Bailout Goes Bust

This guy colorfully sums it up. From the New York Daily News

“This is a huge cow patty with a piece of marshmallow stuck in the middle and I’m not going to eat that cow patty,” declared Rep. Paul Broun (R-Ga.)

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  1. Not sure what to say. I’ve got mixed feelings.
    Although I’m sure the Republicans will somehow realize that the vice-presidential debate can not go on in the wake of this financial crisis. (Sure, that’s the reason.)

  2. Funny too how this all coincidentally happened with about a month left in Bush’s regime.
    I guess it explains the GOP’s insistence on the urgency of passing this. He only has about 30 days left of having the authority to do something about it. Then the orgy of greed is over.

  3. No one will have to drown the government in a bathtub at this point. The government is effectively drowning itself.

  4. “Ample no votes came from both the Democratic and Republican sides of the aisle.”
    Let’s please share the blame ALL AROUND to these sheisters!

  5. Dannyboo.
    I’m not convinced this has anything to do with the Bush Administration. They’re an evil bunch of jerks and deserve to be in jail, but I think this current “crisis” is almost entirely the fault of the banks who loosened the restrictions on getting a mortgage. This in turn caused housing demand to go up, which caused the price of housing to go up. A lot. Take a look at this graph. It clearly shows that housing prices in the U.S. have gone up so much in the past 5-8 years that a massive correction in the market is surely to follow. It was a classic supply-and-demand issue: the more demand you have for an item, the more expensive it gets. The more supply you have, the cheaper it gets.
    The only failure I see here is that of the financial institutions who made those sketchy loans in the first place. The Bush Administration is partially at fault for not regulating the industry and letting these companies do just about anything they wanted.
    The bad news is that the American public will suffer no matter what happens. Either we pay through the nose for a bailout that benefits us very little or we suffer a decline in the value of the dollar and go through several years (or more) of a recession, tightening our belts and hoping Obama raises the taxes on the super-rich as a way to recoup some of the trillions in tax cuts the Bush Administration passed.

  6. “Well, I always wondered what it was like to have lived through the Great Depression.”
    …and I always wondered what it would be like to put a sharp stick into my eye, but so far I have resisted the urge to do it. 🙂

  7. Yes, Conan, so have I, but Congress has often not passed up an opportunity to jab sticks into our eyes, among other bodily locations.

  8. “Interesting that the GOP is putting the wrench in this one…”
    The Democrats could have passed this one without a single Republican vote. That’s how majorities work…

  9. Let’s please share the blame ALL AROUND to these sheisters!
    Or let’s pass the congratulations all around.
    If this thing passed there was a very good chance that it wouldn’t have done anything other than delay the inevitable.
    When the Tech Bubble of the 90s popped, it was caught by the housing bubble and rose higher instead of dropping to proper levels.
    Now the Housing Bubble seems to have popped and instead of letting things fall to the proper levels; the president who ran two companies into the ground thinks he has the solution for what ails Wall Street.
    I just hope that a) the same people who voted down this bill vote down whatever else comes down the line and b) that things don’t get so bad that I’ve no longer got a job this time next year.

  10. I dunno about that, Pork Roll: indirectly, via some of the brainless laws they pass, Congress has been jabbing sticks up our dupas for a long, long time… 🙂

  11. Sorry, Pork Roll — just reread your last post and it appears we are in violent agreement. Misread it the first time…

  12. It will be interesting to see who will lead. This bill was a compromise (which is why so many Republicans voted FOR it).
    If the Democratic Majority wants to lead, they can reframe a bill to the left of the current one which can pass along party lines.
    That’s how leadership works.
    It is fully and 100% within Democrat’s control to pass a bill…

  13. With the failure of the bill, that means the money funds you have your cash in may break the buck like the one last week, which happening to be the first money fund ever created called Reserve Primary Fund. This caused the panic that pushed the treasury to finally propose something, anything. Why? Because money funds are something everyone considered safe, and virtually everyone has, even people who ARE paying their mortgage. So I would expect a strong selloff in all the banks, with a possible run on any bank that is rumored to be losing deposits.
    Investment banks: they still own the toxic MBS’s that they have to mark to market (that they were hoping to sell to the govt). Once they get marked, they will have to balance assets and liabilities which means raise capital. Since the debt markets are frozen, that means selling more stock. That means dilution of existing shareholders and lower stock prices. Don’t forget that the small business owner was having his credit line revoked last week (contributing to the panic), which meant he may not be able to meet payroll. why was it being revoked? because the bank needed the money back to cover their capital needs.
    That brings us to the tri-state area, very hard hit by financial layoffs. So if you or your spouse has a seemingly solid job, but the bank at which you work just bought 2 other banks and has too many people, you too may be looking for work. And then suppose your spouse is in the same situation and you see how this debacle can affect seemingly solvent folks.
    I suggest to buckle up, and while I would normally suggest not watching the markets from day to day, it may be wise to do so at this time.

