The Bailout Plan, Redux
It looks as if we have another go around on the Bailout Plan (They really need another nickname for the bill if they want it to pass). Rba, and others, can you guys post what has changed from the bill that went down on Monday? For example, did Frank get in the desired bankruptcy clauses for folks facing defaulting on their mortgages?
For Fortune magazine's background reading on the whys of the unexpected uprising over the bill:
The crisis: A timeline
Despite the dire warnings of financial calamity from the White House and a few high-profile business leaders, much of Middle America wasn't buying the story that their own livelihoods were linked to the fate of the rescue package. Instead, average workers read the plan as the "big guys bailing out their friends," says former House Speaker Newt Gingrich, who commissioned a bipartisan survey on the subject. Gingrich's poll - conducted by Schoen and Republican Kellyanne Conway - found that a majority of Americans don't want Congress to use taxpayer dollars to bail out financial institutions, even if their collapse means a rocky ride for investors in the stock market.The White House was knocked off-balance by potent blowback over the plan - not from the expected (read: liberal) quarters but from shopping-mall America. Morning talk-show hosts like Regis and Kelly shook their heads in disgust. Constituents in rural southern Illinois - a Republican district - phoned in their opposition to Congressman John Shimkus in a ratio of 200 to 1.
While Senators grilled Paulson and Bernanke on one side of the Capitol, House members on the other side were offering colorful translations of their constituent views, calling the plan "socialist" and accusing Paulson of handing over "the keys to the liquor cabinet," as Democratic Texan Lloyd Doggett put it. Within three days more than 2,000 people had logged their mostly angry opinions on CNNMoney.com.
I haven't had time to scan all the latest on the issue, please post what you find and know below!
Comments
cho
October 1, 2008 - 12:15
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I thought this paragraph summed up a lot of current thinking
rba
October 1, 2008 - 13:06
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Amendment
House amended Sec. 301 et. sq. - the tax provisions. Source note here: C-SPAN has been a go-to place for information, and hasn't yet crashed. Recommend using that site for updated information.
Senate Finance Comm. has information from their side, including staff reports on pending.
cho
October 1, 2008 - 13:13
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Thanks Rba...
what's your appraisal of this amendment?
It looks as 301 deals with sale of preferred stock in Fannie and Freddie and section 302 deals with tax treatment of Executive Compensation. Sounds as if they are capping compensation at 500,000 a year for executives of troubled institution who received government aid. Am I reading that correctly?
rba
October 1, 2008 - 13:18
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None.
Just grabbed and ran. Quick read looks like more specific - and scary - language designed to target a very narrow group of people. Think: '86 tax code.
Ryan Chittum @ CJR checks into with today's "Audit" column. Worth the click.
cho
October 1, 2008 - 13:24
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I gotta admit, none of it makes sense
sounds punitive with all the golden parachute language, but the numbers seem so out of touch with the lives of individuals I know.
I need an intrepreter!
Connecticut Man1
October 1, 2008 - 13:38
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I have a more honest name for it:
"The Shock Doctrine Extortion Bill"
Because the "Blue Skies Bank Rescue Bill" would be too typical.
cho
October 1, 2008 - 13:41
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not sure that title will help it pass...
But definitely a good one, CTMAN1
Roxy
October 1, 2008 - 12:21
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I am still against the "Wallstreet Welfare"
and apparently am not alone ...
Main Street turns against Wall Street:
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ePMedia ... get the scoop with us!
If it's true that our species is alone in the universe, then I'd have to say that the universe aimed rather low and settled for very little. ~ George Carlin
GreyHawk
October 1, 2008 - 12:43
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The "Bush Bailout"? "Republican Rescue"?
How about "The Big Tent's Giant Sh!t-Covering TARP"?
cho
October 1, 2008 - 12:46
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TARP
Is there some "reasoning" behind the TARP acronym?
rba
October 1, 2008 - 12:56
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Katrina
Blue tarps to protect against hurricane. Besides, "D.U.C.T.A.P.E." wouldn't sell.
cho
October 1, 2008 - 13:00
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Ah, the signature plastic
sign of Bush's / Norquist's drown the government in a bathtub.
Thanks, I was slow.
Chris White
October 1, 2008 - 12:49
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The Senate Etc.
The Senate passed a tax bill last week by a large majority (92-7). This bill contains a number of things, like changing the alternative minimum tax,subsidies for alternative.
They are adding the Bail out as an amendment to this bill, with the addition of measures like the increase in deposit insurance.
http://thehill.com/leading-the-news/senate-leaders-press-house-on-rescue-package-2008-10-01.html
The House had already refused the tax bill last week on the grounds that is wasn't funded.
