An Urgent Plea to Georgia’s Congressmen.

Please don’t vote for the bailout bill. It’s no better than the one you helped defeat on Monday, in fact it worse now that it’s loaded with pork (see Bill Simon’s emails here and here). The bill left the House at 106 pages and swelled to over 400 in the Senate. That can’t be good.

There are other alternatives to a government funded takeover of the financial sector. Create an insurance based solution and let banks and other institutions solve their own problems. Sure there will be some more pain, maybe a lot more pain, but there’s going to be more pain anyway and you won’t be putting the taxpayers on the hook for $700 billion (or is it $850 billion?) more dollars.

UPDATE: Reps. Scott an Lewis will change their votes and support the bill:

Scott told his colleagues that he was satisfied with assurances from House leaders that they would press the U.S. Treasury secretary to take action to help homeowners avoid foreclosures. “I will support this bill,” Scott announced shortly before the voting began on the House floor.

Is Scott referring to this promise by Obama?

Obama said during the call that he would push attempts to reform bankruptcy laws to help ill-fated homeowners escape foreclosure, Cummings said, but stressed urgent action to save the US financial system was vital.

“We will work on this, but right now we have got to straighten this out,” Cummings quoted Obama as saying.

53 comments

  1. jsm says:

    Who in the Senate is willing to have a press conference and tell the American people everything that is in this bill? Regular people aren’t going to make the effort to read it and find out, and this is why we keep electing congressmen and senators who do this to us.

  2. It’s an important to get it right, not quick. Quick, sloppy and hurried work makes for mistakes.

    This bill is a huge mistake that will not increase liquidity, but will give early Christmas gifts to everyone from rum makers to those who make toy arrows.

    I have once again asked Phil Gingrey to vote “no.”

  3. A friend of our family who has spent his entire career in real estate and has been through several ups and downs in the market copied me on this email:

    I have just sent this message to Hank Johnson, my Rep. and to both GA Senators and would like to hear any positive or negative thoughts on my suggestion to them, if you have time and inclination to respond. I really think this would reduce FHA Insurance exposure to DPA loans by about 5.75 % to 6.0 % and still provide a little stimulus to the housing market that is badly needed by providing homeownership opportunities to the majority of credit worthy Borrowers. While I am “old school” and a senior citizen I think my idea is realistic and in keeping with the “KISS” principle (keep it simple stupid).

    “Please vote AGAINST HB 6694 regarding DPA and replace with a more realistic alternative. All HB 6694 does is artificially increase the price of property, increase the size of Borrower’s debt, and increase the FHA exposure. A more realistic alternative method to accomplish the same result is to let the FHA insure a 100% loan similar to that done by the VA. The dollar amount of the FHA exposure is the same. eg: $200,000 sale price @ 100% LTV = $200,000 exposure to FHA insurance. A $200,000 sale price with DPA of 3.5% will be raised to +/- $208,000 to net the Seller the same $200,000 but the FHA insurance exposure is now $208,000, an increase of +/- 4%. The additional 0.5% from 3.5% to 4.0% is due to the DPA fee charged by the “non-profit” donor and increased closing costs and real estate commissions due to the higher sales price as a result of the “Gift” by the donor. I would also suggest that the MIP charge not be allowed to be financed above the loan amount but that it should be allowed to be included in the 6% now allowable Seller Concessions. Lenders will not like this as it may reduce their profits of origination fees, junk fees, etc. as borrowers with no money must also include the prepaid tax and insurance escrows in this 6% allowable Seller Concessions. Note that I am a currently licensed Real Estate Broker and Certified Residential Real Property Appraiser in GA.”

  4. jsm says:

    “It’s an important to get it right, not quick. Quick, sloppy and hurried work makes for mistakes.”

    Tell your friend, Johnny Isakson.

  5. IndyInjun says:

    Too late now.

    The Chinese have called in their note.

    For this reason Bush threatened to veto the bailout if it contained prohibitions on buying worthless ‘securities’ from foreign banks.

    If you are a saver, forget FDIC insurance, send your money to the First State Bank of Beijing. 100% of deposits are backed by the full faith and credit of the US government.

    Over here, they are talking about lowering interest rates AGAIN, while Chinese investors are getting double digit returns GUARANTEED.

