Gut Check Time: Will Congress Stand up to Wall Street?

It's gut check time.

The attempt by Treasury Secretary Paulson to put a gun to the head of Congress and terrify them into forking over a $700 billion blank check to the Bush administration in 48 hours has failed. Now what?

Most Americans would just as soon the Masters of the Universe were allowed to sink in their own folly. They had the party; let them clean up the mess. But, looking at sinking housing values and shaken retirement accounts, most Americans know something has to get done.

Banks and investment houses carry weapons of financial mass destruction. Last week, they looked into the abyss. If nothing is done, the chances for a deep and long depression are very great. So stocks skied around the world when Paulson announced his support for a massive bailout of Wall Street. And stocks and the dollar plummeted, and oil and gold soared when it became clear on Monday that the Congress wouldn't simply salute and go along. Doing nothing is not an option.

Leaders from unions, consumer and citizen groups have weighed in, demanding strict conditions on any bailout. On Monday, Sen. Chris Dodd put forth a draft bill that called for an independent board to run the bailout, required that taxpayers get partial ownership in any firm bailed out, and mandated steps to forestall foreclosures and work out mortgages, helping to keep people in their homes. House Speaker Nancy Pelosi demands a kickstart for the real economy - extension of unemployment benefits, aid to states and localities, investment in green jobs and basic infrastructure. (But at only $50 billion, a relative pittance for the real economy compared to the sums demanded to rescue Wall Street). Rep. Barney Frank insists on limits on the compensation of executives of any firm that gets bailed out. Together, these conditions begin to make some sense out of a bad fix.

Initially, Bush and Paulson, backed by the slavish Republican leadership in Congress, resisted, calling for the bill to remain "simple and clear." Republican leaders denounced help for homeowners and Main Street as "political" and "partisan" as opposed to bailing out the Master's of the Universe which somehow is an emergency above politics.

But Paulson is a deal maker. As his testimony indicated today, he'll trade nominal oversight and a few bridges for the $700 billion. As someone who made half a billion on Wall Street, however, he's been unbending on limits on pay for his friends, on providing taxpayers with an equity stake in the firms that are helped, and on measures to force work outs of mortgages and a freeze on foreclosures. And he'll resist any detailed measures to regulate Wall Street to insure this doesn't happen again. For all the talk of bipartisan accord, this will be a face off. Democrats will have to stare him down.

With the financial markets reeling, who will blink first? Will the Democratic leadership insist on common sense? Will Paulson be able to panic Congress into folding? Will the financial firm lobbyists now swarming the Capitol like a plague of locusts be able to rent the votes they need?

The decisions will be made over the next few days. If you want to make your voice heard, go here to contact your legislator, or to get more information.

But this staggering bailout - as perilous and costly as it will be -is only a stop gap. Broader lessons need to be drawn; larger and more permanent reforms are needed. One thing should be clear: the conservative era is over. The theology of market fundamentalism has proven to be a false idol once more. As Joseph Stiglitz has argued, the collapse of Wall Street is to the market fundamentalists what the fall of the Berlin Wall was to communism. It's over. The right has proved once more that it cannot be trusted to run the government it scorns. A trillion dollar debacle in Iraq. A trillion dollar bust on Wall Street. Hundreds of billions pocketed by Big Pharma and Big Oil. It is time for a reckoning.

Comments

[calibpatriot]

After that series of national calamities starting with 9/11, which was preventable; Bush's illegal and ill advised Iraq war; the Katrina disaster; and now, this meltdown of our economy; why anyone of sane mind and normal intelligence would vote Republican now is a complete mystery to me. Could it be something in the water or air?

[fiorastar]

So let's do something about it! I've just clicked every single link on every single website that communicates with my own Congressman and Senators as well as Barack Obama's and John McCain's, letting them know that I expect them to do the right thing here.

These scum who have made out AS (not "like") bandits with OUR money and OUR economy should have the exact same expectation they have of us if we go to them now requesting a mortgage---there should be payments WITH interest, there should be no Golden Parachutes (or Golden Showers for us), and the taxpayers should also be getting real relief on unemployment and mortgages, since these are the things that Wall Street has affected most.

Tell your representatives!

[ProfessorDuh]

On C-Span this morning, virtually every caller, Republican or Democrat or independent, was hopping mad about this bailout. Congress will reveal the identity of their true masters in this vote. We already know that Bush serves only greedy, criminal corporate slime.
What it boils down to is that some time while Americans were absorbed in "American Idol," they lost the republic.

