G7 wants Linder as bailout negotiator.

The seven House Republicans from Georgia have sent a letter to Minority Whip Roy Blunt asking that he appoint Cong. John Linder to take part in the bailout negotiations.

Congressman Linder’s expertise and experience in finance, tax policy, and business would be of great value. He understands well the serious concerns of many House Republicans and has advocated for a more deliberate approach to the negotiations – one which we believe will serve the American people well.

75 comments

  1. I wish Neal Boortz’s web site had MP3 replays of his shows available. Today he replayed his interview he had with Rep.John Linder yesterday. Rep Linder said he spoke with bankers and economist when doing his research and they told him that if congress just got rid of the Mark to Market re-evaluation requirements of their assets, the problem immediately goes away.
    If this is true… Paulson and Bernanke should be fired and investigated!!!

    Putting the American people through all of this when a simple policy change is all that is needed is… is…, someone help me here. I can’t come up with any words other than “F”-ed Up!

    I had just posted this on JasonPye.com Thought it applied here as well.

  2. StevePerkins says:

    I’m not trying to be snarky here, just genuinely curious… what was Linder’s finance background before coming to Congress? I always thought he was pretty much your standard-issue backbencher who toes the party line, looks out for chicken farmers, and uses the FairTax thing to keep his seat safe. Maybe there’s more there… feel free to fill me in.

  3. fishtail says:

    Before his Congressional career, Linder was a State Rep, a dentist, and a slumlord. Now he’s an economic expert.

  4. John Konop says:

    Daniel N. Adams
    Anyone who made that comment does not know what they are talking about. We have around 5 trillion dollars of home loans alone at risk. This does not include the issues with the student loan problem.

    I am not a fan of the last bailout plan, but it is irrational for anyone to think that would cover up this mess!

  5. muffin15 says:

    John is right..Daniel you may need to do some more home work…. saying that someone should be in trouble for not abolishing mark to market rules is plain ignorance. I like Boortz but take your blinders off and use your brain. It is these accounting standards that are helping address the serious credit issues we have today. Its not the wild west anymore.

  6. umustbekidding says:

    Fishtail, Maybe being a slumlord makes him an expert. After all, you don’t want to be as dumb with your money as your renters! 😉

    Newt sent out an email about “mark to market”. He seems to think it is a real problem too.

  7. Doug Deal says:

    Mark to market is not the cuase of the problem. That is like saying going to the doctor is bad because he might find something.

    Anyone who thinnks getting rid of mark to marker, does not really know what they are talking about. Commercial investors know when a bussiness is covering up shaky assets (like bad mortgages). The only thing this would do is give less information to the more casual investors about the condition of the assets of company.

    As I have read more and more about this issue, the only real concern seems to be the drying up of sources of short term loans, the lubricant of capitalism to steal another person’s metaphor.

    It would seem that the correct course of action, if something must be done, is to address that issue. Perhaps make money market investments tax free for 2 years, or even subsidize interest on these types of investments. Money will then shift back to the short term loan business and 670* billion dollars or more can be saved.

    (* To subsidize 1% interest on the 3 trillion money market fund market is only 30 Billion a year).

    If the road caused your supension problems, do you replace the road for $3 million, or do you spend $1,500 on the suspension and take a different route to work? SocializingFixing the mortgage mess to help with this other segment of the economy is an expensive mistake, backed by people who have a lot at risk in bad investments.

  8. umustbekidding says:

    Personally, I think the problem is “living beyond your means”. People bought homes they could not afford, borrowed more against them to buy furniture, charged up every cedit card they could get and never stopped to think, “can I really afford all this?”
    I have one Credit Card. We put 30% down on our home. We own our cars. We save our money, own our business and business property and pay our taxes. Do we get anything for playing by the rules? no.
    I am against the bailout and if anyone is fired, it should be ALL of Congress!

  9. Doug Deal says:

    um’,

    I agree with you, that is the root-root cause. My wife is a lawyer, and I a work as a consultant/contractor for software development. We make a pretty good combined salary. We live in a modest house in a neighborhood with houses in the mid $100,000, we have one $350 car payment, and we do not think that we are saving nearly enough money.

    Yet, my neighbors, who are mostly working class, who likely make less than 1/2 of what my wife and I make drive better, newer and more expensive cars. Have $5,000 lawn mowers that turn on a dime (I have a $300 push mower), ATV’s, RV’s and boats. How can they afford (or think they can afford) this type of lifestyle?

  10. umustbekidding says:

    Yep. Everyone’s gotta have it all and they want it now.

    Doug – my brother is a contract software consultant too. Works with Peoplesoft and some other software. I am not sure what he does, but he is paid very well.

  11. Mark to market isn’t a silver bullet but it is causing problems now because it’s forcing an understatement of certain assets. Easing the rules temporarily, as the SEC has done, is a good idea and it may have a big impact.

  12. Vic says:

    AIG’s most recent quarter (June 30, 2008) financial statement:

    Total Cash (mrq): 154.80Billion
    Total Debt (mrq): 188.30B

    Revenue (ttm): 82.23B
    Gross Profit (ttm): 110.06B
    EBITDA (ttm): -10.91B

    Book Value Per Share (mrq): 29.04
    Shares Outstanding: 2.69B
    Book Value: 78.1 Billion

    Less than a month ago AIG’s headlines:

    1) AIG sees China general insurance business growing
    Wed Sep 3, 2008 1:21pm EDT- Reuters

    2) AIG shares jump with insurance stocks
    Tuesday September 2, 5:55 pm ET-AP
    AIG shares rise as investors are relieved Hurricane Gustav
    will not be as costly as Katrina

    3) AIG makes 18 pct investment in MicroCred Nanchong (China)
    Tuesday August 26, 10:42 am ET-AP
    American International Group takes 18 percent stake in MicroCred Nanchong China

    *so, are we indirectly bailing out Chinese Insurance Companies?

    source:
    http://www.finance.yahoo.com/q/ks?s=AIG

  13. Icarus says:

    My understanding is that M2M isn’t in the new compromise bill. It is kind of funny that there are calls for regulation to keep this from happening again, and simultaneous calls to eliminate Mark to Market, which is the only real regulation involved in this scenario.