  14. I took my money out of money market accounts on friday. I put everything in Citibank but hid some around the house.

  15. Yes. I called them daily. They are not going for the govt insurance on their money market accounts, they feel their accounts are invested conservatively. I thought I’d be more conservative and just bail for now.

  16. From Wikipedia:
    The following is a non-definitive list of recession-proof industries:
    Medical Services / Health care
    Necessities: food/grocery stores/chains
    Home & vehicle repair & maintenance
    Home renovation / improvement
    Debt collection
    Tax preparation / simplification
    Career/Job search/Life coaching
    Security/Alarm services companies
    Weapons industry
    I don’t know if I agree with all of them but I would add the death industry to the list, ie., funeral parlors and such.

  17. My husband’s in entertainment – I guess I could switch to pornography and we could run a business together. We could do make up for corpses on the side.

  18. Of course, this is how bank runs get started.
    Gee, just think how exciting this is, when, in a few months time as we’re all huddling under blankets in our unheated and unlit homes, eating baked beans from the can, you can look back at this moment in time and tell people exactly where you were and what you were doing when it all began!

  19. Of course, this is how bank runs get started.
    Gee, just think how exciting this is, when, in a few months time as we’re all huddling under blankets in our unheated and unlit homes, eating baked beans from the can, you can look back at this moment in time and tell people exactly where you were and what you were doing when it all began!

  20. Of course, this is how bank runs get started.
    Gee, just think how exciting this is, when, in a few months time as we’re all huddling under blankets in our unheated and unlit homes, eating baked beans from the can, you can look back at this moment in time and tell people exactly where you were and what you were doing when it all began!

  21. I don’t know who “Birk” is but I think he’s on to something. Or on something. Too late to undo the AIG bailout but let’s do this for 10% of the cost of the $700-bil bailout that just bit the dust:
    I’m against the $85,000,000,000.00 bailout of AIG.
    Instead, I’m in favor of giving $85,000,000,000 to America in a We Deserve It Dividend.
    To make the math simple, let’s assume there are 200,000,000 bonafide U.S. Citizens 18+. Our population is about 301,000,000 – counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up.
    So divide 200 million adults 18+ into $85 billon that equals $425,000.00. My plan is to give $425,000 to every person 18+ as a We Deserve It Dividend.
    Of course, it would NOT be tax free. So let’s assume a tax rate of 30%.
    Every individual 18+ has to pay $127,500.00 in taxes. That sends $25,500,000,000 right back to Uncle Sam. But it means that every adult 18+ has $297,500.00 in their pocket. A husband and wife would have $595,000.00.
    What would you do with $297,500.00 to $595,000.00 in your family?
    Pay off your mortgage – housing crisis solved.
    Repay college loans – what a great boost to new grads
    Put away money for college – it’ll be there
    Save in a bank – create money to loan to entrepreneurs.
    Buy a new car – create jobs
    Invest in the market – capital drives growth
    Pay for your parents’ medical insurance – health care improves
    Enable Deadbeat Dads to come clean – or else
    Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. This also includes those serving in our Armed Forces. If we’re going to re-distribute wealth let’s really do it instead of trickling out a puny $1000.00 economic incentive that is being proposed by one of our candidates for President.
    If we’re going to do an $85 billion bailout, let’s bail out every adult U.S. Citizen 18+!
    As for AIG – liquidate it. Sell off its parts. Let American General go back to being American General. Sell off the real estate. Let the private sector bargain hunters cut it up and clean it up.
    Here’s my rationale. We deserve it and AIG doesn’t.
    Sure it’s a crazy idea that can never work. But can you imagine the Coast-To-Coast Block Party! How do you spell Economic Boom?
    I trust my fellow adult Americans to know how to use the $85 Billion We Deserve It Dividend more than I do the geniuses at AIG or in Washington DC. And remember, The Birk plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam.
    Ahhh, I feel so much better getting that off my chest.
    Kindest personal regards,
    T. J. Birkenmeier, A Creative Guy & Citizen of the Republic
    PS: Feel free to pass this along to your pals as it’s either good for a laugh or a tear or a very sobering thought on how to best use $85 Billion!!

