handouts. A large chunk of this $700 billion is going to be given directly to Chinese and Middle Eastern banks. There is NO guarantee of ever seeing that money again.
P.P.S. From talking to people I know in DC, they say the reason so many Dems are behind this is because Wall Street this weekend put a gun to their heads and said either turn over the $700 billion or the first thing we'll start blowing up are the pension funds and 401(k)s of your middle class constituents. The Dems are scared they may make good on their threat. But this is not the time to back down or act like the typical Democrat we have witnessed for the last eight years. The Dems handed a stolen election over to Bush. The Dems gave Bush the votes he needed to invade a sovereign country. Once they took over Congress in 2007, they refused to pull the plug on the war. And now they have been cowered into being accomplices in the crime of the century. You have to call them now and say "NO!" If we let them do this, just imagine how hard it will be to get anything good done when President Obama is in the White House. THESE DEMOCRATS ARE ONLY AS STRONG AS THE BACKBONE WE GIVE THEM. CALL CONGRESS NOW.
All major stock markets in the region tumbled sharply, succumbing to heightened fears of a broader global credit crisis.
Japan's benchmark Nikkei 225 index shed more than 544 points, or 4.6 percent, to 11,199.07 after losing 1.3 percent Monday.
Key indices in Australia and New Zealand were both down about 4 percent, Seoul's Kospi lost 3.5 percent, and Hong Kong's Hang Seng index declined 5.5 percent.
The weighted price index of the Taiwan Stock market, which was closed Monday due to a typhoon, fell 6.1 percent, even after Taiwanese Vice Premier Paul Chiu urged investors to have confidence in the island's export-driven economy and its financial markets.
The selling in Asia came after world stock markets tumbled Monday amid a flurry of government bank rescues in Europe that had investors on edge even before the House voted to reject the Bush administration's rescue plan.
The House of Representatives on Monday defeated a $700 billion emergency bailout package for the U.S. financial system, shocking capital and stock markets around the world. The Dow Jones industrial average closed down 777 points, its biggest single-day fall, topping the 684 points it lost on the first day of trading after the Sept. 11, 2001, terrorist attacks.
The downturn sapped the dollar overnight. The greenback was trading at 103.90 yen Tuesday morning in Asia from above 106 yen a day earlier, adding further pressure on major exporters.
Latin American markets were still open when news that lawmakers on Capitol Hill had rejected the bailout sent investors running for the exits from Mexico City to Buenos Aires.
Stocks in Europe had earlier ended lower, although less dramatically, as market players fretted about the health of the world's financial system, even with a U.S. bailout.
But even if the plan is somehow revived, cracks are beginning to widen in the foundations of the global banking system.
Aftershocks from the ongoing credit crisis struck again Monday, with the forced marriage of Wachovia and Citigroup and the nationalization of several European banks.
The latest reverberations come just days after regulators seized the assets of Washington Mutual, which was losing ground to mounting writedowns on mortgage-related investments, and found a buyer in JPMorgan Chase. It was the largest bank failure in U.S. history.
To try to calm the waters Monday, central banks around the world said they were offering up billions of dollars in fresh capital to help banks here and abroad as they struggle to stay afloat in the worsening credit crisis. The Federal Reserve said it will make a total of $620 billion available to other central banks, swapping dollars for foreign currencies. That’s more than double the cash pile already provided by the Fed.
The global effort, involving central banks around the world, is yet another indication that the credit crisis that began in the U.S. mortgage market has tainted the river of capital that flows through the global economy. Until recently, the problem had been limited to a handful of British banks.
“We've seen a sharp increase in funding costs over the past two, three weeks overseas ,” said Alex Patelis, head of international economics with Merrill Lynch. “That's bringing the weaker players in the banking sector down. We've seen a number of issues with banks down throughout Europe today.”
As the banking crisis threatens to spill over, the worry is that bankers have been underestimating the potential impact on their holdings from ongoing losses related to mortgage defaults and foreclosures.
The problem bankers and the financial markets face are fairly straightforward. As the multitrillion-dollar mortgage lending spree now unwinds, there’s no way to know how many more potential shocks are out there. It all depends on how much longer house prices keep falling.
Since no one knows the answer, banks have to guess when to mark down the value of all those mortgage-related investments. The further house prices fall, the more they have to mark them down.
Meredith Whitney, head of stock research at Oppenheimer, figures that from the peak of the housing bubble to the trough when prices finally recover, home prices will have fallen by some 40 percent. She thinks banks have been slow to book those losses — which means bigger markdowns lay ahead.
“Wachovia, which had 60 percent of its portfolio in Florida and California, only assumed 21 percent peak-to-trough declines,” she said. “So there are going to be real (markdowns) that Citibank is going to have to take. They are both going to have to take markdowns, and they have to raise capital to these (markdowns.)”
Monday, September 29, 2008
Democratic and Republican leaders alike pledged to try again, though the Democrats said GOP lawmakers needed to provide more votes. Bush huddled with his economic advisers about a next step. The House was to reconvene on Thursday instead of adjourning for the year as planned.
The stock plunge began even before the 228-205 vote to reject the bill was officially announced on the House floor. The decline for the day surpassed the 721-point previous record, on the day after the Sept. 11, 2001, terror attacks, though in percentage terms it was well short of the drops on Black Monday of October 1987 and at the start of the Depression.