    That said, most people believe the underlying assets in these mortgage portfolios are worth more than anyone is currently willing to pay for them. Given that, a temporary suspension of Mark to Market could be a cheap solution, or at least, part of the solution.

    i.e, if the Wall Street bank had a choice of selling to the government and accepting the new restrictions, or holding the portfolios on the books at cost until actual losses are realized, I’d be willing to bet that a lot of them would hold them as long term assets, and the fed wouldn’t have to write as many checks.

  14. Doug Deal says:

    Vic,

    It would only be a bailout of a Chinese company in that example if the Chinese compnay owned AIG, not the other way around. The stake in the Chinese company is an asset, not a liability.

  15. Vic says:

    Is anyone calling for Public Hearings,with these boys present, prior to giving them $700 Billion?

    BTW, Quadrillion comes after Trillion.

    AIG KEY EXECUTIVES
    $Pay $$Options Exercised

    Mr. Edmund S.W. Tse , 70
    Sr. Vice Chairman of Life Insurance, Director, Chairman of American International Assurance
    Company Ltd, Chief Exec. Officer of American International Assurance Company Ltd.,
    Head of AIGs Worldwide Life Insurance Operations of American International Assurance Company Ltd
    $ 7.66M $$ 1.51M

    Mr. Steven J. Bensinger , 53
    Chief Financial Officer, Vice Chairman of Financial Services and Exec. VP $ 4.99M $$ 0

    Mr. Win Jay Neuger CFA, 58
    Chief Investment Officer and Exec. VP $ 4.64M $$ 106.00K

    Mr. Jay S. Wintrob , 50
    Exec. VP of Retirement Services $ 5.32M $$ 2.84M

    Mr. Robert M. Sandler , 65
    Consultant $ 4.64M $ $453.00K

    *source
    yahoo finance-company profile

  16. IndyInjun says:

    Good advice from Barry Ritholtz

    “If FASB 157 is suspended, I would advise our clients and the investing public that owning any financials that failed to disclose their holdings accurately were no longer investments — they were pure speculations, with more in common to spinning a roulette wheel than owning Berkshire Hathaway (BRK) or Apple (AAPL) or Google (GOOG). Indeed, I know of no faster way to end up on the DO NOT OWN list than to hide from your shareholders what is on your books.”

  17. muffin15 says:

    Vic..does it surprise you that you have to pay top dollar to find top talent to run what used to be the worlds biggest insurance company?

  18. IndyInjun says:

    Vic and Muffin……these are the biggest welfare checks in the WORLD.

    No GOPer has any credibility about welfare any more.

  19. Vic says:

    Top dollar to be oblivious to the largest financial failure in the history of the world, beginning with Noah or the Big Bang, whichever came first?

  20. if congress just got rid of the Mark to Market re-evaluation requirements of their assets, the problem immediately goes away.

    Let be try to be clearer in the point that I believe Linder was making (he definitely did a better job than I did). He was saying that if Banks just went back to the way they use to be required to re-valuate assets prior to Sarbanes-Oxley, the immediacy of the current crisis ($700 Billion now or we all perish) goes away.

    He floated some other things like increasing the federal deposit insurance to $250K and that loans at higher than normal bank rate to financial institutions should be used instead of taxpayer gifts.

    All much better of what we need to do “right now” than what we’ve been hearing over the last week from the congressional leaders, the President, Fed Chairman, Treasurer Secretary and presidential front runners. The only issue I believe he left out was accountability of appointees that allowed all this to happen in the first place and those that tried to use fear to rush a taxpayer funded bailout though unnecessarily .

    I agree with Buzz that this is probably not the silver bullet, but it give us time to investigate in order to find out what the main problem is and come up with well thought out and vetted solution.

    Sorry if I misspoke, I was a little pissed-off. Actually I still am, just less.

  21. Vic says:

    If they do away with Mark to Market, Doug can value his push mower at $5,000 and value his neighbors zero radius mower at $300 and his neighbors can value their zero radius mower at $300 and Doug’s push mower at $5,000.

  22. Vic… do I or the other taxpayers have to pay for either one or the losses incurred when Doug goes to sell his pushmower? And will doug and his neighbor be held accountable for the fraudulent valuation? And will those that were suppose to oversee this valuation be held accoutable?

  23. You want a “bailout negotiator”? Get someone in there who says 1) the government caused this mess, 2) the government “fixing” this mess will cause a bigger mess, 3) the government had no Constitutional authority to do the things that got us into this mess, and it has no Constitutional authority to do the things it is proposing to get us out of it, and 4) GET THE GOVERNMENT OUT OF THE FRIGGIN’ WAY, so that the market can correct and we can get back to real valuations, real money, and real freedom.

    Can’t we find just one person in Congress who will say those things?

  24. Sarbanes-Oxley was a knee-jerk reaction to ENRON. It is what bans M2M.

    It’s odd that Obama said today on the Senate floor that we needed to return to the business regulatory system of the 1990’s, the system that allowed ENRON and the other corporate scandals of the begining of the decade, as well as, the Tech bubble which began to burst under Clinton.

  25. bowersville says:

    This may seem a little off topic, but can I use mark to market to lower my property taxes?

