We don't need this socialist nonsense...banks with bad business models should go under.

Bush's own party won't listen to him...amazing.

McCain ditched his campaign to rally support for the bill...not a good move there.

Speaking of, both candidates support this bill. McCain want to *eliminate* military pork yet *increase* military spending. Obama won't commit to anything.

Both candidates want to antagonize Russia...

I'm writing in Ron Paul

I'm writing in Ron Paul

Sure, that'll help a lot. Why not support someone who has a prayer of getting a clue once in office and responding intelligently to the situation that confronts him?
And on raising the FDIC limits -- won't that just give the banks an excuse to take more lending and investing risk? Like that's what we need.

"The first thing I would do is say, 'Let's not call it a bailout. Let's call it a rescue,'" McCain told CNN.

So that's why the bill failed yesterday. We're calling it the wrong thing!

This is why McCain is an excellent leader.

Dead Cat Bounce

Just call me an old prosecutor, but I could find a tiny bit of enthusiasm for the bill if it had a significant criminal law component.

Specifically, I'd like to see a change in the federal statute of limitations (currently, generally, 5 years) increasing the SOL to twenty (20) years for all mail, wire, bank and securities fraud offenses, and any RICO offenses predicated thereon, involving any transaction or any entity for which the "bailout funds" are used. The SOL change would apply to any offenses alleged to have been committed from January 20, 1992 through the date of passage of the bill.

There is enough blame to go around in both the Shrub and Clintion administrations, and among the Ds and Rs in the House and Senate, whether in the majority or minority at the time, and the K Street Kommanos, not to mention the industry folks, that a special prosecutor ought to get a serious mmandate to look under every rock.

"The nation's reaction so far is sort of like the Saudis' reaction when he stomped his foot and cried for oil -- a good laugh."

But why did the Pelosi and far more democrats and Republicans support the bailout?

You must be bothered by that.

Ben, thanks for all the Republican Party talking points. It saves us from having to listen to right wing talk radio.

Defazio mentioned on the radio this morning that he had a someone from a small bank tell him that the FDIC ordered them not to give credit that it (the bank) could have handled. The big story push today is, of course, that nobody can get credit.

In a sweeping speech in battleground state Nevada, Obama made a direct appeal to the American people and to members of Congress to support the $700 billion rescue plan that failed to pass in the House of Representatives yesterday.
Funny, look who fell for the bluff.

Who knows what to believe about this current crisis, but remember that the last time the Boy Cried Wolf, there really was a wolf. Only that time no one believed him because he had lied about the same thing so many times before.

I'm not sure why this is a Bush bashing story. I mean, that's certainly part of it. No doubt that if Bush had a shred of credibility, he probably would have done better to garner support. But the main angle of the story? Really?

As a few of the comments already noted, this bill had widespread bipartisan support, more Dems favored it than GOPers, Pelosi backed it, Reid backed it, Obama backed it. Why isn't anyone calling into question their leadership skills into question to a more serious degree?

"Guess the sky isn't falling after all."

I wouldn't be so sure about that one. On a day to day basis, volatility in the stock market has very little to do with whatever is going on in the real economy.

As a few of the comments already noted, this bill had widespread bipartisan support, more Dems favored it than GOPers, Pelosi backed it, Reid backed it, Obama backed it. Why isn't anyone calling into question their leadership skills into question to a more serious degree?

Ideological blindness.

I don't think that the bailout had wide-spread support. Those reps facing "tough" re-elections overwhelming voting against it; those reps with "easy" or uncontested re-elections voted for it. It just so happens that more Republicans are facing hard elections than Democrats. That's the way the numbers really make sense, rather than as a partisan issue.

If you look for something, you'll think you find it everywhere.

Jack's right -- Wall Street got their bluff called. Let's face it -- if the problem is THAT severe, $700 billion isn't enough to fix it. If its not that severe, why spend $700 billion?

Ideological blindness.

