RMS: Economic Bailout

By ecthompsonmd|2008-09-23T06:11:25-04:00September 23rd, 2008|Bush Administration, Economy|Comments Off

(Do you like my own abbreviation for the Rachel Maddow show?)

Okay, here’s a surprise, the Bush administration is resisting government oversight. Really? I’m sure if you look in the dictionary, (I think there’s one in the White House) you can’t find the word oversight anywhere. We’ve had no oversight in Iraq. We’ve had no oversight in the financial markets. As a matter of fact, our president encouraged the financial markets to do whatever they wanted because he was creating “the ownership society.” Whether it is torturing prisoners at Guantánamo Bay or developing an energy policy that promotes the oil industry, this administration has been deathly allergic to oversight.

From the Washington Post:

Democratic leaders said they were near agreement with the Bush administration yesterday on key provisions of a massive plan to revive the U.S. financial system, but the two sides remained at odds over other issues and were struggling to gain the support of rank-and-file lawmakers on both sides of the aisle.

Although the White House has warned of severe consequences if the bailout plan is not approved by Friday, lawmakers crafting the measure said their work may well stretch past that deadline.

The Bush administration is resisting changes to the measure being sought by Democratic leaders and many Republicans, including one that would grant the government authority to cut executive pay at firms that participate in the bailout and another that would guarantee that taxpayers share in the profits if those firms recover financially. (more… )

About the Author: ecthompsonmd

No Comments

Chris September 23, 2008 at 8:41 am

Doc:

This is in response to your quotes:

If I hand somebody a blank check, I feel pretty confident they’re not going to write it for $700 billion. So, what we’re handing the financial industry is worse than a blank check. The fact that this proposal has bipartisan support does not warm my heart. The Bush administration wants quick action but… Can someone stand up and clearly articulate where the problem is? Can somebody tell us, the American people, that throwing $700 billion at the problem will fix it? We know the American automotive industry is looking for approximately a $25 billion handout, is that included in this $700 billion? And probably the worst part of this legislation is that the Secretary of the Treasury has no ability to be looked at by the judiciary. There’s no oversight. I don’t get how this is good for America. I understand that financial meltdowns are bad. But I also understand that handing out $700 billion is also bad.

and

As a matter of fact, our president encouraged the financial markets to do whatever they wanted because he was creating “the ownership society.”

You seem to be blaming the Bush Administration for the recent meltdown in the markets, driven by the colossal failure of Fannie and Freddie.

In fact, the Bush administration has been pushing for tighter restrictions on both companies since 2003, and was completely stonewalled by Democrats in the House. Chris Dodd, in the Senate, refused to bring the issue up in his committee.

My source is Bloomberg, from August of 2007:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aYn2.zVtU7vQ&refer=home

My favorite part is the last few paragraphs:

Dodd has yet to introduce a similar measure in the Senate. Congress has failed to pass legislation creating a tougher regulator in each year since 2003, largely because of partisan differences and resistance from Fannie Mae and Freddie Mac to portfolio restraints and other tighter controls.

“There is no reason why” creation of a tougher regulator by Congress should be a “precondition to a modification of the cap that is done in a safe and sound manner,” Dodd said today in a statement.

“The administration’s response to the continued turmoil in the mortgage market is wholly unsatisfactory,” Dodd said, while calling again for higher limits on the companies’ mortgage assets. “More can and should be done.”

You see, Doc, the Bush Administration was advocating tighter controls last August of Fannie and Freddie, while the Democrats were trying to INCREASE their mortgage caps. In short, the Dems wanted to remove restrictions of Fannie and Freddie so they could BUY MORE CRAPPY MORTGAGES. On a straight party line vote, the Bush controls were voted down.

It should be noted that Obama voted against tighter Fannie/Freddie controls, while McCain voted for them.
Chris September 23, 2008 at 8:54 am

Also, it should be noted, per Fox News:

The top three U.S. Senators getting big Fannie and Freddie political bucks were democrats and number two is Senator Barack Obama. … he has only been in the Senate four years but still managed to grab the number two spot ahead of John Kerry, decades in the senate, and Chris Dodd who is chairman of the senate banking committee.

It also has been alleged that Franklin Raines (who’s middle name is Delano…. FDR for those keeping score) former head of Fannie Mae who left in a disgrace over a humongous accounting error is advising Obama on economic issues. In the interest of full disclosure, this has been vehemently denied by the Obama camp, mainly because nobody can prove that they spoke together about the economy.
ecthompson September 23, 2008 at 12:04 pm

I don’t think that you believe what you typed. Name one instance in which the Bush Administration has pushed for MORE regulation. Name one. I can’t think of any. Did the Bush administration actually submit legislation to be considered? Who in the banking committee was the Bush administrations point person on this project?

There is no doubt that Obama has received campaign donations from folks who work or worked at Fannie and Freddie. McCain on the other hand has the lobbyist, Rick Davis (runs the campaign) who received over $2 million for lobbying for Freddie and Fannie.
margaret September 23, 2008 at 12:38 pm

You know I get so tired of people threatening if we don’t do something NOW then everything will stop. Lets see the Bush adminstration has said this at least every 3 months on some sort of problem. Between attacking iraq otherwise they will attack us. To Bush demanding immediate billions of dollars otherwise the military will not function. Then he keeps threatening that the Oil companies have to have permission to off shore drill immediately. They are good at scaring people. I am sorry this is such a HUGE amount of money and they have the gawl to say THEY don’t want anyone questioning them on who get the money. So if Haliburton declares a hardship they would even have their hand out and who could stop them from giving it to them. This is Insane but typical of how greedy these rich folks have become.