    Will this be a good year to challenge property tax evals?

    This may be an omen. If there are any witches reading when I did spell check, eval was corrected to evil.

  26. IndyInjun,

    You’re misunderstanding what mark to market does. As Cobb Needs points out if you can’t sell an asset it’s worthless. How crazy is that? Also, the value of your asset can be reduced (even if you don’t want to sell it) because I can’t sell my asset. Clearly the mark to market rules need refining. It works great when things are going up but it’s a killer when things do down.

    Since when did Independent Indians support such crazy accounting rules? 😉

  27. umustbekidding says:

    Cobb – I like that. I haven’t been able to sale my home in the past year. It must not be worth anything.

    Daniel- We should subsidize any losses on the mower, but he can keep any money made. Isn’t that the direction we are headed? No RISK.

  28. Three Jack says:

    dave ramsey’s common sense fix including mark to market suspension on certain loans:

    Years of bad decisions and stupid mistakes have created an economic nightmare in this country, but $700 billion in new debt is not the answer. As a tax-paying American citizen, I will not support any congressperson who votes to implement such a policy. Instead, I submit the following three steps:

    Common Sense Plan.

    I. INSURANCE

    A. Insure the subprime bonds/mortgages with an underlying FHA-type insurance. Government-insured and backed loans would have an instant market all over the world, creating immediate and needed liquidity.

    B. In order for a company to accept the government-backed insurance, they must do two things:

    1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage.
    a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes.
    b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan. In the event of foreclosure or short sale, the borrower will not be held liable for any deficit balance. FHA does this now, and that encourages mortgage companies to go the extra mile while
    working with the borrower—again limiting foreclosures and ruined lives.

    2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and executive team members as long as the company holds these government-insured bonds/mortgages. This keeps underperforming executives from being paid when they don’t do their jobs.

    C. This backstop will cost less than $50 billion—a small fraction of the current proposal.

    II. MARK TO MARKET

    A. Remove mark to market accounting rules for two years on only subprime Tier III bonds/mortgages. This keeps companies from being forced to artificially mark down bonds/mortgages below the value of the underlying mortgages and real estate.

    B. This move creates patience in the market and has an immediate stabilizing effect on failing and ailing banks—and it costs the taxpayer nothing.

    III. CAPITAL GAINS TAX

    A. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous—and immediate—liquidity in the markets. Again, this costs the taxpayer nothing.

    B. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down. This is not a time for envy, and it’s not a time for politics. It’s time for all of us, as Americans, to stand up, speak out, and fix this mess.

  29. bowersville says:

    [email protected],

    Oh I can sell my property, I just can’t find anyone willing to give what I want for it.

    Maybe this bailout does need to trickle up. Maybe I can get the government to buy it for what I want.

  30. Three Jack says:

    instead of relying upon armchair economists up for re-election to negotiate a solution, why not invite professional economists to spend this weekend locked in a room until they have a viable option.

  31. Doug Deal says:

    3J,

    If I have a 7.5% mortgage, does that mean I should stop paying 3 months before these provisions become active, or should I just start now? What if I am 2.5 months behind, tough luck?

    There would be plenty of liquidity if the companies were allowed to go bankrupt. Healthy companies could aquire the debt at 10-20 cents on the dollar and renegotiate with the home owner and still make a fortune. All the toxic debt then gets normalized at the expense of the companies that caused the problem.

    As long as the carrot of a big welfare check in the form of a bailout, there is no way they are going writedown bad loans when the government might buy them above market price at any moment.

  32. bowersville says:

    True story, I know that makes it a lie. But this has been coming a long time.

    Friends from Detroit bought some acreage in Franklin County 8-10 years ago. As soon as their home in Detroit sold, their plans were to build a home.

    They are in a motor home on their Franklin County property.

    The moral of the story. They can travel if only they could find some gas.

  33. Three Jack says:

    doug, i agree with you. as i stated previously, they got themselves into it, let them figure out how to get out of it.

    but reality is that congress is going to pass something. the only question left is how much will it cost taxpayers. ramsey’s approach seems far better than the 400+ page boondoggle being voted on tonight in the senate.

  34. IndyInjun says:

    Buzz, If NO ONE will buy the things, the price is ZERO.

    This bailout is like buying yesterday’s Lotto Tickets at face value from the holders, who gambled and lost, only to be made whole by Uncle Sammy.

  35. bowersville says:

    I have to concur with Indy.

    You can’t get something for nothing unless it is a government subsidy or a bail out.

  36. tb says:

    Any constitutional legal eagles on peach pundit?

    Am I wrong, but aren’t measures that are supposed to be financial in nature supposed to be brought through the house first?

  37. bowersville says:

    I’m not a legal eagle and I read this else where before posting on another thread.

    Article 1, Section 7 of the Constitution of the United States of America:

    …the Senate may propose or concur with Amendments of other bills…

    The Senate attached several tax extension bills and the Wellstone bill that was previously passed by the House.

    Redstate.com article by Jeff Emmanuel has the bills listed with-in the Senate version.

  38. The housing disaster’s most important proximate cause is bad loans. One cause of that is the house price falling below the loan value. Loans were made on expectations of a continuing bubble of house prices rising, but instead they fell.

    Mark to market worries many, but it shouldn’t. Mark to market accounting requires writedowns of assets that have lost value. The stock market mostly knows and/or estimates such losses even if the banks do not mark to market. Postponing mark to market won’t change the market value losses or the bad loans. Eventually a mark to market has to be written off either to book value or to a loss reserve account. Banks want to postpone this so that they don’t show up as insolvent, which would mean they would need to restore capital or go under, as the realized losses might trigger some debt covenants. Postponement is a means for the existing management to stay around for a longer time. Ex post postponement (changing the rules after the fact) is a way for the managers to put one over on the debt-holders and prevent them from gaining a degree of control over the insolvent bank. Postponing mark to market of the assets gone bad will not resolve the banking system’s insolvency.