In the House chamber, as a digital screen recorded a cascade of "no" votes against the bailout, Democratic Rep. Joe Crowley of New York shouted news of the falling stocks. "Six hundred points!" he yelled, jabbing his thumb downward.
Bush and a host of leading congressional figures had implored the lawmakers to pass the legislation despite howls of protest from their constituents back home. Not enough members were willing to take the political risk just five weeks before an election.
"No" votes came from both the Democratic and Republican sides of the aisle. More than two-thirds of Republicans and 40 percent of Democrats opposed the bill.
The overriding question for congressional leaders was what to do next. Congress has been trying to adjourn so that its members can go out and campaign. "We are ready to continue to work on this," said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee.
"The legislation may have failed; the crisis is still with us," said House Speaker Nancy Pelosi, D-Calif., in a news conference after the defeat.
"What happened today cannot stand," Pelosi said. "We must move forward, and I hope that the markets will take that message."
At the White House, Bush said, "I'm disappointed in the vote. ... We've put forth a plan that was big because we've got a big problem." He pledged to keep pressing for a measure that Congress would pass.
Wall Street started tumbling as the vote was shown on television Monday afternoon, sending investors fleeing to the relative safety of credit markets, worrying that the financial system would continue to sink under the weight of failed mortgage debt.
The plan’s failure means no one knows how the financial sector hobbled by hundreds of billions of dollars in bad mortgage bets will recover. The credit markets remain close to frozen as banks are too afraid to lend — including loans to other banks.
The Dow closed the day down 777.68 points, or 6.89 percent, beating its previous record set on the first trading day after the Sept. 11, 2001, terror attacks. Still, in percentage terms, the decline remained well below the more than 20 percent drops seen on Black Monday of October 1987 and at the beginning of the Depression.
“This is panic, and fear is running amok,” one trader told CNBC. “We are in a classic financial meltdown, and it’s panic-based. We’re seeing panic selling.”
Chris Johnson, president of Johnson Research Group, said Monday’s market was not for the timid.
“Clearly something needs to be done,” he said. “And the market dropping 400 points in 10 minutes is telling you that.”
While investors had some worries that the vote would be close, many on Wall Street appeared to believe it would ultimately pass. The proposal wasn’t been seen on the Street as a panacea for the deepening problems in the financial sector that have led to the failure of Lehman Bros. and Washington Mutual and the forced sale of Merrill Lynch & Co. and Wachovia Corp. — and that still pose a threat to many other banks.
The markets turned highly volatile as it became clear the measure wouldn’t find the necessary support. The broad Standard & Poor’s 500-stock index closed down 106.59 points, or 8.79 percent, while the Nasdaq composite index tumbled 199.61 points, or 9.14 percent — its third-worst point decline ever.
Wall Street is contending with all these issues against the backdrop of a credit market — where bonds and loans are bought and sold — that is barely functioning because of fears that anyone lending money will never be paid back. The evidence of the credit markets’ ills could again be found Monday in the Treasury’s 3-month bill — investors were stashing money there, willing to take the tiniest of returns simply to be sure that their principal would survive in what’s considered the safest investment. The yield on the 3-month bill was 0.15, down from 0.87, and approaching zero, a level reached last week when fear was also running high.
Investors also faced other worries about the banking system. Wachovia became the latest big bank to be rescued from its overwhelming bad mortgage debt, agreeing to a federally brokered buyout of its banking operations by Citigroup Inc.
Marc Pado, U.S. market strategist at Cantor Fitzgerald, said investors are worried about the spread of troubles beyond banks in the U.S. to Europe and other markets.
“Things are dying and breaking apart while they sit there and vote on this thing,” he said.
The dollar fell against other major currencies, while gold prices rose.
Crude oil fell $11.39 to $95.50 on the New York Mercantile Exchange as investors feared that a worsening economy would slice into energy demand. If the decline held, it would be oil’s largest ever one-day drop.
Marc Pado, U.S. market strategist at Cantor Fitzgerald, said investors are worried about the spread of troubles beyond banks in the U.S. to Europe and other markets.
“Things are dying and breaking apart while they sit there and vote on this thing,” he said.
Lawmakers voted down a plan that was different than what the Bush administration had originally proposed. There were restrictions allowing Congress to limit how much of the money goes out the door at once. It also included caps on pay packages of top executives as well as assurances that the government also would ultimately be reimbursed by the companies for any losses.
The Treasury would have been permitted to spend $250 billion to buy banks’ risky assets, giving them a much-needed necessary cash infusion. There also would be another $100 billion for use at president’s discretion and a final $350 billion if Congress signs off on it.
Wall Street found further reason for worry overseas. Three European governments agreed to inject Fortis NV with a $16.4 billion bailout. Fortis, with has headquarters in Brussels, Belgium and Utrecht, Netherlands, is Belgium’s largest retail bank.
The British government, meanwhile, said it is nationalizing mortgage lender Bradford & Bingley, which has a $91 billion mortgage and loan portfolio. It was the latest sign that the credit crisis has spread beyond the U.S.
Japan’s Nikkei stock average fell 1.26 percent. Britain’s FTSE 100 fell 5.30 percent, Germany’s DAX index fell 4.23 percent, and France’s CAC-40 fell 5.04 percent.
Meanwhile, consumer spending fell in August to its lowest level in six months. The Commerce Department said spending remained unchanged rather than increasing 0.2 percent as economists had expected. It was the worst showing since February.