  22. That’s how leadership works.
    It is fully and 100% within Democrat’s control to pass a bill…
    A little disingenuous, since we also know how *politics* works; it’s not feasible to paint a huge target broadside for those incoming torpedoes. Unfortunately, a key performance indicator for a legislator is the ability to succeed in getting (re)elected.

  23. “So divide 200 million adults 18+ into $85 billon that equals $425,000.00”
    That would be $425 per person. Not $425K.

  24. There is no way the Dems are going to be left holding the bag. This has to be a bipartisan decision or the deal is off. Bitter divisive politics have lead us into a ditch.

  25. ROC,
    Well, you know those Creative Guys aren’t always the best at math. 🙂
    ($700B / 200M people = $3,500 though. So, if we’re going to deflate the dollar, let’s at least do it that way.)

  26. “There is no way the Dems are going to be left holding the bag”
    Well that’s courage.
    They have a majority and don’t want to (or know how to use it) use it. They should pass a bill.
    Let’s see if they do.

  27. I love how those brave Republican leaders came out and blamed it all on Pelosi. What a bunch of wimps. “It’s the girl’s fault!”
    It’s going to be a rough week, which no doubt will make laserboy gleeful.

  28. How do you think Boehner actually got through his public comment stating that Republicans who were going to support the bailout bill were unable to do so because of Nancy Pelosi’s address?
    Really? So the legislation as written was worthy of your support right up until you heard somebody say something you didn’t like? Any idea how “third-grade-girl” that sounds?

  29. Yes, walleroo, what nonsense to hold the speaker of the house and the majority party accountable for failing to get legislation through. What utter nonsense.
    Personally, I was never convinced this bailout was a good idea.

  30. Lasekeynesianmikey, walleroo, is probably celebrating at this very moment. Bad news (casualty figures from Iraq, financial distress, et al) always seems to get his juices going.
    Makes one wonder what sort of news he’d rate as “really good.”
    But Nancy Pelosi was indeed a roadblock along the path of the bailout. As were lots of Republican congressfolk, it turns out. Still, she is the most obstructionist, partisan (and fairly dumb, it usually seems) politican since…wait, it’s coming to me…I almost have it…oh, now I remember..Strom Thurmond back when he was a Democrat!

  31. I know we’re in for a few rounds of the blame game. But doesn’t it strike anyone as odd that Pelosi is now blaming Republicans? The majority party with control of congress is blaming the minority. These are same Democrats which held the Republican majority responsible.
    Does the buck EVER stop with them?

  32. “This congress needs to do the right thing and compromise.”
    This WAS the compromise, Dorkus.
    Now it’s time for the majority to propose its own solution. One IT HAS the votes to pass. It’s called leadership.
    (it will be a disaster, to be sure. But that’s where we are right now).
    Put up or shut up.

  33. And yes, laserkeynesianmikey, there is bravery and then there is stupidity. Would you like to tell the assembled multitudes of Baristaville which side you happen to come down on?

  34. Mellon, the bank can probably pull your availability, but not call in the balance (assuming you are current in payments). Many banks have sent notices suspending fruther draw downs on home equity lines of credit unless the borrowers arrange for appraisals (at borrower’s expense and from an approved list of appraisers).

  35. laserkeynesianmikey, I like that. Discretion is the better part of valor.
    RoC, that’s the bitterness I’m talking about. Has to go. Can’t afford it.

  36. Yes, ROC is absolutely right. Since Dems are in the majority, they should have all voted for this hugely unpopular plan put together by that ridiculously unpopular Republican president, and amended by a group of renegade Republicans who didn’t even wind up voting for the dang thing themselves. All of the Dems should have voted “yay,” thereby clearing the way in November for Republicans to take back the House.
    Those Dems are so irresponsible.

  37. ” November for Republicans to take back the House.”
    shock of shocks walleroo. So the prime concern was future political concerns. You speak the truth.
    But what they should do now is offer up their solution. One THEY put forth and can pass. With all the requisite damnable responsibility attached. Because when you control congress THAT’S WHAT YOU DO!

  38. Let’s see if I have this straight.
    When Republicans are in the majority they’re at fault for congressional action (or inaction) and when they’re in the minority they’re responsible again!
    No FDR, these Democrats…

  39. But, Comrade laserboy, you display not so much as a whit of either discretion or valor at any time whence you post here. A fondness for totalitarianism, yes, but neither discretion nor valor.
    (I didn’t want you suffering from overconfidence, and the reference to Keynes was of course a joke.)

  40. “We should make a bet out of this.”
    Why? It makes no difference. The Democratic “leadership” is as effectual whether or not they’re in the majority.