  39. btpull says:

    Taft,

    I agree; the mark to market issue is something Newt brought-up to look smart in my opinion.

    When evaluating investments people look at cash flows and not how accountants value the asset. The reason this “toxic” securities have lost some much value is that their underlying cash flow is uncertain.

  40. IndyInjun says:

    btpull

    That and the fact that all of the slicing, dicing, and securitization created too many players in every mortgage transactions with such complex interelationships and couterparty risks, that it is not economically feasible to spend the HUGE accounting and legal resources to untangle the mess.

    These things are truly worthless and the taxpayer is totally screwed.

    This is nothing at all like what the Resolution Trust Corporation was able to do in the wake of the S&L meltdown.

    What has been done goes beyond greed and extends to TREASON, for the perpetrators have stolen the futures of every American, especially the children.

    Our Republic is now GONE, as foreigners now have greater voice than do its citizens. The great American middle class is to be sucked dry to pay back the Chinese and Asians.

  41. jsm says:

    Isakson was just on WDUN with Martha and said that the Senate bill is the same bailout plan with some additional items. He made the argument about the markets going back to where they “should be” if this passes, etc. Whatever.

    He also made sure to bring up the CRA, Jim Johnson, creative lending measures, etc., right before he finished the call.

  42. Tea Party says:

    The time for partisan politics has left the barn, so to speak. Our Country faces a near term economic meltdown, and not the $700BB mess we are all talking about.

    Some. Mr. Konop, call the ‘rescue plan’ a tip of the iceberg…it is, IMHO the most sobering economic warnings seen to date–Commerical Real Estate loans and leases in danger of increased failure.

    The longer term issue, our inability to pay astonishing and growing National Debt, may induce ‘world shock’ if the US is percieved unable to maintain the ‘full faith and credit’ status.

    If our T-Bill investors leave the barn, we are in for challenges that most will not like one iota. Challenges may include, but are not limited to, troop movements that we cannot influence, things blowing up that we cannot stop, Taiwan going Mandarin, Israel getting a ‘pre-emptive’ strike by Iraq (G’D saves us all), ad infinitum, AD NAUSEUM.

    We’d better start singing from the same Hymnal soon, or we will face the music.

    This is pretty objective/non-political stuff: Hat Tip to CoStar (The TOP National Commercial Real Estate info provider)…for this summary:

    [Breeze down to Dr. Weiss summary if you are pressed for time.]

    The Top of the Iceberg: Current State of Banking

    The Federal Deposit Insurance Corp. (FDIC) has been called in as receiver for 11 banks so this year through today, and the federal regulator expects bank failures in the near term to increase.

    The FDIC’s “problem list” of banks grew to 117 institutions as of June 30, up from 90 at the end of the first quarter. That is largest number on the list since the middle of 2003. Total assets of problem institutions increased from $26 billion to $78 billion.

    A concentration in real estate has been a common theme among the bank failures in 2008. Rising levels of troubled real estate loans has led many institutions to increase their provisions for loan losses. Loss provisions at the end of the second quarter totaled $50.2 billion, more than four times the $11.4 billion the industry set aside in the second quarter of 2007. Almost a third of the industry’s net operating revenue went to building up loan-loss reserves and not to making more loans.

    However, for the ninth consecutive quarter, increases in delinquent loans surpassed the growth in reserves. The amount of delinquent loans and leases (90 days or more past due or in nonaccrual status) increased by $26.7 billion (20%) during the second quarter, following a $26.2 billion increase in the first quarter and a $27 billion increase in the fourth quarter of 2007. Almost 90% of the increase in delinquencies in the last three quarters consisted of real estate loans.

    Also, the net charge-off rate of bad loans has risen to its highest level since 1991.

    To be fair, the primary culprit behind the banking mess has been residential real estate loans and most of the government action and media attention has been focused on problems in the housing market. However, banks are beginning to see an increase in troubled commercial real estate loans, even though the ratio of these troubled assets is far less than in the early 1990s during the last major upheaval in the financial markets.

    The total amount of multifamily and commercial real estate loans delinquent more than 30 days at the nation’s commercial banks is up 65% from June 30, 2007, to more than $20 billion. The amount of commercial properties taken over by banks through foreclosures is up 23% from the second quarter 2007 to $14 billion.

    Current delinquent commercial real estate loans represent only 4.24% of all outstanding CRE loans at commercial banks. While that is the highest it has been since 1995, is not even close to the peak of 12.07% at the start of 1991.

    And year to date, commercial banks have charged off more than $870 million in commercial real estate loans and recovered only $79 million of that amount.

    The current charge off rate for all commercial real estate loans is still less than 1% (0.93%) and that compares to high of 2.54% in the second quarter of 1992.

    Private Research Peers Beneath the Surface

    Martin D. Weiss, Ph.D. and president of Weiss Research Inc. sent a report to Congress this past week that painted a more drastic picture than current conditions. Weiss said there are 1,479 U.S. banks and 158 U.S. thrifts at risk of failure, with total assets of $3.2 trillion – more than four times the amount of the proposed federal bailout and 41 times the amount of assets of banks on the FDIC’s list of troubled institutions.

    “There should be no illusion that the $700 billion estimate proposed by the administration will be enough to end the crisis,” Weiss said in announcing his report. “Nor should there be any false hopes that the market for U.S. government securities can absorb the additional burden of a $700 billion bailout without putting major upward pressure on U.S. interest rates, aggravating the very debt crisis that the government is seeking to alleviate.”

