Happy Days …
… are here again. Stock market rebounding. Dems at cross purposes as Harry Reid pushes the Republican tax agenda in squeeze play on House. Pelosi miffed. Washington Post:
Prodded by a wave of angry calls from constituents, congressional leaders dialed back partisan bickering over the $700 billion Wall Street rescue plan yesterday and advanced modest changes to the legislation in an effort to win over House Republican holdouts.
Leaders of the Senate, where most members have indicated support for the plan, said they would seek a vote on a revised rescue package tonight that would include a one-year increase in Federal Deposit Insurance Corp. caps for bank and credit union accounts, extensions of numerous business tax breaks that have expired and a fix to the alternative minimum tax for individual taxpayers.
The FDIC and tax provisions could make the bill more appealing to House Republicans, but they could also prove unpalatable to a coalition of conservative Democrats who have long opposed the tax changes. The Senate banking committee’s chairman, Christopher J. Dodd (D-Conn.), who helped negotiate the revised package, expressed confidence that the revisions would yield a majority of House votes.
Although U.S. financial markets swung sharply upward yesterday, with the Dow Jones industrial average gaining 485.21 points, Monday’s record 778-point loss, which was fueled by the House’s rejection of the rescue plan, led to angry calls to lawmakers from constituents from across the political spectrum.
There was a widespread sense on Capitol Hill that Monday’s vote had snapped the public to attention about the potential repercussions of Congress’s failure to act. Last week, House and Senate offices were bombarded with calls from opponents who viewed the bill as a Wall Street boondoggle. That call pattern shifted sharply after Monday’s vote, aides to lawmakers in both parties said. “It’s completely in the other direction now,” said Michael Steel, a spokesman for House Minority Leader John A. Boehner (R-Ohio).
Senate Majority Leader Harry M. Reid (D-Nev.) called the Senate’s revised legislation “the best thing to move forward.” Reid was joined on the floor by Senate Minority Leader Mitch McConnell (R-Ky.), who said the plan was “one of the finer moments in the Senate.”
A senior House Republican adviser, who spoke on the condition of anonymity to talk about private strategy, said the addition of the FDIC cap increase and the tax credits — without any corresponding tax increases — could have “substantial appeal” in that caucus. Boehner was consulted by Senate leaders and gave his approval, the aide said.
But the addition of the tax provisions may entail new risks in the House, which returns to action Thursday. Speaker Nancy Pelosi (D-Calif.) responded tepidly to the Senate announcement, and it remained unclear when the House would would consider the revised bill, though a vote is likely by week’s end. “The Senate has made a decision about how to proceed and what can pass that body. The Senate will vote . . . and the Congress will work its will,” Pelosi said.
Democratic and Republican aides warned that the “Blue Dogs” — a bloc of 47 fiscally conservative Democrats — might now oppose the market rescue plan. The Blue Dogs have opposed extending the tax credits unless there are other spending cuts or tax increases to pay for them.
All in good time. Spending cuts sounds like a great idea. Obama wants to show what a leader he is. OK, how much did McCain say Obama’s earmarks added up to?
Robert Robb, Arizona Republic via RCP: Americans owe House a debt of gratitude.
When the plan was first announced, it was widely denounced as a $700 billion blank check to Treasury Secretary Henry Paulson. As voted on in the House, it had been reduced to a $350 billion blank check. But it took another vote in Congress to prevent him from getting the additional $350 billion.
The legislation purported to instruct the treasury secretary to buy distressed securities at the lowest possible price for taxpayers, using market mechanisms such as a reverse auction.
However, the bill also required that the secretary obtain warrants for stock in the companies whose distressed securities were being bought. The warrants were to be for whatever percentage of the company the secretary decided, at whatever price the secretary set.
…
As a practical matter, the bill would have returned Paulson to his make-a-deal mode with individual companies, as the bill also permitted, playing with a very big pot of taxpayer money. There’s nothing in Paulson’s record to date to suggest that he - or any other treasury secretary for that matter - should be entrusted with that kind of power.
There are tough economic times ahead. The country has overinvested in housing and overborrowed in general.
Robb posits if credit has been over-extended, credit must shrink. But if people think Congress must do something …
First, Congress should suspend the mark-to-market accounting rule for mortgage-backed securities. This requires MBSs to be booked for the highly discounted price at which they can currently be sold, not the much higher price they are likely to be worth if held to maturity …
Second, enact the House Republicans’ idea for the federal government to insure MBSs. Paulson says it won’t work. But he would have a hard time explaining why companies pay trillions for such private insurance but won’t purchase more secure insurance from the federal government.
Third, have the federal government guarantee the refinancing of homes based upon extending the life of the mortgage for as long as it takes, even if well beyond the conventional 30-year period, to reduce monthly payments to a certain percentage of income. With such a program, no one would have to lose their home, lenders wouldn’t have to take a hair cut, and, given the income requirement, federal outlays would be minimal.
Michael Goodwin, NY Daily News: Stupidity breeds contempt.
Smart people everywhere are saying it: The bank bailout plan failed because of poor salesmanship. If only supporters had come up with a better word than “bailout,” Americans would have jumped onboard like kids for candy.
I agree. Bailout is the wrong word to describe the $770 billion package. The best word is “fix.” As in the junkie needs his fix.
After borrowing and spending ourselves into a national disaster, the plan is to have us borrow more to get out. And the junkie is gonna quit in the morning, right after he gets the check that’s in the mail.
Topics: everything
Posted by Jules Crittenden at 8:12 am on Wednesday, October 1, 2008
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