Democrats: "We Will Not Simply Hand Over A $700 Billion Blank Check To Wall St"

***UPDATE*** 11:11PM Democrats have begun to push back on the bailout plan offered by the Bush Administration, specifically with legislation that would cut the salaries of the CEO's whose firms participate in the bailout and by adding more oversight provisions. The Washington Post reports:

Congressional Democrats considering the Bush administration's emergency plan to shore up the U.S. financial system yesterday countered with their own demands, presenting draft legislation giving the government power to cut salaries of chief executives at firms that participate in the bailout and slash severance packages for their top management...

...Democrats sought to add oversight provisions and taxpayer protections to the proposal, which amounts to the largest government intervention in the private markets since the Great Depression. "We will not simply hand over a $700 billion blank check to Wall Street," House Speaker Nancy Pelosi (D-Calif.) said in a statement.

Under the proposal drafted by House Democrats, the Treasury would be required to force faltering firms that want to sell their troubled assets to the government to "meet appropriate standards for executive compensation." Those standards would include a ban on incentives that encourage chief executives to take "inappropriate or excessive" risks, a mechanism to rescind bonuses paid for earnings that never materialize and limits on severance pay.

Obama issued a "statement of principles" regarding the bailout plan. One principle it emphasized was that the plan cannot bail out Wall St. and ignore the troubles on Main St.:

"We must work quickly in a bipartisan fashion to resolve this crisis and restore our financial sector so capital is flowing again and we can avert an even broader economic catastrophe. We also should recognize that economic recovery requires that we act, not just to address the crisis on Wall Street, but also the crisis on Main Street and around kitchen tables across America...

...Taxpayers should be protected. This should not be a handout to Wall Street. It should be structured in a way that maximizes the ability of taxpayers to recoup their investment. Going forward, we need to make sure that the institutions that benefit from financial insurance also bear the cost of that insurance.

Help homeowners stay in their homes. This crisis started with homeowners and they bear the brunt of the nearly unprecedented collapse in housing prices. We cannot have a plan for Wall Street banks that does not help homeowners stay in their homes and help distressed communities.

The AP reports that Treasury Secretary Henry Paulson said Sunday that the government should resist including households in its bailout plan despite calls from Democrats to do so:

Treasury Secretary Henry Paulson said Sunday that the nation's credit markets remain frozen and Congress must move quickly to pass a $700 billion bailout package for financial firms. But key Democrats said the legislation needs changes to provide better protections for taxpayers and homeowners in danger of losing their homes.

"The credit markets are still very fragile right now and frozen," Paulson said in an interview on NBC's Meet the Press. "We need to deal with this and deal with it quickly."[...]

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Democrats said they understood the need for urgency but insisted that the measure needed to provide help for homeowners threatened with losing their homes, perhaps by changes in bankruptcy laws to allow for mortgages to be modified, and by capping pay and benefit packages for executives at the huge Wall Street firms that will be selling their bad debt to the government.

"I don't want the American taxpayer to get this bad debt and then the guy (whose company once held the bad loans) gets millions of dollars on his way out the door," said House Financial Services Chairman Barney Frank, D-Mass.

Paulson and President Bush have argued that the alternative would be credit markets that remain frozen, meaning that businesses will fail because they can't get the loans they need to operate and the economy will grind to a halt because consumers, who account for two-thirds of economic activity, won't be able to get the credit they need to keep spending.

At a rally in Charlotte Sunday Obama spoke about how he believed the government needed to deal with the financial crisis when it comes to households:

We must work quickly in a bipartisan fashion to resolve this crisis to avert an even broader economic catastrophe. But Washington also has to recognize that economic recovery requires that we act, not just to address the crisis on Wall Street, but also the crisis on Main Street and around kitchen tables across America.

Read more of Obama's remarks.

Comments

[shepbob]

How about we buy these things for no more than 25% of the face amount of the underlying loans. This gives some 'liquidity' to Wall Street.

Then the government owners of the bad debt renegotiate the terms of the loans with the borrowers, so they will be able to keep their homes and pay off their loans. This gives some relief to Main Street.

Next, the government resells the security backed by stable loans, now a sound one, for how much it can get for it. They can give some of the profit back to the original holder, but no more than 50% of the original value. This protects the taxpayer.

The government keeps any profit over the 50%, to help out with the really bad loans. This helps defray the cost of turning the government into the mother of all mortgage lenders.

Any financial company that will sell under these conditions is welcome to a bailout. If they really think that the securities are worth more than 50%, they can hang on to them if they want to.

Under the Paulson proposal, the Wall Street firms have no skin in the game, and the taxpayers pay all the bills, and the people who are in these homes are still out on the street!

