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Section 1. Short Title.
This Act may be cited as ____________________.
Sec. 2. Purchases of Mortgage-Related Assets.
(a) Authority to Purchase.-The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.
(b) Necessary Actions.-The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:
(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;
(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;
(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;
(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and
(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.
Sec. 3. Considerations.
In exercising the authorities granted in this Act, the Secretary shall take into consideration means for-
(1) providing stability or preventing disruption to the financial markets or banking system; and
(2) protecting the taxpayer.
Sec. 4. Reports to Congress.
Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.
Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.
(a) Exercise of Rights.-The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.
(b) Management of Mortgage-Related Assets.-The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.
(c) Sale of Mortgage-Related Assets.-The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.
(d) Application of Sunset to Mortgage-Related Assets.-The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.
Sec. 6. Maximum Amount of Authorized Purchases.
The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time
Sec. 7. Funding.
For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.
Sec. 8. Review.
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.
Sec. 9. Termination of Authority.
The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.
Sec. 10. Increase in Statutory Limit on the Public Debt.
Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.
Sec. 11. Credit Reform.
The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.
Sec. 12. Definitions.
For purposes of this section, the following definitions shall apply:
(1) Mortgage-Related Assets.-The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.
(2) Secretary.-The term “Secretary” means the Secretary of the Treasury.
(3) United States.-The term “United States” means the States, territories, and possessions of the United States and the District of Columbia.T
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Bess – not funny.
@1– this the actual bailout proposal…you expected it to be humorous?
So they can issue up to $700bn of govt backed paper, at some indeterminate term, in exchange for the crap banks accumulated over the years, but at what price: marks, market, or discount to market. What’s the average ABS portfolio trading at these days? 25c on the dollar? So if he buys it up at 20c he can clean up $3.5 trillion of crapola assets. Hmm.. will it be enough?
Meanwhile, poor schmucks with Alt-As that are resetting are going to cause more problems in 3,6,12…months??
So 700b now, how much later?
Hey a few hundred billion here and there and pretty soon we’ll be talking about real money.
This is the same thing the banks/hedge funds did…issue a bunch of debt to buy a bunch of crappy junk bonds and pray there’s no more downgrades. They’re turning the balance sheet of the USA into that of a bank’s/hedge fund’s balance sheet. We’ve seen how that story ends.
On top of that, the politicians are getting the same treatment as the CEOs. Bush, Paulson, and congress can walk away and let everyone else (generation x) deal with the costs and the carnage just like Mozillo, O’neal, Fuld, etc.
WAPO is reporting they’re going to be including auto loans, student loans, etc. into the bill. They’re throwing in the kitchen sink on this one guys.
I’m Pissed.
This is the same thing the banks/hedge funds did…issue a bunch of debt to buy a bunch of crappy junk bonds and pray there’s no more downgrades. They’re turning the balance sheet of the USA into that of a bank’s/hedge fund’s balance sheet. We’ve seen how that story ends.
On top of that, the politicians are getting the same treatment as the CEOs. Bush, Paulson, and congress can walk away and let everyone else (generation x) deal with the costs and the carnage just like Mozillo, O’neal, Fuld, etc.
WAPO is reporting they’re going to be including auto loans, student loans, etc. into the bill. They’re throwing in the kitchen sink on this one guys.
I’m Pissed.
Wall Street is motivated by two things only: Greed and Fear. Greed for money, and Fear of losing it.
Thank God Uncle Sam did something. Wall St surely wasn’t going to fix the problem they themselves created, as they are clearly incapable of doing so, and that is just unacceptable to America.
People like @#3 have nothing to offer but criticism. Nothing but posturing and bullshit.
We’ll see what happens.
Wall St would have just kept on “grinding the gears” in the financial bus until the transmission fell out and the f’n bus stopped. I wonder what the broken parts would have looked like in the aftermath and who would put them back together? America doesn’t want to find that out.
So chatter away freaks; tell everyone how much you know and how f’d up Uncle Sam is.
Bess…Thank you very much for posting the “Bailout Propsal”. You are doing a great service.
The Guy from Delaware
TGFD…let the bus break and leave it by the side of the rode. Build a better a one instead of fixing a broken one and then get back on it and drive it recklessly until the same shitty bus breaks again and we are back at year zero. Or a suicide bomber jumps on and blows it fucking smithereens. One way or another the bus may get fixed but it still won’t have airbags to cushion the next crash…
Hope I killed that metaphor.
Freak@#8…
Chatter away clown. As I said, Nothing but posturing, bullshit, and one-upsmanship. Grat job.
The Guy from Delaware
Remarkably short for one of the most expensive pieces of legislation in history. I guess when you’re handing over a blank check that “may not be reviewed by any court of law or any administrative agency” there’s not much else to say. Buy anything you want at any price you want.
Freak@#8…
I have to admit “drive it recklessly” is pretty funny.
The Guy from Delaware
The actions of the US today is eerily similar to the Roman Empire’s actions just before they fall.
It is clear that the financial sector cannot absorb any more of its self concocted poison without imminent danger to the rest of the economy.
Therefore I am in favor of the government taking over these problem assets at book value temporarily (several years) in the expectation that the real estate market will firm up again and that these papers can be resold at a better value than now.
Realistically it is impossible to estimate today what the residual loss will be to the Treasury. Whatever it may be though, a good part of it should be charged back to the sellers of the troubled securities. The remainder, the taxpayer will eat as “lessons learned” and result in new regulations for the financial industry.
I would be interested in comments how the residual loss may be charged back.
A debt obligation “tbd” with a 5-year or 10 year maturity?
I liked some economist’s reaction to this that I’m just going to steal it and copy it here:
September 20, 2008, 4:46 pm
No deal
I hate to say this, but looking at the plan as leaked, I have to say no deal. Not unless Treasury explains, very clearly, why this is supposed to work, other than through having taxpayers pay premium prices for lousy assets.