Maybe. But there it was, a singularly bad idea, easy to tag as such by people whose individual opinions would not sway the outcome. For someone running for president just now, to oppose the bill successfully and have a worst-case outcome would have been political suicide. McCain made a show of leadership and seems to have been heavily penalized for it, even though he did not associate himself very aggressively with or against the administration's stinking turd of an original proposal. Obama, I think, wanted to be associated with efforts to improve the bill, but not to be dragged down by it He seems to have succeeded with that.

This shouldn't be a Bush-bashing story? You know if you're going to usurp authoritarian rule with signing statements and in effect turn America into a monarchy, the least you can do is not screw everything up. This President has had nothing but power and now his supporters want to say he wasn't running the country the last 8 years? Good luck.
Now that it's obvious to even his most zombie-like followers that he shouldn't even be running a hot dog stand, well, then, suddenly we get the, "Yes, he was in Washington living in that big White House but he never really ran anything."

Seriously, you're going to try and sell that? He literally relegated the legislative branch and the Constitution to the deep freeze, and now that he needs Congress to share the blame in his failed leadership, we're supposed to go along? I don't think so.

Stop and think what you'd sound like if things had gone great and Bush was doing a victory lap right now. We'd certainly be hearing how wonderful things went while he was in charge then.

The really hilarious moment for your tough-guy leadership was when Republicans claimed they couldn't vote the way they wanted because Nancy Pelosi hurt their feelings. What's that? Profiles in Wimpiness?

Meg, that's more Republican Party talking points?

And remember the majority of Democrats supporting the bailout was good support while the minortiy of Repubublicans voting for it was bad support.

Wall Street got their bluff called, by Democrats voting for it.

That should clear things up.

The problem now is that the Fed pumped most of their war chest (650 billion) into the system in anticipation of the bill passing.

The fed is as broke as they have ever been since 1913 and won't be able to stave off any more failures without the bailout $.

Last night, Kevin Zandi from Moody's was on the Nightly Business Report saying how we have *2 to 3 weeks* until businesses start failing because they won't be able to *make payroll*

What this implies is that business use *credit* or in other words borrow money to meet their payrolls.

This doesn't seem correct...can anyone shed light on this statement?

This bill is about as non-partisan as you get; slightly more Republicans opposed the legislation than Democrats but is was about 50/50 on both sides of the aisle.

Blaming this on one party or the other doesn't add to our understanding of the issue.

Ben, Democrats did not need Republican votes to get this to pass. and is the a question.
"Meg, that's more Republican Party talking points?"

The precise limit of $40,000 or $100,000 or $250,000 or $10,000,000 of coverage for an account at a given institution is a wholly different question than what should be the upper limit of coverage for any one individual for their savings that are spread across many FDIC-covered institutions.

If one person can obtain insurance on $50,000,000 by spreading it out among different FDIC-covered institutions then I guess there would be marginally less hassle to spread it out over 200 banks or 5 banks rather than 500.

If someone could get a maximum of $50,000,000 covered and that maximum precisely matched what they could get at one single institution, then they might actually have an interest in inquiring about how the bank operates . . . even if the FDIC coverage gives the depositor the freedom to be ignorant of anything other than looking for the FDIC label.

It's worth a try.

But how do you work the "one person" limit. Is it a lifetime limit? Is it a limit of failed banks in a rolling 12 months? i.e. if the limit were $200,000 and someone had $110,000 in a bank that failed on January 1st, 2007, and then they had $120,000 in a bank that failed on January 2nd, 2008, what happens? Do they lose $30,000 of the latest $120k? What about 'failures' like WaMu, where no depositor lost money even though the bank failed. In terms of administration the current rules are fairly easy to implement. I think changing them to a single person limit could get very complicated very fast.

By the way, I haven't had good luck, I was banking with NetBank which failed 9/28/07, and then WaMu which failed 9/25/08. So I'm guessing that whatever bank I choose next will fail on 9/22/09. ;)

Funny how this sort of snuck up on the government.

Maybe when Bush was data-mining and illegally eavesdropping on us, he should have been checking out Wall Street.