    The bailout plan whether it passes Congress or not, is an insufficient step to deal with our current credit crisis, agreed Campbell R. Harvey, professor of finance, The Fuqua School of Business, Duke University.

    “While most of the focus has been on Wall Street, there are hundreds, if not a thousand banks, that may be insolvent if their assets, which include capital market instruments, were marked-to-market. Over the next six months, we are faced with the specter of a massive number of bank failures,” Harvey wrote in a report this week entitled: The Financial Crisis of 2008: What Needs To Happen after TARP.

    TARP stands for Troubled Asset Relief Program, the moniker given to the U.S. Treasury’s bailout program.

    As a way of comparison, Harvey noted that the Resolution Trust Corp. initiated in 1989 took over and disposed of more that $550 billion in assets in its lifetime, which is roughly $900 billion in 2008 dollars, he added.

    “Today’s situation is larger in scale than the S&L crisis. The combined assets of just two firms, Lehman Brothers and Washington Mutual, $946 billion, exceeds the assets targeted during the S&L crisis,” Harvey said. “Note the total assets of Wachovia Corp. were $812 billion as of June 30, 2008.”

    “It is naïve to think that the $700 billion TARP program will solve our financial crisis,” Harvey added.

    What’s on the Horizon
    New research this week from TowerGroup found that the weeks and months to come will bring more mergers and restructuring for the US banking industry, even as the drive for greater regulation, transparency, and cooperation continues to be debated. At the same time, financial institutions will return to a focus on more traditional banking activities, as credit terms become tighter, capital is withheld from the market, and economic growth is further stifled.

    TowerGroup said it believes the banking industry is on the verge of a new hierarchy. Strong banks will press their advantage with new products and services; new competitors will enter the market as the industry industrializes; and the need for greater integration across client databases, risk management capabilities, and products will cause bankers to realize they must abandon the cultural silos that have hindered their progress toward make the whole greater than the sum of its parts.

    “This market crisis, the worst in our long-term collective memory, is not over,” Standard & Poor’s Ratings Services wrote in a report this week entitled: When the Smoke Clears, What Happens Next with U.S. Financial Institutions. “Although we anticipate more difficulties, we should still begin to consider what the financial institutions industry may look like when the smoke clears. We believe the landscape is likely to be vastly different, but the changes could contribute to a healthier and more fiscally sound U.S. financial system.”

    In the short term, the Darwinian effect of survival of the fittest could eliminate the weakest players and lead to less robust competition but could also bring an element of stability, S&P reported.

    “We can envision a major overhaul of the established, 75-year-old regulatory regime,” S&P wrote. “A final outcome seems to be the possibility of the Federal Reserve playing a central role in examining and supervising financial institutions, as well as promoting the safety and soundness of the financial system. The national regulators may turn their sights on containing systemic risk if another large institution fails, regulating hedge funds and private equity funds, and regulating the over-the-counter market for trading complex financial instruments.”

    END OF REPORT

    Prayer, common sense, intellect, and our ability to come together as One Nation will maintain our standard of living and world peace, as we know it.

  43. Tea Party says:

    To those that do not believe in the power of prayer, feel free to omit that from your perspective.

    Point is, the time for bickering and postering is over. “We can do this, and you can help.”

  44. Icarus says:

    Good Post, Tea Party. For anyone that thinks this is over with a $700 BN check, they’re fooling themselves and anyone who is listening to them.

    We face as great of a threat to the economic fundamentals of our country than at any point in most of lifetimes. It’s time to work together to figure out a way through it. Unfortunately, we’re also about 30 days away from a Presidential election, so I’m not holding my breath on that one.

    The fact that we’ve had calls for military action this week because some people had to wait 30 minutes for gas tells me that our electorate isn’t quite prepared to deal with the scale of these problems either.

    I would suggest investing in Anheuser Busch. I will be. Not the stock, just the product.

  45. MediaGuyAtl says:

    Enron/Worldcom cost stockholders about 250 Billion Dollars total! The Bear Sterns, Lehman Bros. AIG and Fannie Freddie mess will cost us over a trillion. Lay, Skillings, Fastow all went to jail. Anyone see where I going with this. The media outrage created after Enron/Worldcom was enormous and I’m not seeing half that with this incredible mess. Bottom line Frank, Dodd, Raines, Johnson and Gorelick need to be investigated and if they are found guilty of wrongdoing then jailed along with the Enron gang.
    I’ve emailed and called my REP Dr. Price and said VOTE NO again. Saxby might have lost my vote with his YES vote, we’ll see. Why hurry into something that WILL create a bigger mess in the future. God I’m pissed… Today the Dow is down and this after the Senate voted FOR the bill. Nice job, I bet the DOW falls again on Monday after the House votes too.

  46. Icarus says:

    “Nice job, I bet the DOW falls again on Monday after the House votes too.”

    Possibly a small rally, but we’ve still got some long term problems to deal with. One of the most important economic concepts is the velocity of money. A lot of folks are currently frozen on the sidelines, and money turnover has slowed to a drip.

    This entire exercise has gutted consumer confidence, frozen the lenders into a long term bunker mode, will continue to crowd out small business investment, and has the public just pissed off in general.

    We’re not getting out of this overnight, bill or no bill. I’m not looking for Dow 12,000 anytime soon. I’m just hoping we don’t see Dow 9,000.

  47. Bill Simon says:

    Indy,

    “Since when have religious righties favored thieves and con men hiding the truth?”

    As long as those thieves and con men pander to their pro-life agenda, those religious righties don’t frankly care about the truth.