Personal incomes rose a better-than-expected 0.5 percent after falling 0.6 percent drop in July. But after-tax incomes fell by 0.9 percent. Incomes benefited in past months from the government’s stimulus checks.
Wall Street is also worried about overall sluggishness in the world’s economy. In the U.S., for example, unemployment now sits at a five-year high of 6.1 percent. That rate is expected to increase, perhaps putting further pressure on consumer spending, which accounts for more than two-thirds of the nation’s economic activity.
You must understand what is going on. The financial institutions of this nation have many outstanding loans and credit card debts. The value of these outstanding loans are in the billions. The financial institutions wants 1.8 trillion to back up that debt that is owed to them from these outstanding loans. Then the banks will once again issue credit to the consumers and small businesses, allowing them to build even more debt with them.
Basically we are footing the bill for years of bad loans & credit card debt owed to the banks so you can go out and "buy more stuff" on credit. If that makes any sense...
What I do not understand, is why do we as Americans allow these people to dictate our money? Why does the government not issue the currency so that they are not paying it back with interest? Why is there a private corporation controlling our currency? If you do not know, the Federal reserve is about as federal as Federal Express. They are a corporation. Google it.
Our nation borrows money from this corporation and pays it back with interest. It is a complete scam on the tax payers of this nation. If the government issued our currency, the bankers would not have the power to threaten the collapse of our economy.
Something to think about...
A small crowd of schoolchildren waved flags as three Chinese astronauts rode into Beijing on Monday after completing the nation's first spacewalk, seen as key to longer-term plans for a space station and a lunar landing.
The three landed safely back on earth on Sunday after a 68-hour voyage and space walk that showcased the country's technological mastery and were hailed as a major victory by its leaders.
State television showed the astronauts waving to a small crowd from the back of convertible automobiles as military officials looked on.
China's space programme is now moving to the next phase of development to master the technology needed to dock two spacecraft, and putting a space station in orbit, said Wang Zhaoyao, deputy director of manned space flight.
Beijing plans a scaled-down space lab by 2011, and aims to send both unmanned and manned spacecraft to dock with the space lab.
After docking successfully in space, China wants to launch a manned space station by 2020, said Wang, according to Xinhua. ADVERTISEMENT
China has ambitions to land a man on the moon, but has not announced any concrete plans or timeframe for such a mission.
The South China Morning Post said pride in the nation's technological prowess "has rightly been boosted" by the spacewalk by the crew of the Shenzhou VII.
"The mission -- like the staging of the Olympic Games last month -- showed the heights that China is capable of scaling," said the newspaper.
"Anyone who makes up his mind before he hears the issue is a fucking fool" - Chris Rock
The financial system could face a meltdown of 1929 proportions unless US politicians succeed in their efforts for a $700bn rescue scheme, experts added.
The warning came as Republicans and Democrats met in Washington for a rare weekend debating session to attempt to seal agreement on the contentious plan, aimed at preventing a long-lasting recession in the US.
Officials close to Paulson are privately painting a far bleaker portrait of the fragility of the global economy than that advanced by President George W Bush in his televised address last week.
One Republican said that the message from government officials is that “the economy is dropping into the john.” He added: “We could see falls of 3,000 or 4,000 points on the Dow [the New York market that currently trades at around 11,000]. That could happen in just a couple of days.
“What’s being put around behind the scenes is that we’re looking at 1930s stuff. We’re looking at catastrophe, huge, amazing catastrophe. Everybody is extraordinarily scared. It’s going to be really, really nasty.”
Investors fretted about contagion into Europe, where Fortis, which was part of the consortium that bought ABN Amro last year, fired its chief executive after liquidity concerns pushed shares down more than 20pc to a 14-year low. Holland’s ING and BNP Paribas are looking at buying the bank this weekend.
London investors have warned that the FTSE could suffer falls of as much as 1,000 points - a fifth of its value, if the deal falls through.
Peter Spencer, economic adviser to the Ernst & Young Item Club, said: “This is the time you have to bail people out and ask questions later. It is very difficult to see how the US banking system would survive without that.This has the potential to make 1929 look like a walk in the park.”
Senator Harry Reid of Nevada, the majority leader, said: “We hope sometime [Sunday] evening we can announce some kind of agreement in principle. We may not have another day.”
Rebel Republicans - who see Paulson’s proposals as socialism by the back door - were warned they will be responsible for causing an “amazing catastrophe” if they continue to oppose the plans, which would see taxpayers buy up the bad debts of failing banks. Instead they want an insurance scheme for banks, which would spread the cost to private enterprise.
The 106-page bill established sweeping powers for Treasury Secretary Hank Paulson, and his successor, in carrying out what the bill calls the "Troubled Asset Relief Program," whose acronym is TARP.
Section-by-section analysis of the legislation can be read by clicking here.
MSNBC also has a Timeline that goes back to 2007 that shows exactly what the media thinks led to the current crisis.
With the U.S. House of Representatives slated to vote Monday on a deeply unpopular $700 billion rescue plan for beleaguered financial companies, President Bush and congressional leaders scrambled to corral support.
Bush called the election-year vote a difficult one for lawmakers, but said he is confident Congress will pass a measure his top economic officials have argued is vital to averting a broader economic meltdown.
"Without this rescue plan, the costs to the American economy could be disastrous," Bush said in a written statement Sunday. The president was scheduled to make a statement on the bailout at 7:35 a.m. EDT Monday.