    This bill means the DEATH OF AMERICA, for it mandates central planning and RESTITUTION to CHINA.

    They could have rescued the banking system swiftly by sending the $700 billion to local and regional banks, who know how to restore sound banking.

    Being the tools of Wall Street, these Congresstheives HATE AMERICA.

    Stamp a hammer and sickle over the stars and stripes.

    America is done.

  6. muffin15 says:

    Yes folks..You are correct there are some issues that need to be hashed out in a calculated fashion. These issues are deeply embedded in prior legislation yada yada. The “democratization of financial data” ala internet that has created a situation that forefathers or founders of present day economic principals could not have had the foresight to comprehend. What I am saying here is that the liquidity issues that we are presented w/ are much more grave than some think. If chicken little is the operative chicken here then so be it … but expected value of the probability of the consequences are to the point that this represents a National Security risk. If our dollar tanks (which is what will happen if they do not act) we will have 1990s style Japanese deflation. a no vote is by far the worst representation of the greater good…

  7. kcordell says:

    jsm,

    Isakson was on our local radio station yesterday telling us what a great accomplishment this was. A caller called in and tried to rip him a new one but the host cut him off. There wasn’t one mention of the 110 billion dollars of pork in the bill.

  8. Tea Party says:

    “There’s NO pork in the TARP Bill”

    Direct quote from Saxby’s DC office at 10:04AM when I called in to express my disappointment in this Bill.

    The young lady was quite clear, “There’s NO pork in this Bill, Sir.”

    As HUGELY painful as it is for me to state this, I cannot support Saxby in November .

  9. Tea Party says:

    Tom Price’s office staffer indicated that this Bill was not good, and happily took my information outlining my disapproval of the current TARP.

    Q: Why only $110BN?

    A: They ran out of time or there would have been more.

  10. Icarus says:

    Drudge headline today is that California now needs a $7 Billion emergency “loan”. Expect the next bailout to be $100BN or so to the states.

  11. leantothemiddle says:

    From the Wall Street Journal:
    The GOP decline in the polls has continued through the week, as voters are taking their media cues and focusing on the Republican role in the fiasco on the House floor. Speaker Nancy Pelosi couldn’t have planned it better if she had tried to set a trap, and maybe she did. Perhaps the GOP can recover in the next month, but House Republicans with safe seats who voted no on Monday have put their Presidential nominee and vulnerable Senate colleagues in a very deep hole.

    From Jack KIngston:
    What’s more, he said he objected to company executives suddenly jumping in with their opinions, particularly when they don’t weigh in on other issues.

    “Sometimes, with business, they forget a fundamental part of relationships. It’s not always good to introduce yourself when there’s a problem,” Kingston said. “The time for getting to know each other has come and gone. It’s not an effective way to lobby.”

    I guess they didn’t give him enough money.

    I look forward to seeing the lot of you in the unemployment line

  12. Donkey Kong says:

    Indy,

    Would be nice if you could explain *why* the Chinese receive such high interest rates — inflation. If you’re seeing near double digit inflation, naturally, interest rates will be higher to compensate.

    Also, you can’t separate main street from wall street. Tell me, who underwrote these loans in the first place? Main street. Wall Street only provided the financing through guaranteed purchases of these mortgages from main street banks to package them in MBS.

    Per lending standards, Wall Street encouraged lowering standards by making an agreement with Main Street that they would purchase sub-prime notes for their MBS. It was still main street that ultimately underwrote the debt with lower standards. Both wall street and main street are guilty. You of all people should know the degree of integration within the financial system, and that Wall Street and Main Street can’t be separated as our brilliant little pols like to claim in their demeaning populist rhetoric.

  13. Doug Deal says:

    Well, when every market loss is blamed on not passing the bill when the bill fails and then they are blamed on “bad economic news” when the bill passes the Senate, and gains are credited to the Senate considering the bill, it is clear that the MSM is as much behind this bailout as they are behind Obama.

    Anytime a salesman tells you that you have to “buy now”, you can pretty much be guaranteed that you are being ripped off. Why do people not think this applies to politicians?

    Usually the best answer to demands of “doing something” is to do nothing.

  14. Bill Simon says:

    “Anytime a salesman tells you that you have to “buy now”, you can pretty much be guaranteed that you are being ripped off. Why do people not think this applies to politicians?”