As I posted earlier today, it seems all too likely that a “fair price” for mortgage-related assets will still leave much of the financial sector in trouble. And there’s nothing at all in the draft that says what happens next; although I do notice that there’s nothing in the plan requiring Treasury to pay a fair market price. So is the plan to pay premium prices to the most troubled institutions? Or is the hope that restoring liquidity will magically make the problem go away?
Here’s the thing: historically, financial system rescues have involved seizing the troubled institutions and guaranteeing their debts; only after that did the government try to repackage and sell their assets. The feds took over S&Ls first, protecting their depositors, then transferred their bad assets to the RTC. The Swedes took over troubled banks, again protecting their depositors, before transferring their assets to their equivalent institutions.
The Treasury plan, by contrast, looks like an attempt to restore confidence in the financial system — that is, convince creditors of troubled institutions that everything’s OK — simply by buying assets off these institutions. This will only work if the prices Treasury pays are much higher than current market prices; that, in turn, can only be true either if this is mainly a liquidity problem — which seems doubtful — or if Treasury is going to be paying a huge premium, in effect throwing taxpayers’ money at the financial world.
And there’s no quid pro quo here — nothing that gives taxpayers a stake in the upside, nothing that ensures that the money is used to stabilize the system rather than reward the undeserving.
I hope I’m wrong about this. But let me say it again: Treasury needs to explain why this is supposed to work — not try to panic Congress into giving it a blank check. Otherwise, no deal.
–
Krugman
Who is the biggest private employer in Delaware? Bank of America.
Who would benefit greatly from being able to unload mortgages at above-market prices? Bank of America.
Don’t be such a transparent welfare momma TGFD.
It’s over for the US. Anyone know a livable country where it’s easy for foreigners to work?
@8 is right. Things will get fucked again but posturing isn’t helping.
The Guy from Delaware
Since this only applies to institutions headquartered in the US, it presents a nice arbitrage opportunity. A US institution can buy mortgages at market from non-US institutions and then sell them to the government above-market.
@16…Iraq…go be a contractor.
Make sure you bring small boxes to send your parts back to the USA in.
too legal, didn’t read
Dubai, Hong Kong, Singapore, London…
#18
Absolutely.
The main question is why isn’t this proposed law defining a price discovery mechanism so that the government doesn’t end up paying premium prices for junk? The plan is giving Paulson a blank check. Blank checks don’t bring happy endings with this administration, just more expense and misery.
TGFD, America may not want to find out but America sure as shit isn’t paying to fix the bus the wall street wankers broke. How long before the Chinese decide 2% isn’t doing shit for them with all the crap on the US balance sheet? If Paulson buys this crap at par, hell, if if he buys it for anything more than pennies on the dollar just watch what the people who actually finance the budget (arabs and asians)decide to do with their money.
@23
Yes. And then let’s see what TGFD and his pals can come up with.
On Friday afternoon I heard rumors that they would look to buy MBS in the range of 60-70 cents on the dollar. This may very well be a “fair” price based on fundamentals but it is certainly more than said assets would fetch on the (offer-only) open market. Thain must regret his decision at real prices a few weeks ago.
* “to sell at real prices…”
short term solution for a fundamentally flawed system. Make the fucks who got themselves in this mess pay, oh wait they can’t because the only reason they had money in the first place was from overlevering themselves.
sounds good – I would just add one thing – any bank that uses said fund gets their equity diluted by 80%…I believe there are precedents for this…its bad enough John Mack goes crying to his Washington buddies to manipulate the market by squeezing the shorts but actually using govt money to preserve his equity is a bit of a stretch…
$700 billion for a $3.5 trillion book equates to about $0.25 on the dollar.
Isn’t this leak sent out for reaction. After all its Sat night and the feedback will be what they are looking for – does this float? Are they paying too much for the debt? It will be heavily revamped and filled out by Sunday p.m.
@30, Lets pray they do, otherwise this appears to me as if Shrub is in the shade and Hammering Hank is running the whole show, and having Congress say its so in the documents…
He appears to be saying he expects to be empowered above the Executive and the Judicial systems… Last time I checked, the Supreme Court had last say on most topics…
My first gut thought is that this is going to be over 1.2 Trillion dollars before you can say “Super Size It Please” if they are buying toxic at a better then MTM prices.
As crazy as it sounds, at 700 Big Ones… its large enough to sound big, but not large enough to finish the problem. I hate to say it, but they need to increase the size if they are going to take this route, but they need to increase the haircut taken by the banks…
This appears to be a Giant TARP and they are hoping to shovel enough stuff under it to hide the mess until the next admin arrives. Its too bad $700 Billion isnt what it used to be…
Here’s a deal. Make it like AIG, with the government ie. the taxpayers getting substantial warrants in each of the banks that wants to put their debt into this receptacle, on a ratio that makes them give up 10-15-20% of their equity for the privilege of the having the taxpayer finance this incredible salvation and renewal of their business opportunity. Seems fair, no?
The taxpayer should be set up to make out like bandits over the next 5-10 years if this is going to happen. Only way to make it worth doing. They endangered the system and the taxpayer gets paid to bail them out. Like confiscating and selling assets of drug dealers… And of course, the program should be designed to get back all the money the government put into FNM/FRE and all the prior bailouts, liquidity infusions, etc. EVERYTHING gotten back, at a good return.. Surely this can be balanced with these banks’ need to get new financing, ie. not diluting their share base with warrants to a degree that would prevent new funding, but enough the enrich Main Street and the taxpaying public…
Write your congressional delegation to BEG them not to capitulate to this scam by Paulson to protect his cronies. There is absolutely no benefit to the average taxpaying citizen from this proposed bailout.
The ONLY action this Congress should be taking is to authorize an increase in deposit insurance.
Call his bluff.
@ TGFD
# 4 was merely pointing out that there are more strains on the financial system than merely sub prime loans.
We are just begining to see delinquences in Alt-A. Further Alt-A resets are not expected to peak until Q1 2009
He is most certainly not posturing or full of shit. He is pointing out that it would be tragic if the government thru $700 billion at this problem and did not alter the ultimate outcome.