Convincing their colleagues to back the plan despite thousands of angry phone calls, e-mails and letters pouring in from angry constituents proved a tall order for leaders in both parties.
"Now we have to get the votes," said Sen. Harry Reid, a Nevada Democrat and the majority leader. He said the measure could pass the Senate as early as Wednesday.
"Nobody wants to have to support this bill," said Rep. John A. Boehner, an Ohio Republican and the House minority leader. But he said he was urging "every member whose conscience will allow them to support this" to do so. Officials in both parties expected the vote to be a nail-biter.
The two major presidential candidates — Republican John McCain and Democrat Barack Obama — expressed tepid support for the bailout.
The Bush administration gets broad power to use taxpayer money to rescue cash-strapped financial firms in the legislation, which is designed to unfreeze choked credit and avert a broader economic meltdown.
Congress won a hand in the program too, after 10 days of high-intensity haggling among lawmakers in both parties and Treasury Secretary Henry Paulson, who sought the unprecedented amount of money with little supervision.
Instead, the bill lets Congress block half the money and force the president to jump through some hoops before using it all. The government could get at $250 billion immediately, $100 billion more if the president certified it was necessary, and the last $350 billion with a separate certification — and subject to a congressional resolution of disapproval.
Still, the resolution could be vetoed by the president, meaning it would take extra-large congressional majorities to stop it.
Lawmakers demanded curbs on the pay packages of top executives whose firms get the help, and assurances that taxpayers would ultimately be reimbursed by the companies for any losses. But the government would have broad discretion to decide how to implement both, something Paulson insisted was vital to make the rescue effective.
The legislation also requires that the government take ownership stakes in companies that receive federal infusions, so it could share a piece of potential future profits.
Banks, credit unions, securities brokers and dealers, and insurance companies, among others, could get the help as long as they had "significant operations" in the U.S. Originally designed to help companies get rotten mortgage-related investments off their balance sheets, the legislation allows the government to buy up any kind of asset top economic officials think is necessary to promote market stability.
The final 110-page bill was released Sunday evening after a final weekend of intense negotiating, and Republicans and Democrats huddled for hours in private meetings Sunday night to learn its details and voice their concerns. Many said they left uncertain of how they would vote.
Rep. Joe Barton, a Texas Republican, an opponent, estimated that half of the House's 199 Republicans are "truly undecided."
Democratic Rep. Elijah Cummings, a Maryland Democrat, said he was inclined to oppose the bill. But he added: "A lot of people are going to hold their nose and vote for it, because they've been put in a bad position and they don't have any other option."
Leaders in both parties were scrambling to put the most positive face on the deeply unpopular plan. House Speaker Nancy Pelosi, a California Democrat, said it wasn't a bailout but a "buy-in" for taxpayers to rescue the economy.
Still, lawmakers in both parties who are facing re-election were nervous about embracing such a costly plan proposed by a deeply unpopular president that would benefit perhaps the most publicly detested of all: companies that got rich off bad bets.
The insurance industry is too big to fail. A person's health is too small to matter, so - when it fails due to the absence or loopholes of insurance coverage - that's tough luck.
The Defense Department is too big to fail. The people it's killing in Iraq and Afghanistan are too small to matter.
The US nuclear arsenal is too big to fail. The Nuclear Non-Proliferation Treaty, undermined by Washington, is too small to matter.
Overall, the warfare state is too big to fail. The virtues of peace are too small to matter.
Agribusiness is too big to fail. Family farmers are too dirt-small to matter.
The leverage for the US Treasury to subsidize Wall Street is too big to fail. The leverage to subsidize mothers and children kicked off welfare is too small to matter.
The political momentum for bailing out corporate America is too big to fail. The political momentum for funding adequate payment rates from Medicaid to reimburse healthcare providers is too small to matter.
The oil conglomerates are too big to fail. Global warming is too small to matter.
The prison industry is too big to fail. The need for preschool is too small to matter.
Corporate power is too big to fail. The ordeals of working people and want-to-be-working people are too small to matter.
Human worth as maximized by dollars: too big to fail. Human worth as affirmed by humanistic values: too small to matter.
The current odds of pumping at least several hundred billion taxpayer dollars into corporate America: too big to fail. The current odds of launching a massive federal jobs program: too small to matter.
Such priorities and mindsets are in overdrive at the intersection of Pennsylvania Avenue and Wall Street. But a basic shift in government priorities is possible. That's what happened three-quarters of a century ago, when a progressive upsurge prevented the re-election of President Herbert Hoover - and then effectively mobilized to pressure the new occupant of the White House.
After campaigning in 1932 on a middle-of-the-road Democratic platform, Franklin Roosevelt went on to become a president who denounced the "economic royalists" and made common cause with working people and the unemployed. People across the country organized for social change. In the process, you might say, the power of progressive movements became too big to fail.
Something like that could happen again.
As US officials announce planned measures to tackle the crisis, Al Jazeera asked five prominent economists - Does the crisis signal the end of US-style capitalism? And if so, what are the lessons learned?
This does not mean the end of the United States' position in the world economy.
The US dollar has not moved, which does suggest that the position of the US government is still very much intact.
I think what it means is that in the future the big firms will have a smaller presence.
The years when the US government took the position that financial firms can run the country as they see fit and that regulation could be dismised is finished. There will be a major examination of how the financial markets are regulated.
Such financial events will have a lagged effect on everyone ... its most likely consequence is that the credit crisis will get more intense and the foreclosure crisis will get worse.