    I’m with you, Doug…except…from what I understand, the credit IS getting frozen out there with business loans being called, and sales of autos trickling down to none due to no credit at any interest rate being granted.

  15. ramblinwreck says:

    This bill is a horrible solution to a real problem because it does absolutely nothing to deal with the underlying cause of the problem. The same people who created it will still be involved in fixing it and even expanding it. The old line “you can’t solve a problem with the same thinking that caused the problem” comes to mind.

  16. Icarus says:

    The consequences of doing nothing are far more than 700 points on the dow. I’m still believe there were/are better ways to do something, but doing nothing has a huge price tag, as well.

  17. Bill Simon says:

    This is a cool excerpt from Motley Fool online:

    “The ramifications of not passing this legislation are serious. Credit markets will freeze, businesses will take a hit, and, most of all, consumers will be pinched.

    Problem is, the ramifications of passing it are serious, too. (Rock, meet hard place.) There was a loud uproar this week from Main Street over this legislation: about the piling on to our national debt, about further devaluing the dollar, about increased governmental intervention in the private sector.”

  18. ramblinwreck says:

    I guess I could go along with the bailout if everyone associated with causing the problem, including members of congress, were frog marched into the courthouse like they did Enron and WorldCom executives and ended up doing hard time being some bad man’s girlfriend.

    I’m not going to hold my breath.

  19. Game Fan says:

    On the bright side we could always point to some other country as an example of free markets at work. Tasmania? Iceland? Argentina? Just guessing here. Definitely not the Cayman Islands. And I’ve just added “frog march” to my internal memory.

  20. Ga Values says:

    TOP 10 Tax Sweeteners in the Bailout Bill
    Categories: Federal Budget, Headlines By TCS
    Tags: bailout
    Pub Date: Oct 03, 2008

    The following are some of the top tax sweeteners in the Senate passed Bailout Bill. Not all the provisions are per se outrageous, but collectively are intended to help Congressional leadership get final passage of the 2008 Emergency Economic Stabilization Act.

    Sec. 503. Exemption from excise tax for certain wooden arrows designed for use by children

    Current law places an excise tax of 39 cents on the first sale by the manufacturer, producer, or importer of any shaft of a type used to produce certain types of arrows. This proposal would exempt from the excise tax any shaft consisting of all natural wood with no laminations or artificial means to enhance the spine of the shaft used in the manufacture of an arrow that measures 5/16 of an inch or less and is unsuited for use with a bow with a peak draw weight of 30 pounds or more. The proposal is effective for shafts first sold after the date of enactment. The estimated cost of the proposal is $2 million over ten years, according to the Joint Committee on Taxation.

    The Oregon senators were the initial sponsors of the provisions. According to Bloomberg News, the provision would be worth $200,000 to Rose City Archery in Myrtle Point, Oregon.

    Sec. 317. Seven-year cost recovery period for motorsports racing track facility

    Track owners want to be able write-off the cost of their facilities on their taxes over seven years – a depreciation timetable many of them have used for decades. But the IRS has wanted to stretch it to at least 15 years and has raised questions whether the increasingly popular tracks really belong in the same tax category as amusement parks.

    Auto track owners are simply trying to get out of paying more taxes – which they’d have to do if they deducted less every year. These owners have gotten plenty of tax breaks over the years from states and localities eager to get speedways. The provision would be extended 2 years till the end of 2009 and would cost $100 million. The provision encompasses all facilities including grandstands, parking lots and concession stands.

    Sec. 308. Increase in limit on cover over of rum excise tax to Puerto Rico and the Virgin Islands

    Extends until December 31, 2009 a rebate against excise taxes charged on rum imported from Puerto Rico and the Virgin Islands. A $13.50 per proof gallon excise tax is applied to distilled spirits imported to the U.S. Under this provision a $13.25 rebate is returned to PR and the VI, and is retroactive back to January 1, 2008. Permanent law sets the rebate at $10.50 per proof gallon, but the PR and VI provisions have generally been in place since the first Clinton Administration. The most recent extension of the $13.50 rebate expired January 1, 2008. Cost is $192 million.

    Sec. 301. Extension and modification of research credit

    The legislation reestablishes and extends the lucrative tax credit for companies doing research and experimentation in the United States. Companies that have benefited from this provision include Microsoft Corp., Boeing Co., United Technologies Corp., Electronic Data Systems Corp. and Harley-Davidson. The two-year extension is estimated to cost $19 billion.