People generally (and this adminstration particulairly) make bad decisions in the face of fear and panic. The last time the nation as whole was scared silly the government exploited that fear to go to war with Iraq. And we all know how that turned out.
Nobody is questioning the premise that something must be done. In order to avoid throwing away $700 billion and our AAA credit rating we MUST challange the methods by which the government intends to achieve market stabilization and viabilty of our financial institutions.
Dissent is the corner stone of democracy.
@29: “$700 billion for a $3.5 trillion book equates to about $0.25 on the dollar.”
How’s life after Bear Stearns?
It’s always good to hear from Stupid Equity Guy and always a drag to hear from TGFD.
Three comments:
(1) Paulson and Bernanke have overstepped their legal bounds to such an extent that Paulson probably does believe that the Secretary of the U.S. Treasury is superior to the Supreme Court. He and Bernanke may understand the economic system, but they don’t understand the process of legal review.
(2) Why is $700 billion going to be enough? Each step of the way since March 2008 we’ve been told that unilateral action is necessary to prevent systemic collapse, but the system continues to collapse. Even the CFOs of the institutions that created these instruments can’t get a handle on the degree to which their assets have soured. At what point are we creating an even worse monster — calamitous inflation?
(3) If the deal works and bank credit eases, how are ordinary wage earners going to be able to afford now what they couldn’t afford before? The only way many people could afford homes in some markets was by over extending themselves in short sighted collusion with mortgage lenders. Even if the price of housing is down, it’s still out of reach for many people, and no one in their right mind is going to believe the mantra of housing prices always going up. Why is the average person going to saddle himself with heavy debt for an asset that might decline in the future?
I have some baseball cards that aren’t worth what I paid for them. Where’s my bailout?
lol @ #20. hey that legalese!
Bess,
it is pretty obvious tha this is not the real thing. This line gives it away…
“The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:”
@39
Good Catch.
this aint real. Its a mock up found in Sarah Palins email.
@39/40–it’s the same one the journal has.
http://blogs.wsj.com/economics/2008/09/20/treasurys-financial-bailout-proposal-to-congress/
@36
Your point #3 is very important. Looks like nobody is thinking about that “little” problem, that is, the housing bust can continue as there’s nothing here that will help stimulate demand for housing. Therefore the housing bottom is not in sight. That makes the toxic paper more toxic for a long time.
@39, @40:
yeah. it’s real. you like that line? That’s the one thing that kills me. Initially, I was really against this, but it’s starting to grow on me.
Thanks to @29 for actually doing some math on this. Where did you get the aggregate number from ? I tried using 1.7T, which is supposed to be notional on outstanding subprime, and got $0.41 on the $.
Either way {0.25, 0.40} is a huge premium from the .08 to .10 this crap trades at right now. Banks could end up booking a large profit, IF they have been honest with markdowns.
Subprimes are also defaulting at a rate of 25%+. If you figure a 40% recovery rate, that works out to possibly a 1.7*(0.75+0.25*0.4) = 1.45T value for this crap not counting the interest payments.
It doesn’t sound so bad to me now. Similar to the AIG bailout Am I missing something?
Still, it won’t change the underlying economics. House prices will still be fucked. I shudder to say this but in many ways the Dems are going in the right direction. The govt. needs to put a floor on home prices and restrict the inventory esp. in some states. That’s a much taller order than
creating a landfill, but it’s closer to fixing the issue AND making the deal equitable for all the stakeholders.
What I don’t understand is that there is currently LOTS of demand to buy most of this distressed debt (RMBS, 1st Lien Whole Loans) between $30-$40. The problem has been that none of the IBs or Banks are willing to sell it there. So what exactly is the government going to do??? Go and and offer $30 for it? Guess what, no one will sell it there…… So what happens next? If the government steps in and buys all this stuff at say $45, but no one is willing to buy it there, the tax payers take an automatic loss.
Also, people keep comparing this to the late 80s. Only one problem….back then these mortgages were paying interest rates of like 11% ! With that amount of interest coming in you could afford to have loans go belly up. The stuff the Govy is planning on buying has both low interest rates and is toxic.
What I don’t understand is that there is currently LOTS of demand to buy most of this distressed debt (RMBS, 1st Lien Whole Loans) between $30-$40. The problem has been that none of the IBs or Banks are willing to sell it there. So what exactly is the government going to do??? Go and and offer $30 for it? Guess what, no one will sell it there…… So what happens next? If the government steps in and buys all this stuff at say $45, but no one is willing to buy it there, the tax payers take an automatic loss.
Also, people keep comparing this to the late 80s. Only one problem….back then these mortgages were paying interest rates of like 11% ! With that amount of interest coming in you could afford to have loans go belly up. The stuff the Govy is planning on buying has both low interest rates and is toxic.
When will all you Wall St pussies stop whining? In the real world (not Wall St) if a company makes bad decisions, they end up footing the fucking bill! On the street – its politics that comes to the rescue. You made the investment choices, took the risk and now the shit you thought you understood is unraveling right in front of your eyes. Feel sorry for the folks at the bottom of the food chain – they are the ones getting the shitty end of the this stick. Is anyone ever held accountable anymore?
#46 – When will you stop blaming Wall Street? Everyone caused this problem. Even if you had nothing to do with Wall Street, its people like you that helped cause rapid home price appreciation. Also, people like yourself were over-extending themselves on mortgages that they couldn’t afford or (in some cases) straight up lying about their income.
At the end of the day this is EVERYONES fault. Stop crying that Wall Street did this. That being said, does that mean that the government should bail everyone out? Probably not, but that is a better discussion.