  41. The Democratic majority is extremely thin. Senator Lieberman is the deciding vote in the senate and he’s campaigning for McCain.

  42. The talk, as walked by Gingrich and DeLay, was that when you have “leadership” you get to do (or prevent) whatever you want. Not saying it’s right, but it’s a tradition at least a couple of decades old. Put the crisis 35 days ahead of a national election and you only up the ante.

  43. Thanks ROC, I knew I should have checked that bastard’s math, but was too preoccupied with getting a cat back from the vet. Priorities.

  44. The retail car business is having the stuffing kicked out of them. Buyers cannot get credit, even ones with decent credit history. Dealers are having trouble getting floor plan money (pays for cars on the lot) and buyers are scarce!
    Wait until you see WHO are going out of business, here, locally !!!!

  45. “The Democratic majority is extremely thin. Senator Lieberman is the deciding vote in the senate and he’s campaigning for McCain.”
    Uhhh… it was the HOUSE which voted today where Democrats enjoy a 31 seat MAJORITY. A majority of one MORE than the previous Republican majority.
    “extremely thin” eh?
    I predict we won’t see a Democratic alternative passed on party lines precisely because Pelosi and pals would NEVER stick out their necks and make such a momentous decision.

  46. Let’s be clear, as Barack would say. President Bush has absolutely no idea what is going on. This is very indepth finance which he certainly does not understand. In this case, Bush is a pawn, at the mercy of Paulson and Bernanke (thank god). But then again, this is what delegation is all about. Let the people who know what they are doing DO THE WORK. I would love to see Bush get on the TV and describe the difference between a CDS and a CDO. For that matter, can anyone here do that without wikipedia? I thought not.

  47. Personally, I was never convinced this bailout was a good idea.
    This makes you a perfect fit for a Republican representative from, say, Wyoming or Nebraska or South Dakota, ROC. I can just see you refusing to vote because of your free-market principles, while your so-called leadership blames it all on Pelosi’s speech.

  48. This makes you a perfect fit for a Republican representative from, say, Wyoming or Nebraska or South Dakota, ROC.
    Uh, yeah — or better yet, a Democrat who represents much of Baristaville: Pascrell, who voted against the plan even though his district has huge amounts of financial industry employees.

  49. “Democrat who represents much of Baristaville: Pascrell, who voted against the plan even though his district has huge amounts of financial industry employees.”
    You can blame that on me. I wrote to him to urge him to vote against the bill.

  50. p.s.
    Why, should I trust the people who came up with the Community Reinvestment Act (one of the causes of this) to come up with a “solution”?
    No thanks.

  51. How much of a “crisis” can it be? They are all taking a few days off!
    “The sky is falling….we’ll take care of it in a few days”.

  52. Crisis is a tool for statist authoritarians to achieve their ends. It’s exactly how we’ve ended up acquiescing in the indefinite detention of supposed combatants without habeas corpus, it’s how we’ve come to look the other way when incidents of torture surface, it’s how judicial nominations are opposed, it’s how politicians get elected and it’s how the bailout would pass. This time, the sheer fecklessness of Congress made them unable to pass a bill, even though the “crisis” supposedly warranted its immediate passage.
    So, ROC’s right: if it’s a genuine crisis, they are abdicating their profound duty. If not, but it’s important, why did they overstate their claim other than to further aggrandize the already-overempowered executive?

  53. “statist authoritarians” which need the approval of an elected legislature?
    I’d stop at “statist” – they’re certainly not “Authoritarians”

  54. “They” meaning who, exactly? If you mean The Man, I totally agree. If you mean the Dems in Congress, you’re looking at the world through blinkers. Although the lack of leadership is pervasive, the lion’s share falls squarely in the camp of the Republicans, both that pathetic empty suit in the White House, who went in front of the nation last week to do nothing but stoke fear, and his meglomaniacal Treasury Sec, to the Republican Whips who were too feckless to deliver the votes they were so sure were theirs, to that buffoon of a candidate who was claiming credit for forging a deal at the very moment the financial world was collapsing around us.
    I’m not a huge fan of anybody in Congress, but to blame the Dems, who delivered 60 percent of their representatives on this near-suicidal bill, for this failure is absurd.

  55. Why, should I trust the people who came up with the Community Reinvestment Act (one of the causes of this) to come up with a “solution”?
    This comment is a recent folly of the right-wing but is, as with many such scraps, simply not true. Sounds good and scary to the uninformed, though, doesn’t it?
    The truth is that the institutions that are obligated to CRA are not the same ones that traded in bad loans. Look it up.