This is where the lobbyists make their money to get on the list.
JeffLeon September 23, 2008 at 1:20 pm

Quit griping and fork over Hank Paulson’s $1,300,000,000,000.00. It’s just a coincidence that every time another catastrophe hits the US, billions (or trillions) of dollars land in McCain/Bush/GOP contributors’ pockets. Punishing (or complaining about) others’ good luck is class warfare.
ecthompson September 23, 2008 at 4:36 pm

Jeff –

As soon as my wallet quits crying,I’ll fork over the money! 😉
Chris September 23, 2008 at 5:52 pm

I don’t think that you believe what you typed. Name one instance in which the Bush Administration has pushed for MORE regulation. Name one.

I do believe in that statement, and I believe that answers your question/demand above.

Further:

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The article is from the September 11, 2003 edition of the NY Times.

Here is the link:

http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=print

There are a lot of things about the Bush Administration that I don’t like. I cannot verify this, but I heard today that in terms of total dollars, the US Government is now worth double what it was 7 years ago. If true, I feel that is a travesty. In addition to the suggestion that he has grown government in the past 8 years, it does suggest that President Bush is fond of spending money, something else *I* am not in favor of.

To deny the obvious truth that the Bush Administration, by all accounts, was all over this issue like white on rice 5 YEARS ago is a little reckless on your part, Doc.

From the same article:

‘‘These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

“Not facing any kind of financial crisis”.

Indeed.
Chris September 23, 2008 at 6:26 pm

Quit griping and fork over Hank Paulson’s $1,300,000,000,000.00. It’s just a coincidence that every time another catastrophe hits the US, billions (or trillions) of dollars land in McCain/Bush/GOP contributors’ pockets.

Jeff: The 700b “bailout” isn’t going into Paulson’s pocket. It’s to be used to buy some of those crappy loans, much like the S&L bailout in the early 90’s. It is almost certainly not worth the 700 billlion price tag, to be sure, but it’s certainly not worth $0.

Remember, at this point, all they’re suggesting is that the US Government, buy those crappy loan packages for 700 billion and basically take them out of circulation. Eventually, they’d be sold off and the proceeds would go back to the Treasury’s coffers, offsetting at least SOME of the original cost.

At this point, if enough mortgages AREN’T in default, and the US holds onto the asset long enough, we might break even. I wouldn’t exactly hold my breath for this scenario to play out, but it isn’t out of the realm of possibilities either.

Again, the Bush Administration has warned Congress about this exact scenario, multiple times, for 5 years. The Democrats refused to play ball, even as late as August of last year, because they feared the availability of home loans for the “less fortunate” (oh, how I LOATHE that term) would dry up, thereby pissing off a vast multitude of their constituency. And now, they’re stonewalling because all of a sudden, they don’t like the idea of government intervention, which is silly, because Democrats during the New Deal created Fannie as a government entity that would lend money to people looking to buy a home, which, in my book, is DIRECT government intervention in a private market.

So, I guess I’m confused as to your point. Who exactly, from the Bush Administration, is having his pockets lined?

Doc: I forgot to ask… what is your source for that “2 million” number? From all official sources that I can find, Obama was the greatest beneficiary of Fannie/Freddy donations to the tune of around $150k, which would refute your 2 million dollars number. Please post your source so I may research this further.
FLMom September 24, 2008 at 11:25 am

The $700B Economic Bailout must not be a “Blank Check”

http://www.floodthelines.com/noblankcheck/
Joel_ September 24, 2008 at 3:03 pm

@ Chris

I think one only needs to look at Congress’ current refusal to DEMAND investigations into this mess (as they so QUICKLY did with the ENRON scandal) to conclude that they are trying to cover their own a**es…

This crisis was a problem of the Washington Elite trying to use F&F as welfare offices… providing houses to people who couldn’t pay for them… putting their own people in leadership positions at both institutions where they made millions (Franklin Reins, Jamie Gorrellic, etc), using them as campaign slush funds (where Obama got 100K in 2 years), and then conveniently letting them off the hook when things went bad — using the “market” as a scapegoat for their own stupid policies.
ecthompson September 24, 2008 at 3:34 pm

FLMom –

I have argued on this blog before that $700 billion is much worse than a blank check. If I hand you a blank check you may fill it out for a thousand or even $10,000. This is far worse.

Thanks for the link.

Thanks for your comments.
ecthompson September 24, 2008 at 3:39 pm

Chris —

It is in the New York Times article. $30,000 per month and multiply that times the number of years gives you the $2 million number.
Chris September 24, 2008 at 6:18 pm

Doc:

That’s not a political donation, and can’t be compared to Obama’s sum.

Rick Davis was paid to do a job, not to carry favor to John McCain. Are you upset that he was paid to lobby for Fannie Mae?

Joel:

What investigation? There are plenty of people (as I’ve posted above at length) who KNEW what was going on at LEAST 5 years before the current “crisis” enveloped Wall Street, the Dems just didn’t want to play ball. That’s their prerogative, I suppose, but to grandstand NOW, after the same Chris Dodd refused to fix the problem 5 years ago is just plain stupid.

Now, it must be said that I am not wholly convinced that all these bailouts are necessary, nor am I convinced that they have been effective. I am convinced, however, that in the light of the evidence, the current grandstanding by Chris Dodd and company is partisan hackery of the basest form. And that should appall everyone, regardless of party slant.