[gladys46]

All of those people who were channeled into LIAR LOANS for homeownerships ought to be given debt forgiveness just as the fat cats who misrepresented their obgligations and got richer at their expense will be forgiven their debts!!!

Africa was raped of it's diamonds, gold and many other natural resources ... people walked away flithy rich .. then they offered Africans high interest loans and watched that great continent suffer untold poverties & disease attempting to pay back ... how long was or will their "debts" not be forgiven as many nations of Africa struggle to pay!??

It's the design people ... this is how it works, the rich get richer ... period !!!

[Middleclassvotingbloc]

This will not work and they know that it will not work.

[Middleclassvotingbloc]

On a personal note, in my day to day professional life I have witness those with cash money attempting to buy foreclosed home and the realtor and/ or the banks failed to even returned the calls. One need to ask themselves what is going on here.

[Middleclassvotingbloc]

Thank God that there are those clear thinkers that are beginning to look at this with a keener eye. Paulson sound like a used car salesman or a predatory lender on the Sunday Talk Shows. What made me suspicious is when he used the word "quickly" over 20 times in less than 15 minutes. There is something very wrong with this deal. It think it was all fabricated long before the so call crisis came to light.

[grizhead63]

It all st ink s like a de ad rode nt. No more bailouts.

[Middleclassvotingbloc]

Let us not forget how they tricked us into Iraq by proclaiming that Sadam was an imminent threat to our security. This is the same scam. We the people continue to be looked upon as complete fools by our government. What is going on here and where will all of this lead? We all should be very concerned. We are caught up in a scam and do not know where it will lead.

[addie24]

I agree 100%.

[Nofuzzydreams]

If this is a trick, all Democrats are complicit in it. Remember Obama gets 66% vs.33% vs. McCain from Wall Street. And he is the second highest recipient of Freddie and Fannie PAC money!!

[gladys46]

Our congresspersons ought to tell us exactly how lucrative is this 700 billion + bailout will be for Phil Gramm the architect of DEREGULATION ... McSame's economic "off-staff" but not far away adviser!

http://thinkprogress.org/2008/09/21/mccain-deregulation/#comments


http://www.ubs.com/1/e/investors/boards/seniorleadership/vicechairmen.html

[Imnot2blame]

For every company CEO that takes money from the bailout, give them the SES federal pay scale and point them to their new pay rate.

[Phil Waste]

If the Democrats vote for the Bailout, I won't vote in the election! This is a deal breaker for me.

I won't vote at all, I will withhold to only thing I have left that means anything. Not much by itself but if millions of us Democrat withhold our vote ..........­.

[ObamAtomic]

Really,you are wasted,seriously,if Democrats hold the vote,,,,,lipstick win,NO!

[Cay]

...John McCain will be elected!

[grizhead63]

Since the theocr ats couldn't win the nomination they have pushed McCain to the back of the bus. He will be replaced by someone they trust in October.

[U R 1 2]

ROTFL.....­.......typ­ical GOP Rethug shill. Not even a 'nice try'! tsk tsk

[Punkynsnow]

Phil, I'm as angry as you are, but think about what you're saying. One million withheld Democratic votes=Cindy and Caribou Barbie measuring for drapes at the White House.

Something has to be done in order for the country to function, but bailouts of the rich and greedy and FOREIGN investment firms should not be part of the package. Period.

Call or write to your representatives in both houses of Congress, demand that they not support this scary bailout as proposed. Millions of phone calls and letters to our elected representatives will do a whole lot more than withholding your votes come November.

Get involved and participate!! It's supposed to be Government By The People For The People. We elected them, they need to listen to us NOW. Let's all make them hear what WE want for a change!!

[exflatlander]

And that's how the real evil-doers take control in many countries. People abdicating their responsibility to vote. Democrats are the only alternative, and they do not have a significant majority. They may need more control in Congress than ever before if McSame is elected. Worry more about the morons who vote skin color and their ignorance. Or those who think somehow their not voting is going to solve anything in a democracy. ( or one-time democracy)

[McFlipFlop]

McCain is giving a speech in Scranton, and parrotting Obama's message almost word-for-word.

Help students, help main street, no high executive pay, we need change, etc.

[TheSecularist]

McCain is pathetic. He has no originality and runs around parroting everything Obama says. Any Independents stupid enough to vote for him deserve the bankrupt country we'll all get. McCain is the same kind of egomaniac GWBush is and, like Bush, he cares nothing for middle class America. He, like Bush, is a true elitist.