Sec. 13 Treatment of Fuld
a) Dick Fuld is to be dressed in a cocktail dress and lipstick.
b) Fuld will then be transported to Iran.
c) Fuld will be airdropped into Tehran with a placard that says “will engage in unnatural acts for government funding”
d) As they say, nature will then take its course
#$47. I’m not over extended. Never have been, never will be. I live well within my means. Wall St has as much to do with crisis as the folks that gave loans to people with not verifying income and the knuckleheads that tapped all their equity and now are negative. My point is that there is NO accountability. Everyone involved is pointing the finger to another sector.
@46, this is an epidemic problem and really is the tip of the iceberg. I’m pissed as hell too, and I want to make sure that the people in power at these banks are held accountable. I think in the end there will be a ridiculous amount of regulation enforced on banks and they will be shadows of their former selves
But as of right now things have to get fixed. The consequences for this were a total financial meltdown beyond anyone’s comprehension — as bad as the great depression or worse.
Can you live without a credit card, a car loan, student loans for you or your kids, a mortgage? You want to walk around grocery stores with bare shelves or pay 2x for the price food. Go right ahead.
Mortgage Bailout Bill Includes Bailing Out Foreign Companies
Treasury Seeks Authority to Buy Mortgages Unchecked by Courts
The Bush administration sought unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets.
The bill would prevent courts from reviewing actions taken under its authority.
“He’s asking for a huge amount of power,” said Nouriel Roubini, an economist at New York University. “He’s saying, `Trust me, I’m going to do it right if you give me absolute control.’ This is not a monarchy.”
THE TREASURY WOULD ALSO HAVE DISCRETION, AFTER DISCUSSIONS WITH THE FED, TO MAKE NON-U.S. FINANCIAL INSTITUTIONS ELIGIBLE UNDER THE PROGRAM.
Paulson is asking for the power to hire asset managers and award contracts to private companies
Paulson would gain discretion to act as he “deems necessary” to hire people, enter into contracts and issue regulations related to a revival of U.S. mortgage finance, according to a three-page proposal.
The Bush administration seeks “dictatorial power unreviewable by the third branch of government, the courts, to try to resolve the crisis,” said Frank Razzano, a former assistant chief trial attorney at the Securities and Exchange Commission now at Pepper Hamilton LLP in Washington. “We are taking a huge leap of faith.”
Excerpted from: http://www.bloomberg.com/apps/news?pid=20601087&sid=ae6b6P1L8E_E&refer=home
This is the Shock Doctrine. Paulson will get what he wants, whether you like it or not.
“This is the Shock Doctrine. Paulson will get what he wants, whether you like it or not.”
Only because we’re a nation of sheeple.
Too Short, Won’t Work.
Two things:
1) Re: legal review. Saying it doesn’t make it so. If a court decides the law is unconstitional, it is, and “We say this law is constitutional, nanny nanny boo boo” and other secret catchphrases are irrelevant. What this means practically is that any *given* act under authority of this law is not to be reviewed. Either the law is constitutional, or it isn’t, and no coming to court whining that the Treasury should have bought MY shit, too, since they bought HIS shit.
2) Does anybody else have a problem envisioning Uncle Sam foreclosing on Aunt Petunia’s mortgage… and pissing off her, Uncle Porky, and all their voting friends and relations? It’s one thing to *back* a mortgage – even when Fannie was a real government agency, they didn’t foreclose on people, they just backed the paper. But once Hammerin’ Hank actually owns the notes, how many trillions of letters to their Congresscritters are people going to write asking for some kind of intervention? We’ll be looking at the Keating 535, not the Keating Five.
On a related note, why aren’t the Democrats hammering on the fact that McCain was one of the Keating Five and has done jack in the intervening two decades to prevent the sequel? Just curious.
Did anyone else see the article in the WSJ? The AIG warrants were never properly documented according to the Fed. After taking $35 billion from the government, the AIG board is now saying that the warants can only be isued with shareholder approval – and shareholders would approve why? I documented the loan to my little brother for his motorcycle better than AIG bailout appearantly. SEC can’t even list correct tickers when it shuts down the options markets on 700 stocks. Anyone besides me getting nervous? It’s like the surgeon just walked in to operate on your brain and he is three sheets to the wind.
#53 Baaaaaa, Baaaaa
Watching Sunday morning talk shows – not even the WSJ guy has a basic understanding of finance and economics. See #13 Krugmans analysis – RTC and every other “bail-out” was extended for assets at BANKRUPT intstitutions. Here Paulsen has unchecked non-transpearant $700 Large to buy GS, NS, Carlyle assets from Bush buddies at 2X, 3X, 10X market and allow them (and their shareholders to prosper). I have been a Republican, but come on guys, this stinks like old fish.
Bush did look into Putin’s eyes and liked what he saw. The USA is turning into a Kleptocracy just like Russia.
we’re so f*cked, stock up on groceries people..
It’s pretty frightening that a guy so deluded about his self-importance that he believed that a bazooka could fit into his pocket now wants to give himself vast, unchecked power to save the world.
Congress is seriously considering this bill because they don’t want to take the time to enact balanced legislation. Also, whatever further disaster that occurs can be pinned on Paulson.
I hope there are some saner voices that can slow down this madness. If not, we’ll just have to have Cheney challenge Paulson to a duel next week-end.
The proposal would raise the statutory limit on the national debt from $10.6 trillion to $11.3 trillion to make room for the massive rescue.
So is $700b the aggregate premium he’s paying on the market price of the assets? Are they factoring in the hit to taxpayers up front?
#51
I suppose UBS needs saving at some stage in the future.
Phil Gramm must have had a hand in drafting this bill.
This Paulson Plan just reeks of self-interest. It doesn’t smell right.
Seems to me $700 billion is just the start. I don’t think Paulson is underestimating the problem. He probably knows $700 billion is the most he can get from the Congress in the last days of the Bush administration.
#59 Good questions – except for the fact that they are the questions a rational and sane person might ask.
Read the actual bill that Paulson put on the table. I kid you not: it is two pages long and it says only that Paulson has $700 billion to buy any residential or commercial related financial asset at any price and from anyone he chooses. Theonly other substantive sentence states that his actions are non-reviewable by congress or by the judiciary. The only reporting that is required is whatever he wants on a semi-annual basis.