    Sec. 504. Income averaging for amounts received in connection with the Exxon Valdez litigation
    The bailout bill would give a tax break to Exxon Valdez plaintiffs, allowing them to average out their punitive damages awards over three years rather than suffer a one-time tax hit from the Internal Revenue Service, as well as other provisions. Rep. Don Young (R-AK) is a big supporter of this provision. Cost is estimated at $49 million.

    Sec. 601. Secure rural schools and community self-determination program.
    Secure Rural Schools lead sponsors Reps. DeFazio (D-OR), Bill Sali (R-ID); Sens. Wyden (D-OR), Larry Craig (R-ID), are major boosters of this program that expired in 2006. In 1908 the federal government agreed to share logging revenue from Forest Service land with neighboring communities that could not tax the land because it was federal. As logging declined in the 1990s, the “county payments” program was initiated in 2000 to directly provide federal funding, more than half going to Oregon, to deal with the loss of revenue. The original version of this provision was introduced as a bill in early 2007 and was estimated to cost $2.2 billion when the OR and ID delegations came to agreement. To give the package more heft, Payment In Lieu of Taxes (PILT) was added to the package, bringing the total cost to $3.3 billion. PILT provides more general funding to counties for federal lands located within their borders. Sen. Reid (D-NV) talked about the PILT program being one of the important elements of the package when the Senate passed the bailout bill.

    Sec. 201. Deduction for state and local sales taxes

    Allows residents of states that don’t pay income tax to deduct, from their federal taxes, sales tax paid over the course of the year. States that benefit include Texas, Nevada, Florida, Washington and Wyoming. The bailout bill extends this provision for 2 years at a cost of $3.3 billion.

    Sec 502. Provisions related to film and television productions

    In an effort to keep film and television productions in the U.S, they would be eligible for a tax incentive program. Under this program, the cost of production of qualifying films would be permitted to be immediately expensed — that is, fully deducted from income for tax purposes — in the year the expenditures occur. This provision also makes permanent other favorable tax treatments for production. Historically Rep. Diane Watson (D-CA) has been a supporter (dating from its creation in the 2004 corporate tax bill). The cost is estimated at $478 million over 10 years.

    Sec. 325. Extension and modification of duty suspension on wool products; wool research fund; wool duty refunds
    The tariff relief (duty savings) is intended to benefit U.S. worsted wool fabric producers that use imported fibers and yarns as inputs, as well as U.S. tailored clothing manufacturers that use imported fabrics as inputs. This provision was originally introduced as a bill in December 2007 by Reps. Louise Slaughter (D-NY) and Melissa Bean (D-IL). It extends current law provisions until 12/31/14, and in some cases to12/31/15. The 2010 to 2015 cost is estimated to be $148 million.

    Sec. 309. Extension of economic development credit for American Samoa

    This extends by two years a previously approved tax credit, the American Samoa economic development credit. In general, this credit allows certain corporations operating in American Samoa a tax credit. The possessions tax credit allows these corporations to offset a portion of their U.S. tax liability on income earned in American Samoa from active business operations, sales of assets used in a business, or certain investments in American Samoa. The cost is $33 million, according to the Joint Committee on Taxation.

  21. debbie0040 says:

    I have opposed it from the beginning, but after eading this article from Newsmax, I am having second thoughts.

    Republicans’ Votes Against Rescue May Backfire

    Wednesday, October 1, 2008 5:13 PM

    By: Ronald Kessler

    Rightly or wrongly, Republicans are being blamed for the failure to pass a financial rescue package, causing a one-day loss of $1.2 trillion in the value of American equities.

    If the bill does not pass this week, Republicans will be blamed not only for another scary decline in the stock market but also for the ensuing loss of jobs that will accompany what probably will be a deep recession or depression.

    The reality is that, if they do not receive enough support from Republicans, the Democrats will seize the opportunity to pass a bill that includes many of the liberal spending measures they favor, such as funding of the Association of Community Organizations for Reform. The organization has pushed risky loans for low-income home buyers.

    Until now, Democrats have sought Republican support for a rescue package. In return, they have avoided including measures that would unduly offend them.