[tomsemioli]

The Congress is Wall Street!

[MichelLLB]

Not all of them.
Please check Ron Paul:
http://www.campaignforliberty.com/
Please check Dennis Kucinich:
http://kucinich.us/index.php?option=com_content&task=view&id=2442&Itemid=1

[dandypeaches]

I've got a better bail out plan for half of the cost. Offer Wall Street $200 billion in loans, loans that need to be paid back, to be secured by their assets. Like any other borrower, if the statements about the assets' value is false - oops, you've broken the law - let's see how much they borrow. Part two - give $150 billion to the hundreds of Housing Authorities around the country to buy up homes in foreclosure and make them into temporary public housing. These HAs would then be free to sell these assets to the renters of the property only. This should wipe out speculation on foreclosed homes, provide needed rental housing and stabilize neighborhoods. They would also be required to retrofit the homes to make them more energy efficient. This is the only way to deal with this mess.

[johnw]

Will congress stand up to Wall St? Is Fox News Fair and Balanced? Hell no!

[iluvcodandwhitepointers]

Perhaps u dont like Mr Murdoch. He is with new Australian PM in NY at moment. In the theorem of non theories do you think the 20 trillion dollars in English Banks will keep departing back to foreign owners and what will happen to USA on that. Perhaps USA will buy Australia and New Zealand or USA will go under and USA closest allies will too. The latest Lockheed jet for Australian Aiorforce aat some billions? is said to be like a balloon facing a WW! fighter ace compared to Chinese fighter jets bombers. Good ol Lockheed. Well looking sideways will the West go down or is the european in these climes finished . Is it war. War is economic. Has that passed. I think we need some of the old DIA persons back --they were tossed out in the great privatisation of secrets which were then sold to
Heres to tomorrow

[smartgrl]

Blah, blah, blah. The Repulicans are a bunch of bullies. What I'm conerned about right now is Bush giving a useless address to us this evening and my missing any good season premiers on the networks. After this mess is over, I will have to give up my premium channels and watch regular tv.

[LarksTongue]

It's obscene.

[liveride]

Unless every Man, Women, and Child in America ponies up $2,300 each (or roughly 10k per Family), we will have to borrow $700 Billion from China and the Middle East. If we need to borrow that much money, wouldn’t it be better spent creating a Sustainable Energy infrastructure that allows us to create our own Energy, create Millions of Jobs, and make Money off our Investment while sending Less Money and Troops to the Middle East?

Bad Debt should fall to its true value. We should not buy it for more than its worth just to prop up jobs for Wall Street Millionaires. Yes, some will lose homes if they purchased one beyond their means. That’s why you should have to Qualify for a loan based on your earnings. Bush’s attempt to give Wall streets Bad Debt to Taxpayers is a BAD DEAL and we should do all we can to fight it.

Bush & Cheney and McCain’s advisor Phil Graham are trying to give Wall Street the ability to stick their Bad Debt to US Taxpayer families. The Gramm-Leach-Bliley Act, which replaced Glass-Seagal, was written by the Wall Street lobbyists, and allowed companies to make their riches on the back of increased burdens of Debt on American Families. When many of those families could no longer afford that debt, and lost their homes, this Pyramid Scheme returns to haunt its Perpetrators.

[billwood]

Remember the old saw about the danger of throwing good money after bad?

Throwing $700 billion into the ravenous maw of the ever expanding financial crisis will do nothing to staunch the hemmoraging and everything to reward the neocon acolytes who wish to continue feeding on the carcass of American capitalism.

Why? Many reasons, but for starters there's roughly $50 trillion (yes, that's a T not a B) of exposure to credit default swaps (CDS's) in the global financial system. If you want to understand this complex subject a little better, this piece from the Daily Kos which discusses (and links to) an insightful essay by my old friend Ben Stein is well worth a few minutes of your time:

http://www.dailykos.com/storyonly/2008/9/23/133349/153/556/607628

[liveride]

A Strong Economy is the Foundation for which Domestic and Foreign policy is effective. Nobody cares what you have to say if you can’t Pay your Bills, or Live off of Borrowing from your neighbors. That’s the path Bush has taken us on for the last 8 years. If you want to be a leader, and a country that’s make a positive difference in the world, on topics from Terrorism to Nuclear Proliferation, then you should have a proven record for Success, Employment, Fairness, and Money in the Bank.