#69, mine eyes have seen the glory of the coming of the end, truly goldman rules the world…
This package is at best ill conceived and hasty. At worst, an unprecedented theft from taxpayers and a poison to our freedom. No, I do not want to backstop borrowing from China and Russia to make first-loss loans to wealthy bankers and poor folks in fancy houses. This is sick.
@56
You did what to your bro? Whatever happen to family trust?
@61
In situations of panic, any irrational policy has a high chance of getting passed through
So the tax-payer gets saddled with another $1-$2 trillion in liability. Business climate is still in severe recession and housing market will still be in melt-down. Lower business and consumer activity is here to stay. Lower business activity equals lower gov’t revenues at all levels. Lower revenues equals higher deficits, cuts to services, greater demand for credit from the Russia, China, Japan and oil states.
I can’t see how this proposal improves America’s position one or two years out.
The people who created this mess are now coming-up with proposals for solutions?
America, you’re boned.
@58 Well said. I cannot believe that legislation which is so costly and so empowering of one gov’t body would pass quickly through any democratic institution. A high school class would debate this proposal more thoroughly than Pelosi’s Congress.
43 – How many people have actually marked their books of this shit to .10? Hell, MER pretended that it was still worth .22, nevermind the 75% finance, of course.
There are a lot of institutions that would actually take large losses if they sold out at .20.
@all
how many banks would be insolvent if they mark their toxic assets to $0.20?
@55: “Either the law is constitutional, or it isn’t, and no coming to court whining that the Treasury should have bought MY shit, too, since they bought HIS shit.”
Actually buying one guy’s shit and not the other’s could also be a constitutional issue under the equal protection clause.
Paulson wants to turn the US Treasury into the world’s largest hedge fund.
There are due process questions backed up in the courts from the $29B loan to Bear Stearns as a condition of the takeover by JP Morgan. As you may remember, the Treasury forced an incredibly low share price on the shareholders in that deal. It was a huge unregulated transfer of wealth to JP Morgan. The Fifth Amendment requires that the Government shall not deprive people of property without due process of law. When you make up the law over a week-end, that’s not due process.
Now Paulson wants to do away with all trivial considerations of due process and equal protection by frightening Congress into passing a law saying anything the Treasury Secretary does to sell mortgage backed assets is lawful.
The U.S. Attorney General is a conservative but rational man who once served as a powerful federal judge. Where’s Mukasey’s counsel in all of this? Or is he just cut out of the loop, so just Bernanke and Paulson are making decisions?
That proposed bill is not a piece of legislation, it’s a power grab.
@71
Paulson will get what he wants. Just watch and stick it. You and everyone else are powerless to stop it.
They are planning to buy at above-market prices:
http://www.nakedcapitalism.com/2008/09/why-you-should-hate-treasury-bailout.html
I worked at [Wall Street firm you've heard of], but now I handle financial services for [a Congressman], and I was on the conference call that Paulson, Bernanke and the House Democratic Leadership held for all the members yesterday afternoon. It’s supposed to be members only, but there’s no way to enforce that if it’s a conference call, and you may have already heard from other staff who were listening in.
Anyway, I wanted to let you know that, behind closed doors, Paulson describes the plan differently. He explicitly says that it will buy assets at above market prices (although he still claims that they are undervalued) because the holders won’t sell at market prices. Anna Eshoo pressed him on how the government can compel the holders to sell, and he basically dodged the question. I think that’s because he didn’t want to admit that the government would just keep offering more and more.
I don’t think that our leadership has been very good during this negotiation (or really, during any showdowns with this administration) at forcing the administration to own their position. If Paulson wants this plan, then he needs to sell it to the public, and if he sells a different plan to the public (the nonsense buying-at-market-price plan) then we should pass that. I’d rather see the government act as a market maker for the assets to get them transferred over to private equity firms and sovereign wealth funds and other willing holders. And if we need to recapitalize these companies, it seems like the cheapest way for the taxpayer is to go in and buy up the distressed debt and then convert that to equity.
He is using the RTC as a model. This requires the bank or entity to declare bankruptcy (negate shdlr value) before government steps in to absorb assets and assume liabilities of the bank.
If the assets have value, they can be used now by GS or MS at the discount window to gain liquidity – provided it is a liquidity not an insolvency issue.
The government should have required transpearancy months agon in disclosing level II and III holdings. And also could have provided temporary releif from mark-to-market if reasonable models showed value above market – IF these were liquidity issues.
If they are insolvency issues, there is no reason to bail out MS versus the guy who ever-extended and over-borrowed to buy an asset he couldn;t afford.
Where is in all of this a section on how to:
1. Court marshall the execs.
2. Execute the execs by a firing squad.
Fat cats get fatter, Average Joe (investor, non key employee, or tax payer) gets shafted! Read it below.
http://financialtraders.blogspot.com/2008/09/leman-stock-leh-bankruptcy-insolvency.html
This just confirms that the next hugely profitable trade is to cover your shorts on the financial sector, take a deep breath, pat yourself on the back, then load up on US Treasury CDS’s…
What’s the over/under on when the Treasury will no longer be able to borrow in USD?
TGFD is here for only a short time this afternoon. Too many outside activites keeping me busy today.
I didn’t get to read today’s posts, so I just thought I’d drop this off. Seems that UK chicken-shit hedge funds are trying to sue the British Gov’t just as US chicken-shit hedge funds are trying to sue Uncle Sam.
They’re going to have difficulty because nobody, not even the judges seem to give a shit about them.
Here’s the link:
http://www.marketwatch.com/news/story/british-hedge-funds-sue-over/story.aspx?guid=%7B5DE1279C%2DFA8F%2D4CA0%2DB0E4%2D65A45E5C7D4C%7D&tool=1&dist=bigcharts&
BTW, I read in the local paper today that some financial expert was quoted as saying, “A disproportionate amount of economic and intellectual capital has gone into speculative activity in recent decades, and it’s proven to be unhealthy for the U.S. economy.”