    If the Democrats pass their own bill, Republicans will have lost the electorate’s confidence that they will protect the economy and will wind up with legislation that is far worse, from their standpoint, than the measure they voted against.

    What about all those constituents who bombarded conservative members of the House with angry calls demanding that they vote against the rescue plan? After the plunge in the stock market, those calls almost vanished. Instead, lawmakers now are being bombarded with calls from constituents demanding that they pass the rescue bill to avert a financial panic.

    This article should make you think. Just look at the polls…

  22. House Republicans with safe seats who voted no on Monday have put their Presidential nominee and vulnerable Senate colleagues in a very deep hole.

    leanto,

    Actually… House Republicans with vulnerable seats who voted no on Monday have secured their seats by representing the people.

    Their Presidential nominee and vulnerable Senate colleagues put themselves in a very deep hole, by supporting this God-awful rip-off.

  23. I don’t give a crap if Republicans are “blamed” for the failure of the bailout — if this bill fails, Republicans should get the credit for saving America.

    Some people are all about politics, and some people are about supporting our country.

  24. Doug Deal says:

    Taft,

    That was my point to. Just because the public may point to the Republicans for stopping it, doesn’t mean it is blame it could very well be credit.

    Personally I do not give blame or credit to any party on this, I hold the individual candidates regardless of party responsible. Marshall and Shambles are equally moronic, and Shambles has earned that libertarian doofis my vote this year. Not because I think that libertarian is worthy of being elected, but because Georgia has runoffs and I would rather see Shambles face a runoff vote or sweat out enough to avoid it than have him think he is anything other than the problem.

  25. Chris says:

    Doug,

    I’d rather give Martin the seat and try to get a decent guy nominated in 6 years.

    It is very hard to see how Martin or Obama could do a worse job than Saxby or Bush.

  26. Doug Deal says:

    The last 41 Senate Republicans always seem to find their spines, but for that to happen you need 41 Senate Republicans.

    In any event, I will do my best to make it a runoff.

  27. IndyInjun says:

    Icarus:

    And the bailout is going to cost $5 TRILLION, not $700 billion.

    Bush is really good with numbers like that ….Medicare D was supposed to be $300 billion, now $8 trillion….Iraq war supposed to cost $50 billion, now $1 TRILLION PLUS…both along the way to TRIPLING THE DEBT.

    Saxby Chambliss has been with him all the way.

    $TRILLION

    Think about it.

    You can COUNT on it.

  28. Bill Simon says:

    “causing a one-day loss of $1.2 trillion in the value of American equities.”

    A trillion here, a trillion there…really now, it’s all paper profits and paper losses.

    If all those people/entities had sought to DUMP their profits that day, the market would have sold off faster and deeper than it did.

  29. Bill Simon says:

    Indy,

    I’m gonna invest in Rum, Racetrack, and Wool Futures…that’s how I’m gonna get wealthy now.

    And…of course, start shorting bank stocks…

  30. Chris says:

    Neither Bush or Saxby will vote or sign legislation to kick your taxes up to 60-70% in order to “give” you “free” healthcare.

    No Shep, they’ll instead deficit spend the money so the pain will be felt generations down the line when they are long out of office.

    At least Obama/Biden have the decency to say we should pay for our indolent self absorbed lifestyles ourselves and not burden our kids.

    Which makes them marginally better than the GOP.

  31. Bill Simon says:

    “At least Obama/Biden have the decency to say we should pay for our indolent self absorbed lifestyles ourselves and not burden our kids.”

    Chris…if you feel the need to flog yourself for your “indolent self-absorbed lifestyle”, go ahead.

  32. IndyInjun says:

    Donkey:

    You are right, of course, but only to a point.

    The local banks did originate and sell mortgages, the use the proceeds for even more lending, with much of the excess invested in the GSE’s. This is why the later had to be bailed out…..every local bank I evaluated had $100’s of millions in government and AGENCY debt.

    HOWEVER, the locals had nothing to do with creating CDO’s , CLO’s , auction rated securities, and the lunacy of CDO’s SQUARED.

    Locals pretty much stayed within the range of leverage in the 10 to 20 range. Wall Street took leverage up to 60:1 and the hedges THE NEXT SHOE TO DROP took leverage to 100:1.