  48. Tea Party says:

    I think it is the ‘pishing in the sandbox’ that got us her. It certainly won’t resolve problem one.

    $700BN ‘rescue’ not enough

    According to previous article(s).

    Even if we could wring the dough from Corporotacracy, and this will NEVER happen, the $700BN ‘plunderers premium’ would not be enough for Round Two, if those articles I posted hold true. Much less, the Jackals don’t have enough dough to resolve our ever increasing Nation Debt.

    As Icarus points out, almost immediately after the inane, yet inevitable $700BN passes, we will vote on POTUS. Our Nation has virtually never been more divided by race, socio-economic status, education, and complacency and passion.

    Frankly, neither Party can or will resolve the mess, it is up to the People. And I hold little hope there, since most folks want to talk about traffic, gas, if Mr. Obama is a ‘closet’ Muslim, or Mr. McCain will pre-decease Ms. Palin.

    IMHO we got here, from the New Deal to the Raw Deal, because we the People did not stop the madness. From Tea Pot Dome to the S&L Bailout, to the current $700BN, and more ominously, our National Debt, People have not spoken loudly, and in ONE voice to deny Power over Principle.

    Sure, hold those accountable for this mess, try to wring some dough out of the richest, most well-lawyered folks in America, let me know how that goes. Meanwhile, create:

    Sound economic policies that favor savings,
    Eliminate National Debt w/o devaluation of dollar and inflation,
    Actual gov’t spending reduction, not ‘rate of growth’ reductions,
    Massive new US infrastructure re-development,

    Embrace a WWII style ration program to re-allocate resources by industry: Energy, Packaging, Water, Transportation, every SIC Code out there.

    Start with the US Gov’t, as it consumes 25-28% of GDP. Is it as lean and mean as possible? Taming waste might alone resolve a huge expense, invest the balance to debt reduction.

    Call it Socialism, Lehmannism, or whatever you want, America needs to stop wasting resources, and re-allocate the wondrous gifts we have. Consider the alternatives…

    Do we acquiesce to the brutish concepts of Paul Wolfowicz and his merry band of lunatics and let the system crash, to be rebuilt? One horrible way to eliminate our National Debt is to not PAY IT, which is a by product of a worthless dollar and hyperinflation.

    That would involve extreme acceleration of the dollar devaluation and hyper-inflation. Hmmmmmmm, an acceleration of current trends due to a faltered US economy????

    The true Founders of the Tea Party are rolling, nee’, spinning in their collective graves as most of the Citizenry wrings its’ collective hands and ‘tsk,tsk, tsks’ in front of their TV set.

    I don’t know the answer, neighbors. I do know we are at a critical crossroads in our Nations history.

  49. IndyInjun says:

    Konop:

    That Walker piece was using numbers BEFORE the financial system blew up. His draconian measures to shore up the finances of the US Government were probably impossible politically.

    With this, the “full faith and credit of the United States” goes from dubious to GONE.

    This bailout will trigger the collapse.

    People shorn of Social Security, their savings, their pensions, and their entire futures might tend to erupt.

    The futures of every American have been stolen by a corrupt gang of thieves and their henchmen in Congress.

    All must unite for survival.

    All must unite against those who perpetrated this, beginning with demanding that criminal penalties under Sarbanes Oxley be used in the same aggressive manner as RICO has been in drug cases, instead of repealing Sarbox.

  50. Three Jack says:

    saxby’s reply to those who contacted his office in opposition to the bailout plan follows. if you had any question about his inability to continue as one of georgia’s u.s. senators, this should answer that question:

    Thank you for contacting me regarding the turmoil in our financial markets and the actions taken by the United States Treasury as they pertain to several leading financial institutions. It is good to hear from you.

    This is the most serious and critical domestic issue I have dealt with in my 14 years in Congress. We have been betrayed by many people and by abuse of the system. Now we have two significant choices to make – do nothing or take action.

    I strongly believe that doing nothing will destroy the financial security of millions of Americans and possibly lead us into a depression. I just as strongly believe the bill as now negotiated will arrest the crisis and begin to turn our economy around.

    The bill that I voted for is not a bailout. H.R. 1424, “The Emergency Economic Stabilization Act,” is crafted to address the crisis; restore security for the American taxpayer; and return our nation to the strongest economic power in the world. And in the process this bill enables us to root out and punish those who cheated us all.

    I know that my vote in favor of this package was not the politically popular thing to do, but this is not a popularity contest. This is about the future of our country and the future that my children and grandchildren will inherit. I have absolutely no doubt in my mind or my heart that my vote in support of this measure was the right thing for our economy, for Georgians, and for our country.

    My first reaction was one of anger and frustration. How could this happen in the strongest economy in the world? How could the best financial system in the world fail? After calming down, I realized the seriousness of the situation and the consequences of Congress failing to act.

    The Treasury Department submitted a proposal to Congress requesting authority to purchase troubled assets from financial institutions. This program was intended to address the root cause of the market stresses by removing these assets from the financial system.

    I did not support the original proposal submitted by the Administration because it did not address the critical needs of the American taxpayer, community banks, retirees, and small businesses and it concentrated too much power in a small group to administer the plan.

    As the conversations in Washington and across the nation continued over how to address the challenge before us and as the details of the problems in our financial sector were revealed daily, I became convinced that something had to be done and done soon.

    Moreover, when the House rejected the plan, the economy suffered a $1.2 trillion dollar blow in the stock market, which only made more apparent the impact this credit crunch is having on Main Street . Specifically, in some cases, Georgia community banks are unable to make auto loans.