We will have to wait and see. But people do not learn from mistakes. How many times do we have to go through this?
A well-functioning financial system has rules and it's when the rules are relaxed that shady practices and get rich quick schemes abound, which is what happened in the [sub-prime] mortgage system in 2005 and 2006.
The banks' behaviour was conditioned by Bush. [He] sent a clear signal that they could get away with everything, [that there was] no more effective supervision so go ahead and make toxic loans, we won't stop you, then everyone made a bundle and left an enormous mess.
The evolution of good conduct is defined by effective rules. John McCain [the Republican presidential candidate] lectures on the morals of Wall Street but they are no more or less corrupt than other humans.
A full recovery will only begin with a new administration with a different philosophy seriously committed to ... bringing in new people, giving them adequate resources and the legal authority.
I would argue it is impossible for McCain to do it. Even if he is a genuine convert to prudent regulation which he has opposed thoughout his career, who would believe it?
He has been an enabler of the most speculative elements of banking system.
I think Barack Obama [Democratic presidential candidate] appreciates the severity of the issue and has the judicious temperament.
This is not a job for zealots or revolutionaries, it's for serious people to build institutions that can last for a long time.
I think if they tried to invoke National Marshal Law, it would blow up in their face. They could not handle one city in Iraq with a few million people. They could not handle New Orleans after Katrina. How would they lock down 350 million people? I just do not see it happening.
If there is one thing Americans will not accept, that would be the freedom to leave their home and go buy shiny new "stuff". I doubt the elite bankers of this nation would want us to stop buying "stuff". It is about making money and if the nation is locked down, then no one is making money.
We know the money does still have value because the Treasury wants 1.8 Trillion.....they would not want the money if it was worthless.
Just use your head and remember most of what we are hearing is just "fear mongering" coming from ALL sides. Our President spewed fear last week on TV to scare us to support the bailout. Even these people who are trying to wake people up with truth are using fear.
It is such an animal attribute and to exercise it so freely just shows how close to the chimpanzees we really are.
Belgium’s Prime Minister Yves Leterme said the bailout shows account holders and investors that Fortis will not be allowed to fall victim to the global credit crisis.
Leterme announced the deal after weekend talks between the three countries, European Union and national banking officials.
The deal will force the bank — which has headquarters in both Brussels and the Dutch city of Utrecht — to sell its stake in Dutch bank ABN Amro, which it partially took over last year. Fortis paid 24 billion euros for its share of ABN.
Fortis Chairman Maurice Lippens will be forced to resign and will be replaced by a candidate from outside the company, Leterme said.
“We have taken up our responsibility, we did not abandon” account holders, Leterme told reporters.
Under the bailout, Belgium will invest 4.7 billion euros ($6.88 billion) and the Netherlands 4 billion euros ($5.86 billion) in Fortis’ banking operations in the two countries. In return, they each receive 49 percent ownership in those national arms of the bank.
Luxembourg will invest 2.7 billion euros ($3.95 billion) in the bank’s Luxembourg operations, also for a 49 percent stake.
The deal, orchestrated by the three neighboring countries and EU Central Bank chief Jean-Claude Trichet, is meant to restore confidence in the bank before the reopening of markets on Monday after a tumultuous week in which Fortis’ shares imploded.
Belgian officials also announced Sunday that they planned to offer better guarantees for all retail deposits at Fortis, the country’s largest bank and largest private employer.
Fortis named its third chief executive officer in as many months Friday after insolvency fears caused the company’s shares to tumble to 5.18 euros ($7.56), their lowest level in more than a decade. The shares have lost more than three-fourths of their value in the past year.
Fortis denies any imminent solvency problems, but it has been in trouble since it took part in a three-bank consortium last year that acquired ABN Amro in a 70 billion euros ($102.5 billion) deal that was the largest takeover in the history of the banking industry.
On June 4, 1963, a virtually unknown Presidential decree, Executive Order 11110, was signed with the authority to basically strip the Federal Reserve Bank of its power to loan money to the United States Federal Government at interest. With the stroke of a pen, President Kennedy declared that the privately owned Federal Reserve Bank would soon be out of business. The Christian Law Fellowship has exhaustively researched this matter through the Federal Register and Library of Congress. We can now safely conclude that this Executive Order has never been repealed, amended, or superceded by any subsequent Executive Order. In simple terms, it is still valid.
When President John Fitzgerald Kennedy - the author of Profiles in Courage -signed this Order, it returned to the federal government, specifically the Treasury Department, the Constitutional power to create and issue currency -money - without going through the privately owned Federal Reserve Bank. President Kennedy's Executive Order 11110 [the full text is displayed further below] gave the Treasury Department the explicit authority: "to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury." This means that for every ounce of silver in the U.S. Treasury's vault, the government could introduce new money into circulation based on the silver bullion physically held there. As a result, more than $4 billion in United States Notes were brought into circulation in $2 and $5 denominations. $10 and $20 United States Notes were never circulated but were being printed by the Treasury Department when Kennedy was assassinated. It appears obvious that President Kennedy knew the Federal Reserve Notes being used as the purported legal currency were contrary to the Constitution of the united States of America.
U.S. House Speaker Nancy Pelosi, speaking to reporters after a meeting with fellow Democrats, said the fee could be assessed after five years if the non-partisan Congressional Budget Office determined taxpayers had lost money in the bailout.