I'm with Obama 100%. We have to bailout the greedies to save our country from the Republican policies of the last 28 years, but we should not give them a free ride and we should not forget about ordinary Americans who are about to lose their homes.

[mrsmdressup]

Mackie is on tv reading slowly from his index cards again. Wolf Blitzer has more intonation in his voice than this guy.

[TheOpus]

i'm watching too. he's reading as if from a book. and not well. stumbling over his hypocritical lines about regulation. like a high-school student.
ah ,,, now he's asking for transparency !!! Give us Palin's tax records and medical records!. Give us YOUR medical records. Now that would be transparency .

[ObamAtomic]

MMMMcccCaaainnn , iiiisssss,­,,,,veeeee­rrrryyyyy ttttttiiii­rrrreeeedd­ddd!

[TXfemmom]

The Democrats should not give in to Bush/Paulson. They will never, ever come up with terms which would protect the taxpayers. Bush will try to slam this down their throats, but they need to stand their ground, but make the case LOUDLY AND FIRMLY to the American people that they will not go along with another one of Bushes' cheat the people schemes. Additionally, nothing should be able to be confirmed without the support of Congress, and no firm ultimate things should be signed for permanent policies until the next Congress takes office.

[grizhead63]

No more bailouts for the Uber Rich. Now and Never Again!

[Darkdonnie]

The dems will give them what they want because they are complicit actually more than complicit they ultimately are at fault along with some willing republicans! Throw them all out but you will not like the list of complicit players they are mostly dems!

[Cay]

Send an email, write a letter, make a call right now to your reps and let them know we support them in handling this crisis with the evaluation it deserves.

[Nofuzzydreams]

Saw a piece on CNN the other day about a homeowner who is a mortgage broker for WaMu and also disabled in her lower body so she has walk with a crutch. It was about her predicament about possibly losing her job, her home and her healthcare. Very troubling indeed. But as I watched more carefully I saw glimpses of the home she bought - granite countertops, upgraded appliances beautiful cabinets! And her hair and makeup? Must have cost a fortune. Clearly she was living beyond her means big time. As a taxpayer, just like I do not like to bail out Wall Street firms, I also do not like to bail out mainstreet greed - especially when, while we probably made and make far more money that this lady, have foregone many of her pleasures by being responsible.

[Darkdonnie]

Reasoned and salient points! They will not like you in here!

[exflatlander]

I like it. I totally agree. I look at what was once beautiful farmland and see huge deveopments of monster houses for families of four, an SUV in the driveway next to the cabin cruiser. We're supposed to feel sorry that they tried too hard to keep up with the Joneses.

I hear the blue color types going off on welfare bums which is defined as anybody needing a helping hand, while they voted for Bush and giving billions to those who don't need it. My own mother rants about illegal immigrants being the "biggest problem facing this country." Right. Paco is ruining us while the Wall Street billionaires robbing us blind are a good Americans.

[Cay]

She's a mortgage broker, so she's not just Main Street, she's a little bit of Wall Street too. It's true that individual home buyers were greedy along with individuals in investment banks, and that's the essential problem. Without regulation to oversee markets, ever present human greed runs amuck. We need to get our financial markets under control again with a little oversight.

[nastyvirus]

The Democrats will talk (blah blah blah) but will eventually give Bush what he wants: The tool with which to bludgeon Medicare and Social Security to death.

[Darkdonnie]

The dems have to, they are complicit!

[ObamAtomic]

W agreed fisa,oil,,,,

[mrsmdressup]

Have no fear people...J­apan has just bought 20% of Morgan Stanley. Soon the USA will be the United States of Asia.

[ObamAtomic]

Haha,we add ,,,United States Associates,Mexico and Canada.

[TrooAmerican]

Another Republican Caused Disaster, with Republicans Not paying any penalties, and getting away with it, while Republicans give away tax dollars releiving Criminal corporations from being Responsible for the bad debts they wrote, that they bought and sold for profits, and Republicans making more money off the backs of taxpayers through Government Sponsored Corporate Welfare.

If the government is going to do anything for 700 billion dollars they should just buy up all the homes in distress for ther current market worth, make the loan companies take the losses on them, and then resell them to the occupants at fixed rate, market value mortgages.
Period.
There should be NO other solution. NONE. anything else screws the poor people and future homeless, while handing freebies over to corporate predators that make billions a year in profits, while holding NONE of them accountable.

[Nofuzzydreams]

What about Freddie and Fannie snuffy?? Also Wall Street contributes far more mone to Democrats like about two thirds to one third!! And what about greedy people who took on loans and lived beyond their means on credit cards?? Wall Street did not abuse the system by itself - main street was complicit and enjoyed the good times as well while it was rolling.