    Below are details of the legislation:

    TAXPAYERS ARE PROTECTED. In its current form, the legislation before the Senate protects taxpayers in many ways. Accountability, safeguards, and oversight measures are numerous. There will be transparency, public reports, and triggers to end the program if, for some reason, it is not effective or end the program early if it is more successful. Moreover, I worked to negotiate a mechanism to stop all transfers of taxpayer funds if necessary. That said , I believe this legislation will be effective.

    NOT A BLANK CHECK. I opposed the President’s initial request to simply give a blank check to Secretary Paulson. I also opposed the second version submitted by the President and Congressional Democrats that would have given taxpayer money to liberal groups such as ACORN. Let me be clear – this current bill, the bill in the Senate, is not a blank check for anyone. First, it allows the release of $250 billion to purchase these toxic loans. Then, Congress can release another $100 billion but only with Presidential involvement and certification that it is necessary. And only if absolutely necessary and again with Presidential certification and Congressional approval, the remaining $350 billion could be released. However, I do not believe the entire $700 billion authorized will be necessary or used.

    NO GOLDEN PARACHUTES. CEOs and other executive officers who drove their companies into the ground will not be able to walk away with millions leaving taxpayers holding the bill. Those companies that choose to participate in the program will be subject to strict compensation limits.

    {ROTFLMAO!!!!} NO NEW GOVERNMENT SPENDING. The language is clear – all revenue generated through the repayment of any assets purchased and any sold must be used to pay down the national debt. No money will go to pork projects, new government spending, or liberal groups such as ACORN.

    HELP FOR MAIN STREET . As this crisis continues, community banks are being affected more and more. Car loans and home loans, even to those with good credit, are drying up. People are losing their retirement savings. Small businesses are now having difficulty getting loans to make payroll or grow their business to create new jobs. If we allow this to continue, jobs will be lost, more retirement accounts will be impacted, and credit will get even tighter.

    PUNISH CRIMINALS. The Federal Government is actively investigating cases of fraud and abuse. Where wrongdoing is found, the perpetrators, including, if implicated, members of Congress will be brought to justice. We have already seen subpoenas issued for records at Fannie Mae and Freddie Mac. This bill demands cooperation with the Federal Bureau of Investigation (FBI) and I expect we will see more subpoenas and criminal prosecution.

    ADDRESS THE UNDERLYING CAUSE WHILE WE TREAT THE SYMPTOMS. We are seeing the symptoms now – lack of trust in the banking industry, daily tightening of the credit markets, losses in personal retirement accounts – and while this legislation addresses those issues, it also goes further to treat the cancer that got us here. This legislation authorizes the Securities and Exchange Commission (SEC) to modify the ‘mark to market’ accounting procedures that magnified this crisis by forcing banks to mark down the value of assets they had no intention of selling in the near future. This mark down of value caused a corresponding loss of value to the institutions. The SEC has already begun the process to modify this procedure.

    RETURN TRUST IN THE BANKS. By increasing the Federal Deposit Insurance Corporation (FDIC) protection on bank accounts from the current $100,000 to $250,000, taxpayers and bank customers can once again trust that their money is safe in the bank of their choice.

    DEBT REPAYMENT. Toxic loans will be purchased at a discount and 100% of the monies repaid to the government will go to reduce the debt we incur in this process. While we shouldn’t expect full repayment, it is possible that all of the money expended will be repaid.

    PROTECT OUR NATIONAL SECURITY. If we do not act and this crisis spreads like a cancer to every segment of our economy, it will destroy not only taxpayer savings but it will erode our ability to fund our military, supply our troops with the resources they need, and protect our homeland.

    NO TIME FOR POLITICAL FINGER POINTING. There is plenty of blame to go around but now is not the time to throw stones, now is the time to address this crisis and get our economy moving again.

    FOR THE COUNTRY; NOT POLITICAL POPULARITY. This is not a popularity contest, this is a crisis. And since this crisis began, I have had numerous conversations with economists, community bankers, small business owners, and taxpayers. I have weighed the costs of inaction versus the costs of unpopular action. I support this bill because it is good for the country, it is the right thing to do today for taxpayers and tomorrow for my children and grandchildren, and it is necessary to get our economy moving again.

    Strong capital markets are vital to a prosperous U.S. economy and given the renewed focus of our regulators and market participants, I remain confident in our financial markets and our overall economy.

    However, history warns us against inaction by hard lessons learned. Delaying to act would be a repeat of the mistakes of the 1920s, when thousands of banks failed before significant confidence was restored to our financial markets.

    If you would like to receive timely email alerts regarding the latest congressional actions and my weekly e-newsletter, please sign up via my web site at: http://www.chambliss.senate.gov . Please let me know whenever I may be of assistance.

  51. Tea Party says:

    Room under the TARP?

    This just in from NAR realtors trade group:

    A SUMMARY OF THE PROPOSED ECONOMIC STABILIZATION ACT
    WHAT’S AT STAKE FOR REALTORS

    The House has defeated the Emergency Economic Stabilization Act (EESA) on a vote of 205 – 228. NAR supported the package. Media reports about it did not present the case for the many ways it would have supported the real estate industry.

    The summary below presents all the bill’s provisions, condensed into some general subject headings. Many of these provisions are likely to survive in whatever legislation comes next.

    Help Homeowners and Borrowers: The legislation responded to the criticisms that lenders have been slow and/or unwilling to work with homeowners and borrowers. It encouraged negotiation in short sales and consumer efforts to refinance or reconfigure existing mortgages:

    When the Treasury (or other federal agency that holds mortgages) acquires troubled existing mortgages from financial institutions, agencies are required to work with lenders and mortgage servicers to find ways to avoid foreclosures.

    All federal agencies are required to work with servicers to facilitate loan modifications that will consider the net present value of the mortgage.