My sentiments exactly.
The Guy from Delaware
p.s. @#17 is bogus. I didn’t write that.
Further ARM resets are a huge problem. They have been mentioned above, but what hasn’t been mentioned is the scope of the problem:
http://bubbleinfo.squarespace.com/statistics-2007/2007/3/15/arm-reset-schedule.html
@78 & 17
It doesn’t matter. Both of you are retarded.
Home inventory = 5,000,000. What if feds gave $50,000 to the next 2,000,000 people who bought homes? This would cost $100 billion. I would think that this would drive up home prices in a hurry.
this proposal is fucking joke.
pure and simple.
if this is the best that Paulson and Bernarke can muster, then this market is seriously fucked-period.
selling out my IRA stocks and holding cash and 2yr notes until this shit show blows over.
good luck DBers. i think we will all need it.
KB
@81 – assume the median home price is around $300,000 for the nation. You would need 2MM real households (not speculators – that’d just drive another bubble) that can actually afford the $250,000 mortgage (none of the ARM crap) now. In this economy, by the time you can find all those people, the financial system would’ve collapsed and you’d be collecting pennies from foreigners. Genius.
American Home Owners Lending Entity or AHOLE.
@73 – Unless they verify the source of that email (“an email from a reader” sounds like BS to me), I won’t believe a word of it. If spreading rumors is your thing, I heard TMZ might be hiring a few interns.
LOL,
P&B are really true numbnuts- LOL!!
They (Treasury) are making both tax exempt and taxable money market funds eligible in this “guaranty” program- sweet! I can liquidate my IRA stocks and move them into money market fund without taking any hit or losing tax deferred status!
hahahahahahahahahahahaa, beautiful!
KB
Of course Treasury will be paying above market. Any bank that wants to sell at market can do so at any time without this plan.
This is just a thinly veiled transfer of wealth from taxpayers to banks.
@87
Exactly. I’m sure that hank and ben have thought the whole adverse selection issue through in the 24 hours it took them to hammer out this three pager while Super Cox manipulated the market to stop market manipulation.
My confidence is certainly much higher.
uh…how much of paulson’s $700 mill will go toward that bailout?
I think the ramifications of this new TARP that Hammering Stammering Hank wants is going to cause a few blinks down the road. The name alone … “troubled asset relief program” says a lot. It reminds me of the post 9/11 laws we instantly had ready to be voted on and implanted in a matter of weeks.
The fact that our new and wonderful relief program has already changed its basic purpose from Domestic US only, to an expanded world wide bank relief program says just how bad things are in reality. The fact it took less then 3 days to undergo a radical increase in scope says a lot about who can call Hank at these moments and get his attention.
An example is in the Middle East, where inter bank loans dried up last week. UAE found its new mega banking center complex itself starved for cash as their oil flows to market. When the SWF start blinking at their own end, you know its time to change the rules. Right?
Now, add in when China is deploying stimulus programs for domestic reasons, while Russian equity markets are closed for most of a week because of limit down or limit up issues, and Australia goes so far as to ban all short sales, you know things are worse then they appear here.
The shear folly of world group think during the build up to this misadventure, when talking heads discussed economic decoupling as if it would happen, has been shown to be nothing more then wasted hot air.
We as a world society are more interlocked today then ever before. It is not surprising that Hammering Stammering Hank wants authority to fix the problems he helped create. He has more masters then US Citizens have rights at this stage.
The Chinese want/yelling/demanding to start a brand new financial system that does NOT include the US in it as a key player, but only if we deny them satisfaction on the Fanny Freddy topic, is what is driving their agenda.
Even Russia is sounding like they might have overplayed their hand in Georgia and is now talking about “NOT” being isolated from the economic world. It used to be that nations played their cards slowly, so all could see and evaluate the next step. In today’s version of 3 card monty, people are tossing their cards down daily now.
At this point in time, with the rule book being changed in the middle of market hours, on a regular basis, it is long past time for anyone sane, to liquidate and park their personal net worth on the side lines.
Be it Gold, Silver, Swiss currency or some mix of other asset classes, staying exposed to Hanks swings at the market no longer appears to be worth the experience. It will be interesting to see how much longer the game continues, with the amount of shear headwind that is now blowing against it.
I am praying for a continued rally this week, as I have more long exposure I am looking to unwind. Cash, what ever that means, is looking good right now.
~SEG
I don’t see how so many can read a coherent “plan” into this piece of legislation. The legislation says plain and simple the Treasury Secretary can do whatever he wants to do to buy up $7B of mortgage backed assets. Nothing the Treasury Secretary does could ever be further reviewed by the courts.
Paulson could change whatever game plan he is currently privately sharing with Congress after passage and do whatever he felt like doing next, as long as he doesn’t spend more than $700B.
This is the same concept as the bazooka in the pocket. Give the Treasury Secretary unbridled power and the problems will go away.
Doesn’t the Mob offer the same deal?
http://www.treas.gov/press/releases/hp1151.htm
$37,716.67 = your share of the national debt. Lever it up baby!!!
$37,716.67 = your share of the national debt. Lever it up baby!!!
$37,716.67 = your share of the national debt. Lever it up baby!!!
$37,716.67 = your share of the national debt. Lever it up baby!!!
$37,716.67 = your share of the national debt. Lever it up baby!!!
$37,716.67 = your share of the national debt. Lever it up baby!!!
http://dealbook.blogs.nytimes.com/2008/09/21/goldman-morgan-to-become-bank-holding-companies/
The more I look at this plan, the more it looks like Paulson’s real objective is to save the Wall Street banks. If anyone holds a different view, please explain and I’d gladly be proved wrong.
Letting Goldman and MS become bank holding companies and giving them access to the fed funds windows is just ludicrous. If it were up to me, I’d demand Goldman and MS to, as a condition, reduce their leverage ratio from 22 times and 30 times respectively now to a figure that is more in line with the other bank holding companies (in the low teens).