"If after five years ... the CBO decides that the American taxpayer has lost money in this, then there would be a fee on financial institutions," Pelosi said, adding that she hoped the provision could be part of a final bailout deal.
Pelosi said that the Secretary of the Treasury could determine how to assess the fee.
Sunday, September 28, 2008
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
This IS NOT how America operates...
We are witnessing a bankers' coup d’etat. In the name of saving the economy from a crisis created by their own greed and immense profits, the biggest bankers have taken a country and a people hostage.
“Give us your money and tear up what’s left of your Constitution or we will sink your economy,” is the message from Wall Street and the Bush Administration. “Give us the power and money we demand or you will be left jobless from a new economic depression."
Under the pretext of the banking crisis, the Bush Administration is changing the way this country operates. This is not simply taking trillions of dollars from the people and giving it to the richest bankers to do with as they see fit.
Do what is right and stand up for yourself! Wake up!
U.S. lawmakers on Sunday were set to sign off on a deal to create a $700 billion government fund to buy bad debt from ailing banks in a bid to stem a credit crisis threatening the global economy.
"They want to help the banks and not help the poor," Lula said late on Saturday in Sao Paulo during a campaign rally ahead of Oct. 5 municipal elections.
"Why give $700 billion to the banks and no money to the poor guys who lost their houses," Lula asked, according to local media. He referred to the troubled U.S. housing market.
The former factory worker, who obtained record approval ratings this month, said the United States had the primary responsibility to fix a crisis with global repercussions that it had caused.
"I'm not at fault if they turned their economy into a casino," Lula said in reference to accusations that lax U.S. financial regulations worsened the crisis.
Brazil was in a better position to withstand the crisis than it was years ago, the former union leader said.
"I don't want to say we're at ease but ... today we depend less on the United States for our exports," Lula said.
Brazil's economy is growing by more than 5 percent annually but is expected to slow to around 4 percent growth next year. A few Brazilian exporters announced last week large derivatives losses related to currency fluctuations caused by the global financial crisis.
Gingrich even expressed concern with Paulson's connections to Wall Street. The treasury secretary served as the chairman of a major global investment banking and securities firm before joining the Bush administration.
"You have the former Chairman of Goldman Sachs asking for 700 billion dollars, and in his initial request, asking for it in such an un-American way that I think he should have resigned," said Gingrich. "I think Paulson has terminally misunderstood the nature of the American system. Not just no review, no judicial review, no congressional accountability. Give me 700 billion dollars, 700 BILLION dollars! 'I'll be glad to spend it for you.' That's a centralization of power that is totally un-American."
The loan guarantees were included in a continuing resolution that included funding for the US government and the wars in Iraq and Afghanistan.
President George W. Bush has indicated that he intends to sign the bill.
"We're very pleased Congress has chosen to act at this critical time," said Greg Martin, director of communications for General Motors Corp's Washington office.
GM had been subject of much speculation that it could be forced into bankruptcy.
The bill, which was approved by the House of Representatives on Wednesday, are the first loan guarantees for US carmakers since Congress approved a similar 675 million dollar measure for Chrysler Corp. in 1980.
Chrysler Chairman Robert Nardelli, however, said this week the loan guarantees should not be considered a rescue package for struggling carmakers. "This is not a bailout," he said.
Under provisions of the new legislation, not only US carmakers are eligible for the guarantees but also suppliers and foreign automakers with plants in the United States that are more than 20 years old -- Nissan and Honda's US operations qualify.
Martin said automakers could use the money for projects such as a new engine plant GM has announced it intends to build in Flint, Michigan.
GM Chairman Rick Wagoner spoke of plans to invest 370 million dollars in a new plant, which will be the exclusive site for production of the gasoline engine or "range extender" for the electric Chevrolet Volt, due out in November 2010.
Venezuela's leftist President Hugo Chavez said on Saturday it was the capitalist system that had caused the financial crisis in the United States and the country should come up with a new constitution.
Speaking to reporters in Lisbon on the last leg of a tour that included visits to China and Russia, he said: "I think the United States should start a constituent process to create a constituent assembly, a new truly democratic model."
A constituent assembly is a body elected to draft and sometimes adopt a new constitution.
"It was capitalism that caused the ruin" in the United States, said Chavez, who is one of Washington's fiercest critics, calling the financial crunch "the worst financial crisis in history".
"Let the U.S. empire end and let a great nation and great republic rise from the ruin ... It's time to shout 'Liberty!' again in the United States," Chavez said, calling for a new government to be free of the "dictatorship of the elite" such as big banks and corporations.
Critics accuse Chavez of running an authoritarian, Cuban-style regime in oil-rich Venezuela.
Chavez, who has signed various deals from weapons to energy this week in China and Russia also signed an agreement with Portugal's Socialist government on Saturday to buy 1 million ultra-cheap laptops for schools and 50,000 pre-fabricated houses in deals worth $3 billion.
They also signed a draft deal between Energias do Portugal
The computers, which the government started distributing in Portuguese primary schools this week at a subsidised price of 50 euros , will be delivered to Venezuela from December. They cost 285 euros in stores in Portugal.
The laptop is based on Intel Corp's
Kirk Stephenson, who was married with an eight-year-old son, died in the path of a 100mph express train at Taplow railway station, Berkshire.
Mr Stephenson is believed to have taken his own life after succumbing to mounting personal pressures as the world’s financial markets went into meltdown.