    Similar refinancing and foreclosure prevention requirements apply to mortgages involving owners of multi-family properties. Policy goal is to assure that tenants don’t lose their residence when an owner has problems with the mortgage.

    Changes to existing mortgages can include (but are not limited to) revisions in principal, interest rate and period for repayment.
    Get Money into the Financial System Quickly: The credit markets are nearly frozen. Lenders can’t lend because they are receiving no payments on existing loans. The legislation allowed the government to buy troubled loans and mortgage securities. The funds that the institutions received when the government purchased the existing portfolios were to be available to issue new mortgages with more carefully specified and monitored lending standards. Provisions include:

    Create a Troubled Asset Relief Program (TARP) to purchase and guarantee the troubled assets from the financial institutions that hold mortgages and/or mortgage-backed securities.

    A new Office of Financial Stability within the Treasury to operate TARP, with input from the Federal Reserve, Federal Deposit Insurance Corp (FDIC – the agency that works with failed and failing financial institutions to insure and protect consumers), the Comptroller of the Currency (bank regulator), Office of Thrift Supervision (regulator of former savings and loan companies) and the Secretary of Housing and Urban Development.

    Timing for TARP purchases designed to assure that all the authorized $700 Billion is not released at one time.

    First release of funds to purchase troubled assets will be $250 Billion. Second release of up to $100 Billion must be authorized by the President. Final $350 Billion can be issued only on Congressional approval. Congress given 15 days to act.

    Follow, Protect and Watch Over the Money: Congress will keep a tight rein on TARP. Congress will have the assistance of numerous agencies charged with specific tasks and reporting responsibilities.

    TARP Oversight Board at Treasury — monthly activity reports to Congress.
    Secretary of Treasury — detailed reports to Congress for each $50 Billion in transactions as the transactions are completed.
    Government Accountability Office (Congress’s auditor) — financial reports about TARP activities every 60 days.
    Judicial Review — Federal courts may issue injunctions when there is a finding that the Secretary of the Treasury has acted in a manner that is arbitrary, capricious or outside the law.
    Create a new Inspector General (IG) for TARP. An IG might be viewed as the “cop on duty” who has authority to investigate TARP’s activities. IG will make quarterly reports to Congress.
    Appoint a Congressional Oversight Panel – receive and process all these reports to keep Congress apprised of the state of financial markets, activities of the regulatory system and the use of TARP’s asset acquisition and disposition authority.
    Federal Reserve — provide reports to Congress on utilization of the lending authority created earlier this year. That authority was intended to assist ailing financial institutions.
    Put Brakes on the Bad Guys: Congress wanted to curtail perceived “bad acts” of executives who made big bets and lost.

    Assure that skilled asset managers who buy and sell TARP assets have no conflicts of interest with prior employers or firms.

    No golden parachute or severance payments to executives of companies that sell assets to TARP. If a company that sells assets to TARP does make any post-employment payments (other than retirement compensation), the executive (not the company) must pay a 20% excise tax.

    If a company sells assets to TARP, then no tax deductions for salary or other compensation will be allowed if a worker’s compensation package is more than $500,000.

    All financial regulatory agencies are required to cooperate with the FBI in its investigations of fraud, misrepresentation or malfeasance in the selling or advertising of financial products.
    Give the Taxpayers a Stake in the Profits: Historically, when the government has intervened to shore up a company’s or government’s financial dealings (such as the loan guarantees made to Chrysler and the aid given to New York City during a fiscal crisis), the long-term effect has been that the government has made money back on the deal. The legislation provided an “upside” benefit for taxpayers:

    Any profits generated when the government subsequently sells TARP assets would be used to pay down the national debt.

    The government will receive warrants in the companies that participate in TARP. The warrants are similar to stock, but do not grant any voting authority to the government. If the participating company pays dividends at some future time, the warrants would allow the government to receive the dividend. Similarly, if the government sells its stake in the company, the warrants would entitle the government to any appreciation.
    Recoup What’s Still Owed: If, after five years from the date of enactment (the date the President signs a bill), the program has lost money, the sitting President will be required to present a plan to Congress for ways to recover the funds from the financial institutions that benefited from the TARP relief.

  52. Doug Deal says:

    Bah,

    Once again the spam filter spam filtered out a link. Go to wattsupwiththat.com and check out their latest story about something they need to remove from this bill.

    I will give you a hint, it relates to global warming.

  53. umustbekidding says:

    Three Jack, I got the same email. I thought he cared enough to write me personally. 😉
    My favorite line was “How could this happen in the strongest economy in the world?”
    Well, it happened because we have a bunch of control freaks who care more about being re-elected than doing what is right (and legal). He just doesn’t get why most of America is against this. He thinks he KNOWS what is best. It is like immigration, we complain and Congress does nothing that will cost them votes. Heck, if we’d deport all the illegals we’d have plenty of jobs and lots of extra money from taxes.

  54. Three Jack says:

    i guess saxby missed that part along with the multiple pork programs for wooden arrows, hollywood producers, automobile racing and wool research totaling over $150b.

  55. Will Hinton says:

    I left Saxby a message tonight letting him know that he has not only lost my vote but that I will be actively working to see him defeated. He has betrayed the people of the state of Georgia, his supposed conservative principles, and ironically considering his email, he has most of all betrayed our children and grandchildren by voting to saddle them with debt forever.

    Why in the world do these people insist that “something must be done”??? Aren’t these the same people who were telling us 6-9 months ago that everything was fine? I am tired of the fear mongering from these crooks in Washington who put us in the position in the first place. The only thing to be done is nothing; let the crooks on Wall Street fail and be put in jail. Why are we wanting to save those who have created this situation?

    I have yet to hear anyone give any substantive answer as to why action must be taken.

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