The House Republicans have a proposal which calls for allowing mortgage related businesses to write off losses incurred before the adoption of the measure, to take losses on income tax forms for the last three years, to take losses as regular income not capital losses, they want FNM and FRE privatized, and they want the Humphrey Hawkins legislation (makes unemployment an agenda item for the Fed) repealed.
George Soros has got a proposal together which he is circulating among Congressional Democrats.
Nothing from me on Franks and Co.
cho
October 1, 2008 - 12:59
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So is the bill with the amendments worse,
in your assessment, than what was hammered out by the House Dems and defeated on Monday?
Connecticut Man1
October 1, 2008 - 13:41
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Anything that gives any of our money
to them is a Toxic Bill. You cannot add enough progressive candy to this kind of theft to make it morally or fiscally justifiable.
susie dow
October 1, 2008 - 13:43
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Capital
All of the generally respected economic minds and investment gurus say the same thing: without capitalization, a bail-out plan won't work. Monday's Bail Out Plan had minimal capitalization.
Capital: Government injects cash in exchange for equity rather than in exchange for more or less nothing -- a concrete example of this: Buffett just bought preferred shares of Goldman thereby injecting capital into the company.
Krugman has been bitching about injecting Capital extensively.
http://krugman.blogs.nytimes.com/
cho
October 1, 2008 - 13:45
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Thanks Susie.
Two things: Krugman quotes Galbraith:
My fear is the next administration -- should it be McCain Paulsen.
And my second question:
Can you interpret that section 302 of the Senate Amendment that rba found? The Golden parachute part completely confused me.
susie dow
October 1, 2008 - 13:56
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Current Senate Bill
I can't be certain but it looks like
a) any executive pay over $500,000
b) paid during a year that a company is participating in the govt bail out program
c) including deferred payment paid at a later date
cannot be a deductible expense for tax purposes for said company.
In other words, the deductible expense for executive pay is capped at $500,000.
Hope this makes sense.
cho
October 1, 2008 - 13:59
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Yes, that's what I thought...
but so unsure of my ability to translate legalease... thanks.
DEFuning
October 1, 2008 - 17:21
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The "Concessions"
According to the White House Talking Points page yesterday ,the concessions have a real doozy in them, especially about the so-called Congressional Oversight.
o Incremental purchasing of troubled assets: Treasury will have the ability to immediately purchase up to $250 billion in troubled assets. In order to access the next $100 billion, the President must certify this action and report to Congress.
For the final $350 billion; the President must request the authority through a written report to Congress. Treasury will then have the authority unless Congress passes a joint resolution of disapproval within 15 days. The President can veto the resolution.
DID YA CATCH THAT? THE PRESIDENT CAN VETO THE RESOLUTION.
cho
October 1, 2008 - 17:35
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hummm... so it's still not
an infusion of capital, a la Susie's note that that is what is needed (from Krugman and Galbraith) but again, trying to suck the so called toxic assets out of the market?
susie dow
October 1, 2008 - 17:44
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Troubled Assets
is code for throwing money at Wall Street.
If the bill includes the phrase "troubled assets" then the bill is useless.
DEFuning
October 1, 2008 - 17:25
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From the White House Talking Points 9/30/08
o Limits on executive compensation: When Treasury buys assets directly, the financial institution must observe standards limiting incentives and prohibiting golden parachutes.
When the Treasury Department buys assets by auction, any institution that has sold more than $300 million in assets is subject to penalties for golden parachute payments triggered by events other than retirement.
Steep tax consequences for executive compensation above $500,000 - eliminating tax deductibility for firms that receive assistance.
My question is what does "compensation" mean? Does that mean options, pension pay outs etc? Or just a lump sum buyout?
cho
October 1, 2008 - 17:33
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For some reason I was reading that as
salary... so the stock options and other perks... would not be included?
carol white
October 1, 2008 - 15:34
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Isn't there a political angle on the Senate bill?
My hypothesis is that Senate bill by including more elements is meant to be a red flag to the Republicans, not a compromise. I am basing this on conversation with Chris as we drove to and from the doctor, so it is a question. I'm looking for nothing much to happen until after a new adminstration comes in.
carol
Chris White
October 1, 2008 - 17:52
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Better, Worse?
The package seems to be more than represented by wire and other outlets and needs to be looked at.
Chris White
October 1, 2008 - 16:32
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JFTR
It is now called an amendment to the Retirement Security Act and it is 451 pages long.
susie dow
October 1, 2008 - 17:46
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From 3 - 451
in a mere week.
cho
October 1, 2008 - 17:49
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Wow...
bet that means it will pass.
rba
October 1, 2008 - 20:19
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Looks like
they tacked it on/merged with an existing bill.
DEFuning
October 1, 2008 - 21:25
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Passed
Senate says Yay.