The death of the respected 47-year-old City figure evokes memories of the 1929 Wall Street crash in America and comes as:
- Bradford & Bingley teeters on the brink of nationalisation after a dramatic share price slump.
- David Cameron faced embarrassment on the eve of the Tory conference after members of a secretive club of Conservative donors were linked to the ‘short-selling’ of Bradford & Bingley.
- Gordon Brown was wrongfooted by Shadow Chancellor George Osborne, who announced plans to set up an independent watchdog to police the Treasury and strip it of key powers if the Conservatives win the next Election.
Last year, the private equity firm tried to buy a 15 per cent stake worth almost £1billion in Northern Rock before the bank was nationalised, bidding against Virgin boss Sir Richard Branson.
Treasury Secretary Henry Paulson, House Speaker Nancy Pelosi, (D., Calif.) and Senate Majority Leader Harry Reid (D. Nev.) were flanked by key negotiators in the Capitol as they announced that a $700 billion plan to have Treasury buy up toxic assets had been all but finalized after days of exhausting negotiations involving members, staff and representatives from the Bush administration.
"I think we're there," an obviously tired Mr. Paulson said, a sentiment echoed in the statements of negotiators such as House Financial Services Chairman Barney Frank, D-Mass., and Senate Banking Committee head Christopher Dodd (D., Conn.).
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 Sen. 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 Sen. 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 Pelosi summary also said the legislation will expand the range of firms that can sell troubled assets to the government to include pension plans, local governments and community banks serving "low- and middle-income families."
A House Democratic aide said the government would be able to receive warrants it could hold until maturity from financial firms on assets received either through auctions or through direct purchases.
The summary also said the legislation would institute new executive compensation requirements for participating companies, including "no multi-million dollar golden parachutes," limits on compensation generally, and the ability to recover "bonuses paid based on promised gains that later turn out to be false or inaccurate."
President George W. Bush spoke with Sen. Pelosi earlier in the evening about the discussions, and the White House welcomed news of the deal. "We're very pleased with the progress tonight and appreciate the extraordinary bipartisan efforts being made to stabilize our financial markets and protect our economy," White House spokesman Tony Fratto said.
The next step will involve selling the deal to rank-and-file lawmakers, who have been unhappy over signing on to a giant bailout package just weeks before the November elections. Rep. Blunt said that he planned to talk to colleagues and get reactions.
Lawmakers entered a new round of meetings shortly after 7:30 p.m. EDT, with pizzas headed to one office and a platter of cold cuts from sandwich chain Cosi being delivered into the House Speaker's office. By roughly 11:30 p.m., what Reid described as a "breakthrough" came in the form of an idea from Pelosi that was enough to advance talks.
"She took over at the last minute," a House staffer familiar with the talks said Sunday morning. "The last hour-and-a-half she really brought things together and made it possible to reach this point."
She found middle ground on a plan to allow the federal government to recoup money for taxpayers if the asset-purchase program isn't making money after a certain amount of time. A House leadership aide said early Sunday morning that details were not immediately available. But the general concept was to provide Congress with a mechanism that would be triggered perhaps within five years to allow lawmakers to offset some, if not all, of the bailout costs.
Offers and counteroffers were flowing back and forth all night. Among the offers extended by Democrats: an agreement to drop a proposal to devote 20% of potential profits to an affordable housing fund, according to a Senate staffer close to the talks.
A House staffer reached after the deal announcement was made confirmed that lawmakers did decide to drop the affordable housing fund proposals, which would have potentially directed billions to state and local governments to fund housing projects.
One of the biggest sticking points involved concerns that executives at troubled financial institutions would wind up benefiting with handsome pay packages as the government took on more risks. But Democrats emerging from the talks said a whole array of issues related to executive pay had been addressed, including issues involving "golden parachutes," the big pay packages that are sometimes awarded to departing executives.
Sen. Dodd told reporters that protections against golden parachute awards had made it into the final deal, along with an insurance component sought by House Republicans as an option for the Treasury to use if necessary and requirements that Treasury seek to mitigate and reduce foreclosures where possible.
Overall, staff said they expanded Treasury's original two-and-a-half page proposal. The agreement will include significant oversight of the asset purchase program, executive compensation restrictions, the potential for equity stakes in firms that participate in the asset-sale program, and other taxpayer protections.
As for foreclosure prevention measures, Pelosi's office said the legislation would allow the Treasury to work with cash-strapped homeowners whose mortgages are purchased by the federal government to refinance into a more affordable mortgage.
Other foreclosure-prevention measures include an extension of the tax holiday for homeowners who face foreclosure, as well as a tax break for community banks that held shares of Fannie Mae and Freddie Mac. The rescue plan will allow affected banks to take an immediate tax deduction on losses from investments in the two firms, which were taken over by the federal government earlier this month.
It also includes a bipartisan oversight board appointed by members of both parties in Congress, an inspector general to monitor Treasury decisions, and regular audits from the Government Accountability Office. Treasury will also have to post publicly and online transactions made through the troubled asset program. Unlike the original Treasury proposal, which would have given the department legal immunity in the program, the tentative agreement reached Saturday allows for judicial review of Treasury decisions.
Sen. Barack Obama (D. Ill.), the Democratic Party presidential nominee, said the tentative deal appears to embrace key principles he favors: better oversight, the potential for taxpayers to receive profits from the workout, CEO compensation limits and foreclosure protections.