Massive investment in our ***Infrastructure*** and ***Renewable Energy*** Production is the most effective way to strengthen our Economy and National Security. We can create millions of Jobs and dozens of new Industries while taking advantage of our Natural Resources in the most effective and efficient manner.

We have a formula for success and it’s not by giving Wall Street our hard earned money for Worthless paper. Even in the best of times under Bush, our Economy lost Millions of Jobs. Reverse Action now while the money is still in our pockets. We can create 2 Million Clean Energy jobs in just 2 years with a $100 Billion investment. Imagine how many $700 Billion would create (14 Million New Jobs?)

http://www.reuters.com/article/environmentNews/idUSN0930092120080909

[keoman]

I don't know why anyone would think the era of right wing conservatism is over. The majority of Americans still vote on issues irrelevant to their economic and politic interests. They vote on whom they would rather have a beer with, their guns, imposing their religion on everyone else, and "America right or wrong." And we still have to hear from all of the closet racists who cannot vote for a Black man. How else can you explain selling a 72-year old Washington insider as an agent of change, and Sarah Palin as in any remote way qualified to be president. The old bait and switch, and most of us will apparently fall for it.

[leeskyblue]

Deja vu and FISA all over again. It's an "emergency" so Bush wants more power, is "adamant" but will graciously concede nothing while Fox's hacks bewail the obstructionism of debate.
Obama will deplore then reluctantly accept a bailout with "oversight" by a powerless agency, just as he did with FISA.
I will invest in those banks, taking advantage of the rise in their stock prices when this pending horrific legislation is passed. It is a good buying time.
It will be another handful of financial nails in the coffins of our descendants of course, but I will bequeath my ill-gotten gains as partial compensation, after spending as much as I can before I croak on Chinese trinkets. We should all keep a vial of Kool-Aid sweetened morphine around our necks, labeled "Break when Broke"
Perhaps we can supplicate the Chinese to make us one of their provinces? They hold the lion's share of our debt, those mass executions of the 1940's look pretty good with hindsight. Korea and Iran? Let the Chinese treat them like Tibet.
Billions wasted "rebuilding" New Orleans. A few bulldozers could have razed the levees, diverted the Mississippi, turned Louisiana into a rice paddy, put thousands to work, and created a lucrative cash export crop for the Asian markets. The Asians could trade us that opium I mentioned. Jazz clubs? -- put them on stilts.

[MichelLLB]

"Doing nothing is not an option". YES, it is an option and the BEST OF ALL. Otherwise in the future, every big corporation will take extra risk and do whatever they want to do because they know they will be rescued by the Government. So, big time and big profit for them, and if any problem, don't worry just ask the US Treasury and the suckers will kick in. And they will be no end to it because the other big bankrupted corporations will recall and complaint, Hey! Why not saving me?

On the other hand, the purpose of the Plan is to boost the property market and pay back 100 % (face value) of any mortgage-backed securities (collateralized debt obligations) to the creditors. All those creditors are high risk investors (gamblers) that signed papers saying that they could afford to lose their money. Right off the bat, this is non sense because just few weeks ago, Merrill sold $31 billion of these CDOs for roughly $.20 on the dollar and provided 75 percent of the financing, which means that the CDOs were really worth approximately $.06 on the dollar. No wonder who is managing Paulson.

If the Plan is cancelled, the gamblers will loose their bet and the property market will go down until it reaches its real market value, then people will be able to buy cheap houses. NOTHING ELSE will happen except Paulson will get his friends mad at him.

[TJC]

How can we allow the men who were asleep at the wheel supervise another 700 billion? Just asking for this kind of deal with a tag line of "or else" reeks of dereliction of duty and borders on embezzlement by not producing the required process details for such a bail-out. The three men that McBush recommended to supervise this transaction are also too connected to Wall Street.

The congress should pass a bill that provides for the US to purchase the loans at 50% of the loan amount and receive ownership of the properties. These properties should be redistributed through sales to the public. Wall Street must take the responsibility of a 50% loss. The former home owner must suffer any equity loss (if any) from the foreclosure.

Future loans should be 30 fixed conventional with 20%down/650 credit score with documentation and PMI. Cash for loans would be administered by the new Fannie Mae and Freddie Mac and sold again to Wall Street. Non-conventional loans must stay off Wall Street and the risk completely taken my mortgage company. If a new conventional loan fails and foreclosed, the mortgage originator must replace it on Wall Street with an equal or better value.