  56. They are statist and the executive branch are authoritarians. They support the authoritarian approach, therefore, statist authoritarians.
    Wait, that’s not sufficient. I’ll choose “Statist Authoritarian Weenies for 500, Alex.”

  57. “Why, should I trust the people who came up with the Community Reinvestment Act (one of the causes of this) to come up with a “solution”?
    Funny how according to blowhards, laws like the 1977 Community Reinvestment Act, which seeks to steer investments to economically marginalized communities so as to stimulate economic development and reverse the longstanding process of racial and economic redlining, is the real culprit. As if to say that if banks hadn’t been forced to throw good money after bad, and make loans to “minorities and risky folks” as Neil Cavuto said on September 18th, none of this would have happened.
    Of course, none of the reactionary cranks making this argument has seen fit to present even a single, solitary piece of statistical evidence to support their scapegoating of CRA. Evidence doesn’t matter. Simply saying it, simply insisting (since you don’t have the balls to actually come out and speak it aloud) that it’s the black and the brown and the poor who are to blame is supposed to be enough. Sadly, for lots of comparably ignorant Americans who have no use for things like the truth, it will be. The kind of people who listen to the Limbaughs of the world, after all, rarely care much for facts. But for those who still put a premium on truth, and who place more value on honesty than their own need to nurture their anger, here are a few things to keep in mind.
    First, the Community Reinvestment Act only applies to banks and thrifts that are federally-insured. This means that the independent mortgage brokers, who are responsible for half of all the nation’s sub-prime lending–and who have been writing such loans at more than twice the rate of banks and thrifts–aren’t even covered by the law. And make no mistake, it was the hand of the mortgage broker, more than any other, that precipitated the housing bubble. These are folks who were writing “stated income” loans (which means you don’t have to prove your income, you can just tell them a number and get the OK), not caring about whether the borrower might default, since they were going to turn around and dump the loan at a profit, onto the secondary market, by pawning it off to investors who were gobbling up debt, betting on the further expansion of home values. In this scenario, neither the original broker nor the investor who bought up the debt was concerned about what would happen to the borrower who took out the initial loan. After all, if a borrower defaulted, but the housing market was still going up in value, they could swoop in, foreclose and sell the house again at a profit.
    On neither end of this equation were poor people to blame. The persons getting stated income loans were overwhelmingly middle class, perhaps hoping to keep up with the richer folks down the block, but certainly not the poor. Most poor folks are still renters, or just hoping to get a modest home. And let it suffice to say that none of the vultures snapping up the mortgage debt on the secondary market were poor, and very few were persons of color. These were affluent white people, willing to gamble on the potential misfortune of others.
    Secondly, the idea that loans to the poor or to moderate income folks could create this mess is almost inherently absurd. Fact is, the risk involved with loans to such persons is quite low. The amount of money lost, even when a low income family does default, is quite minimal. On the other hand, when a middle class family, striving to live above their means, takes out a note that eats up half of their income, the amount lost when the bubble bursts is quite a bit more substantial. This is one of the reasons that, according again to the evidence, loans to those with more moderate incomes are actually LESS risky than those to the affluent. Looking at CRA-related loans, for instance, the fact is, these represent nearly one-fourth of all loans written, but less than 10% of the high-cost, high-risk loans that precipitated the current crisis. These loans actually have lower default and foreclosure rates than non-CRA connected loans, and are twice as likely to be retained in the portfolios of the banks that originated them than other loans. In other words, it is not CRA loans being dumped into the hands of greedy speculators, and then falling flat, taking the economy with them.
    Finally, to the extent low-income folks of color are shuttled into the sub-prime market, and then unable to pay their house notes, this unhappy fact owes more to discrimination than anti-discrimination efforts such as CRA. As several studies have shown, banks often reject borrowers of color, even when they have credit records similar to whites with the same incomes. Then, these rejected applicants are steered towards sub-prime lenders which charge far higher interest and place the borrowers in great jeopardy by driving up the amount they must repay.
    A few years back, a study of Citigroup (which includes Citi, the group’s sub-prime lender), found that Citi in North Carolina was charging higher interest even to borrowers who could have qualified for regular loans. In the process, over 90,000 mostly black borrowers were roped into predatory loans, and as a result paid an average of $327 more per month for mortgages than those getting loans from a prime lender. This added up to over $110,000 in excess payments over the life of the loans, on average. In other words, folks of color who could have qualified for lower-interest loans (that they would have been able to pay back far more easily) were steered to higher-cost instruments by greedy financial institutions, looking to make a quick buck at their expense. That’s not the fault of civil rights protection, it’s the fault of economic civil rights violations. – Counterpunch

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