"When taxpayers are asked to take such an extraordinary step because of the irresponsibility of a relative few, it is not a cause for celebration," Obama said in a statement Sunday. "But this step is necessary."
Republican nominee Sen. John McCain, interviewed by ABC's "This Week," said, "This is something that all of us will swallow hard and go forward with."
Some lawmakers had set a deadline of reaching a deal by the time the Asian markets open Monday morning. In a sign of how sensitive Congress is to market reaction, lawmakers stayed in touch with outside experts during the negotiations, including talking to billionaire investor Warren Buffett.
Saturday, September 27, 2008
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
In short, the so-called "mother of all bailouts," which will transfer $700 billion taxpayer dollars to purchase the distressed assets of several failed financial institutions, will be conducted in a manner unchallengeable by courts and ungovernable by the People's duly sworn representatives. All decision-making power will be consolidated into the Executive Branch - who, we remind you, will have the incentive to act upon this privilege as quickly as possible, before they leave office. The measure will run up the budget deficit by a significant amount, with no guarantee of recouping the outlay, and no fundamental means of holding those who fail to do so accountable.
Is this starting to sound familiar? Robert Kuttner cuts through much of the gloss in an article in today's American Prospect:
The deal proposed by Paulson is nothing short of outrageous. It includes no oversight of his own closed-door operations. It merely gives congressional blessing and funding to what he has already been doing, ad hoc. He plans to retain Wall Street firms as advisors to decide just how to cut deals to value and mop up Wall Street's dubious paper. There are to be no limits on executive compensation for the firms that get relief, and no equity share for the government in exchange for this massive infusion of capital. Both Obama and McCain have opposed the provision denying any judicial review of decisions made by Paulson -- a provision that evokes the Bush administration's suspension of normal constitutional safeguards in its conduct of foreign policy and national security.
The differences between this proposed bailout and the three closest historical equivalents are immense. When the Reconstruction Finance Corporation of the 1930s pumped a total of $35 billion into U.S. corporations and financial institutions, there was close government supervision and quid pro quos at every step of the way. Much of the time, the RFC became a preferred shareholder, and often appointed board members. The Home Owners Loan Corporation, which eventually refinanced one in five mortgage loans, did not operate to bail out banks but to save homeowners. And the Resolution Trust Corporation of the 1980s, created to mop up the damage of the first speculative mortgage meltdown, the S&L collapse, did not pump in money to rescue bad investments; it sorted out good assets from bad after the fact, and made sure to purge bad executives as well as bad loans. And all three of these historic cases of public recapitalization were done without suspending judicial review.
Kuttner's opposition here is perhaps the strongest language I've seen used, pushing back on this piece of legislation, in any publication of repute, and even here, Section 8 is not cited by name or by content. McClatchy Newspapers also alludes to Section 8 with concern, citing the "unfettered authority" that Paulson would be granted, and noting that the "law also would preclude court review of steps Paulson might take, something Joshua Rosner, managing director of economic researcher Graham Fisher & Co. in New York, said could be used to mask previous illegal activity." Jack Balkin also gives the matter the sort of attention it deserves on his blog, Balkinization.
But elsewhere, the conversation is muted. The debate over whether Congress is going to pass the Paulson bailout package, or pass the Paulson bailout package really hard seems to have boiled down to a discussion of time and concessions. The White House has made it clear that they want this package passed yesterday. Congressional Democrats seem to be of different minds on the matter, with some pushing back hard, and others content to demand a small dollop of turd polish to make the package seem more aesthetically pleasing, at which point, they'll likely roll over and pass the bill. Neither candidate, John McCain or Barack Obama, seem all that amenable toward the bailout, but neither have either demonstrated that they are willing to risk their candidacies to do much more than exploit the issue for electoral purposes.
Sunday morning came and went, with Paulson traipsing dutifully from studio to studio, facing nary a question on Section 8. Front page articles in the New York Times, Washington Post, and the Wall Street Journal detail the wranglings, but make no mention of this section of the legislation. On TV, cable news networks are stuck in the fog of the ongoing presidential campaign.
Throughout the coverage, one catches a whiff of what seems like substantive pushback on this power grab, but it largely amounts to a facsimile of journalistic diligence. Most note, in general terms, that the bailout represents a set of "broad powers" that will be granted to the Department of the Treasury. Yet the coverage offsets these concerns through the constant hyping of the White House's overall message of "urgency."
But one cannot overstate this: Section 8 is a singularly transformative sentence of economic policy. It transfers a significant amount of power to the Executive Branch, while walling off any avenue for oversight, and offering no guarantees in return. And if the Democrats end up content with winning a few slight concessions, they risk not putting a stop-payment on the real "blank check" - the one in which they allow the erosion of their own powers.
Over in the Senate, Christopher Dodd has proposed a bailout legislation of his own, which critically calls for "an oversight board that not only includes the chairman of the Federal Reserve and the SEC, but congressionally appointed, non-governmental officials" and would require the President to appoint an "independent inspector general to investigate the Treasury asset program." In Dodd's legislation, Section 8 is effectively stripped from the bill.
Nevertheless, the fact that Section 8 of the Paulson plan seems to strike few as a de facto dealbreaker can and should astound. The failure of Congress to hold the line on this point would be truly embarrassing. But if we make it through this week with nobody in the press specifically informing the public about the implications of this single sentence - in the middle of a complicated bill, in the middle of a complicated time - then right there, you have the single largest media failure of this year.