    The pols HAD the opportunity to cordon off bank deposits at a cost of $500 billion or so, but because they ARE PUPPETS OF WALL STREET, just made the fatal error of attempting to buy DERIVATIVE LEVEL DEBT.

    Bank deposits were bailable.

    Derivative Level Debt is too big to bail, but we are about to burn $5 TRILLION up to prove it.

  33. Doug Deal says:

    Indy, if you run, let me know, I probably will have a donation for you. Anyone who takes on Isakson in a primary or general election who is not out of his mind will have my vote. never liked the empty suit, never will.

  34. IndyInjun says:

    Deal,

    I really liked the sign…..i have a couple of prominent places….shoot I might put two BIG ONES up

  35. IndyInjun says:

    Collateralized Debt Obligation. A CDO squared is a CDO that contains other CDO(s)

    Worse are the fact that they will wind up bailing out CDS – Credit Default Swaps.

    Donk needs to get out from that evil place while there is still time.

    We are SOL and when the masses see it……let’s just say Wall Street experience is not something I would want on my resume.

  36. Doug Deal says:

    Indy,

    Thanks, and please do.

    I think it could be a good grassroots effort all across the country. I was going to stay up all night and make one for every member of congress who voted for it.

    The original is a gif big enough to print an 18×24 sign. I think the yellow really stands out against all the red white and blue eye ones that all look identical.

  37. bowersville says:

    Indy,

    Is there anyway to know what a foreclosed property with 2 year old construction that is on the courthouse steps is worth that was initially a distress purchase in the last 12 months?

    Prime property, prime location, purchased in distress sale and probably ALT-A.

    10 per 100?
    20 per 100?…..85 per 100?

  38. IndyInjun says:

    Bowers and Farris –

    The value is what the highest bid is.

    Some new homes in Florida that were priced at $225,000 are now selling for $65,000. Under mark to fiction they would remain $220,000. Under mark to market they are $65,000.

    The buyer is taking huge risks even at $65,000 because tax freezes don’t apply (even on long-held properties it has been discovered that the Freeze cuts both ways, so when prices drop taxes remain frozen on the freeze date.), taxes are concentrated on rooftops , and insurance costs are exploding. Carrying costs exclusive of interest can run $15,000 to $20,000.

    This is a very real example.

    Most folks don’t like the fall in RE, but going back to lying about values won’t work, just as the governments use of 1% inflation rate when figuring GDP to avoid a recession hasn’t paid for $1 higher gas prices and rates that even the liars admit are over 5%.

    Lying is not a way out of this.

    Deception meets reality at the courthouse steps and at the gas pump.

    Begging for more lies, zero interest rates, and deception is like a drunk taking the “hair of the dog that bit him” cure.

  39. Doug Deal says:

    Indy,

    You make more sense every day. People who claim to be free market people think continuing the same fraud is a solution. It just makes people trust the markets even less.

    They need to start letting a bunch of poorly run companies file for bankruptcy so a decent company can pick up their assets in a fire sale and make a profit.

    Think about it this way. If people want to help the homeowners, which is the best way to do that. Having a third party buy the debt from the first parties bad debt at 20 cents on the dollar, where they can then negotiate with the deadbeat for a new principle and still make a profit, or having the government agree to buy these bad debts at somewhere above real market values so the people who caused the problems can retain as much of their assets as possible so they can turn around and do the very same thing?

    Liquidity will return when these companies are liquidated. If it means a bunch of Wall Street puncks lose their shirts and a bunch of traditional banks make a big profit, so b it. It is the way it should be anyway.

  40. IndyInjun says:

    Doug,

    The $700 billion would have best been spent boosting the capital of the local and regional banks.

    – They were not at the apex of the fraud
    – They know traditional lending
    – They are closer to the people and Main Street
    – At 10:1 leverage of the capital infusion, $5 trillion would have been immediately available for lending

    So when the IDIOTS expouse that they “HAD TO DO SOMETHING” ….well it did not have to be the WRONG THING, did it?

    As is stands we have ever-escalating bailouts over this year, are only 1/3 of the way through and $1.8 trillion has been burned so far, you have the states needing another $75 billion, FDIC needs $2 trillion, and pensions will need $4 trillion after the market crashes.

    The bailouts have opened a bottomless pit and put the FRAUDSTERS in charge.

    By George, the goldbugs will end up being right.

Comments are closed.