The whole point is to save the banking system and get rid of the old corrupt practices so we can start anew. Giving these guys access to fed funds will allowing them to carry on business as before. Nothing will change under Paulson’s plan.
I am still baffled by how both sides of Congress would be willing to grant Paulson such wide-ranging “unlimited” powers without oversight. They have no leash to control Paulson and can do nothing but post-mortems.
@2; My ‘not funny’ comment was intended as sarcasm – sorry you found it ‘not funny’.
By the way; I never consented to be ruled by “King Paulson” – therefore – REALLY ‘not funny’.
P.S. – Opening Pitchfork Concession on National Mall…Franchises available for $100K…ex-Lehman employees preferred.
the bailout provision for foreign banks is disturbing.
fuck them. right in the ear.
I guess Paulson looked into the abyss and it looked back.
Chad
http://www.cfolounge.com
You can’t make this stuff up. The ink isn’t dry on the bill that would allow $700B to be spent from the U.S. Treasury buying up mortgage-backed assets, and Paulson admits more may be needed. The banks successfully pressure the Treasury into allowing relief for money market funds. Foreign nations successfully lobby to be let in on the deal.
If people aren’t keeping track, the national debt ceiling was just increased by $4 trillion to accommodate the Fannie Mae/Freddie Mac take-overs. Not that we would ever need to go there, Paulson testified. Now another $1 trillion seems to be needed to buy mortgage backed assets and whatever other distressed assets the Wall Street banks are holding.
The Democrats, and some Republicans (such as Arlen Specter), are seeming to wake up about the proposal, which is nothing more than an outrageous grant of unchecked power to the Treasury Secretary. Our worst fears about the integrity of the deal have been played out over this week-end, as the Wall Street chiefs position themselves to gain from the new game plan.
Some of the Democrats need to get off their hobby horses and focus their attention on what’s before them. In other words, Barney Frank, it’s not the time to limit executive compensation, although Paulson is unintentionally hilarious when he calls such a measure “punitive.” It’s also not the time to figure out relief for homeowners facing foreclosure. That issue has stumped the band for the last year, and no one is going to solve it in a few more days.
This bill not only needs to allow Treasury oversight and judicial review, but it also needs to contain an articulated PLAN. Constitutional law allows broad delegation of authority from Congress, but only if Congress provides guidelines as to a PLAN.
Congress can’t say we hereby authorize Henry Paulson to wing it! And by the way, nobody gets to complain, nobody gets an accounting, and nobody gets to sue.
I get the bad idea that this plan is like buying really bad garbage that can not be recycled and we pay preminum prices for the garbage?
What depositors are we protecting here? There are none.
Do we get back all the wall street bonuses from this bullshit?
BTW, I guess the Secretary is trying to run another investment bank from the tresury. This guy has some big cahunas.
The provisions on foreign banks need to be REMOVED…look at Barclays? Who were they wining and dining in Wdc and at the Fed in the days/hours before the Lb bkptcy.? Despicable…Paulson is clearnly not a Christian Scientist, he’s a Maoist.
Stop being an ass #106
Who are you to accuse Paulson of being a Maoist.
Yours,
Phil Gramm
Let me see if I’ve got this right. The Federal Government is going to go into debt to the tune of $700 billion to buy up the worthless debt of failing financial firms, reward wall street fat cats for their stupidity and greed, and that’s not going to cost the taxpayer a cent and is going to save the econmy.
Only in Washington could such lunacy be applauded as an accomplishment.
Let me see if I’ve got this right. The Federal Government is going to go into debt to the tune of $700 billion to buy up the worthless debt of failing financial firms, reward wall street fat cats for their stupidity and greed, and that’s not going to cost the taxpayer a cent and is going to save the econmy.
Only in Washington could such lunacy be applauded as an accomplishment.
Let me see if I’ve got this right. The Federal Government is going to go into debt to the tune of $700 billion to buy up the worthless debt of failing financial firms, reward wall street fat cats for their stupidity and greed, and that’s not going to cost the taxpayer a cent and is going to save the econmy.
Only in Washington could such lunacy be applauded as an accomplishment.
Let me see if I’ve got this right. The Federal Government is going to go into debt to the tune of $700 billion to buy up the worthless debt of failing financial firms, reward wall street fat cats for their stupidity and greed, and that’s not going to cost the taxpayer a cent and is going to save the econmy.
Only in Washington could such lunacy be applauded as an accomplishment.
Let me see if I’ve got this right. The Federal Government is going to go into debt to the tune of $700 billion to buy up the worthless debt of failing financial firms, reward wall street fat cats for their stupidity and greed, and that’s not going to cost the taxpayer a cent and is going to save the econmy.
Only in Washington could such lunacy be applauded as an accomplishment.
Let me see if I’ve got this right. The Federal Government is going to go into debt to the tune of $700 billion to buy up the worthless debt of failing financial firms, reward wall street fat cats for their stupidity and greed, and that’s not going to cost the taxpayer a cent and is going to save the econmy.
Only in Washington could such lunacy be applauded as an accomplishment.
Let me see if I’ve got this right. The Federal Government is going to go into debt to the tune of $700 billion to buy up the worthless debt of failing financial firms, reward wall street fat cats for their stupidity and greed, and that’s not going to cost the taxpayer a cent and is going to save the econmy.
Only in Washington could such lunacy be applauded as an accomplishment.
Let me see if I’ve got this right. The Federal Government is going to go into debt to the tune of $700 billion to buy up the worthless debt of failing financial firms, reward wall street fat cats for their stupidity and greed, and that’s not going to cost the taxpayer a cent and is going to save the econmy.
Only in Washington could such lunacy be applauded as an accomplishment.
@108-116, I applaud you for the accomplishment of hitting the post comment button the most amount of times of any user in DB history for one post. Not once or even 5 times, but the full 9 yards worth of clicks…
Well done my good man,
~SEG
As cited from,
Debt & Delusion, Central Bank Follies that Threaten Economic Disaster”
By Peter Warburton
BORROWED TIME
The Anatomy of A financial Crisis: How the Delusion may Unravel
To envision the impact of financial collapse on ordinary life, it is first necessary to speculate a little on the precise sequence of events leading up tp it. Let us suppose that the shock originates in the US bond market and, within a few months, the news breaks that a major financial institution is in trouble, squeezed between a rise in consumer debt delinquency and the cost of debt service. Unable to find emergency credit at an affordable cost, the institution defaults on its bonds by failing to make an interest payment. The Federal Reserve considers a support operation, but Congress is vehemently opposed to the use of public money for a bail-out. While the political wrangling is still going on, US bond yields jump higher still and credit quality spreads widen. Several other mortgage and credit card agencies admit to a cash-flow problem and a crisis is born. Meanwhile, the rise in US bond yields is transmitted via the futures markets to
Europe.
On Wall Street, shares in US banks and financial companies plummet on account of the credit quality scare and the rise in bond yields. Because financials company shares have a large weight in the S&P index, the whole market turns down.
This story continues on …The news emerges that one of the Largest US broking firms has suffered a massive hit on derivatives trading and its capital has been wiped out. The crash has happened and it is already too late for individuals to avoid substantial losses on their investments.
This book was copyrighted 2005.
How is it that Mr. Warburton in his book could so clearly see what has happened in September 2008. Free and easy credit with a “No doc and No down” credit approach to the consumer who could not afford the mortgage they were given. Mortgage back securities were then repackaged and sold to investors to create more expanding credit. CDO and Credit Default Swaps were invented. This was a direct result of the lowering of the interest rate in the early 2000’s, which caused the explosion of “cheap” credit.
As to the taxpayer bailout, I ask how anyone can sleep who is involved with the use of taxpayers money to bailout the financial system. This money is marked for the development of America not as a lifeline for the financial system. The taxpayer money was to build roads and bridges better schools and improved medical care for all. All that I can see is that the 800 billion dollars is being thrown into a financial fire with little return to the taxpayers but ash. The underlying plan is to use a large amount of taxpayer money only to depreciate the loss over many years to the taxpayer. As to the banking committee who now in the face of a full financial crisis has a life saving plan. Where were they when this was occurring? Would it no have been easier to correct this problem before it was here? Why do so few have the ability to spend so much? This is the wrong plan at the wrong plan. We will look back and realize this, “ It seemed right at the time…”
BORROWED TIME
The Anatomy of A financial Crisis: How the Delusion may Unravel
To envision the impact of financial collapse on ordinary life, it is first necessary to speculate a little on the precise sequence of events leading up tp it. Let us suppose that the shock originates in the US bond market and, within a few months, the news breaks that a major financial institution is in trouble, squeezed between a rise in consumer debt delinquency and the cost of debt service. Unable to find emergency credit at an affordable cost, the institution defaults on its bonds by failing to make an interest payment. The Federal Reserve considers a support operation, but Congress is vehemently opposed to the use of public money for a bail-out. While the political wrangling is still going on, US bond yields jump higher still and credit quality spreads widen. Several other mortgage and credit card agencies admit to a cash-flow problem and a crisis is born. Meanwhile, the rise in US bond yields is transmitted via the futures markets to Europe.
On Wall Street, shares in US banks and financial companies plummet on account of the credit quality scare and the rise in bond yields. Because financials company shares have a large weight in the S&P index, the whole market turns down.
This story continues on …The news emerges that one of the Largest US broking firms has suffered a massive hit on derivatives trading and its capital has been wiped out. The crash has happened and it is already too late for individuals to avoid substantial losses on their investments.
As cited from,
Debt & Delusion, Central Bank Follies that Threaten Economic Disaster”
By Peter Warburton This book was copyrighted 2005.
How is it that Mr. Warburton in his book could so clearly see what has happened in September 2008. Free and easy credit with a “No doc and No down” credit approach to the consumer who could not afford the mortgage they were given. Mortgage back securities were then repackaged and sold to investors to create more expanding credit. CDO and Credit Default Swaps were invented. This was a direct result of the lowering of the interest rate in the early 2000’s, which caused the explosion of “cheap” credit.
As to the taxpayer bailout, I ask how anyone can sleep who is involved with the use of taxpayers money to bailout the financial system. This money is marked for the development of America not as a lifeline for the financial system. The taxpayer money was to build roads and bridges better schools and improved medical care for all. All that I can see is that the 800 billion dollars is being thrown into a financial fire with little return to the taxpayers but ash. The underlying plan is to use a large amount of taxpayer money only to depreciate the loss over many years to the taxpayer. 800 billion is a large number but 80 billion over 10 years is more acceptable. This amount will be added to future Federal budgets. The Federal Government will issue Federal bonds backed by the taxpayers in full as the government does not have this money in the bank.
As to the banking committee who now in the face of a full financial crisis has a life saving plan. Where were they when this was occurring? Would it no have been easier to correct this problem before it was here? Why do so few have the ability to spend so much? This is the wrong plan at the wrong plan. We will look back and realize this, ” It seemed right at the time…”
Bailout proposal: They need to bailout the taxpayers and they in turn will bail out mortgage companies and banks and all other companies by spending the so called bail out money. Why would we bail out companies and in the long run the taxpayers are going to suffer while the people making millions are still making millions. I feel the middle class people are being deleted and there are two classes of people left high and lower, and the middle class are for sure not moving up, so guess where they are going. There should have been a cap put on these oil prices a long time ago, those companies are still making millions in profits and this could have been prevented. Alot of people seen our country going downhill and the ones who could’ve stopped did nothing and now they want to help the wrong people. alot of companies go bankrupt and people lose their jobs all the time and no one helps them, basically it like thats life,well thats what we need to say now. We need to give the bail out money to the taxpayers and then the taxpayers put it back into the economy.