This is not demo or republican, this was not an issue for regulation or deregulation. After reading for several days about the root of the matter, these failing institutions created there own paper money or value- sold it to each other made up there own kind of insurance (don't confuse this with auto or fire insurance) A solution I really like is in this column. After sorting this out I can see why politicians of all stripes are being torn apart over the voters at home who vote for them and the fat cats on wall street paid for their campaigns.
Let Risk-Taking Financial Institutions Fail

http://www.time.com/time/business/article/0,8599,1845209,00.html

"What this implies is that business use *credit* or in other words borrow money to meet their payrolls.

This doesn't seem correct...can anyone shed light on this statement?"

I'm sure others can address this better than I, but it seems to be routine for businesses to use a line of credit to cover routine operating expenses such as payroll. Presumably there are good reasons for doing this, perhaps not, but it seems common nonetheless. If those lines of credit dry up and the businesses don't have cash on hand to make payroll, then the snowball starts rolling as their employees can't pay their bills on time and other businesses' revenue streams dry up.

The sober people who are worried about this seem to be saying that it is a distinct possibility that these lines of credit may dry up for lack of available cash.

The media is scare-mongering at the moment . . . claiming that credit has "shut down" and that only a bailout can fix things. At the same time, I've seen and heard numerous ads from local credit union and banks offering loans and credit. I'm still getting mail solicitations from the usual suspects. Shame on major networks and some politicians for trying to frighten us.

Shots of the trading floor on Wall Street looked more and more like a casino.

As far as my IRA taking a hit, it had been either stagnant or losing money (for the most part) for the past several years. This is nothing particularly new.

Dennis Kucinich's recent explanation for his vote included the following, which I found illuminating:

"Here is a very quick explanation of the $700 billion bailout within the context of the mechanics of our monetary and banking system:

"The taxpayers loan money to the banks. But the taxpayers do not have the money. So we have to borrow it from the banks to give it back to the banks. But the banks do not have the money to loan to the government. So they create it into existence (through a mechanism called fractional reserve) and then loan it to us, at interest, so we can then give it back to them.

"Confused?

"This is the system. This is the standard mechanism used to expand the money supply on a daily basis not a special one designed only for the "$700 billion" transaction. People will explain this to you in many different ways, but this is what it comes down to.

"The banks needed Congress' approval. Of course in this topsy turvy world, it is the banks which set the terms of the money they are borrowing from the taxpayers. And what do we get for this transaction? Long term debt enslavement of our country. We get to pay back to the banks trillions of dollars ($700 billion with compounded interest) and the banks give us their bad debt which they cull from everywhere in the world.

"Who could turn down a deal like this? I did.

"The globalization of the debt puts the United States in the position that in order to repay the money that we borrow from the banks (for the banks) we could be forced to accept International Monetary Fund dictates which involve cutting health, social security benefits and all other social spending in addition to reducing wages and exploiting our natural resources. This inevitably leads to a loss of economic, social and political freedom.

"Under the failed $700 billion bailout plan, Wall Street's profits are Wall Street's profits and Wall Street's losses are the taxpayers' losses. Profits are capitalized. Losses are socialized.

"We are at a teachable moment on matters of money and finance. In the coming days and weeks, I will share with you thoughts about what can be done to take us not just in a new direction, but in a new direction which is just."

This doesn't seem correct...can anyone shed light on this statement?

If you google "Short Term Credit Market" in advanced search and filter it for just the last week or even the last 24 hours you'll find some articles that will enlighten you on what he is talking about.

The way things used to work was that new and emerging businesses sought investors and took out larger loans in order to get started. Once a business is up and running (didn't the IRS used to peg that time at up to 5 years in which it can take to break even or show a profit?) it should be able to pay its expenses out of its income. If it can't, it is a failed business.

It's obvious that many of these large businesses are either operating at a deficit or have got themselves into a position where they owe their upper management, stockholders or employees more than they can reasonably afford to pay out of their profits. When that happens, there's something wrong with the business model.

Of course any business can take a bad hit and may need to borrow to get out of a temporary hole. It seems, however, that many businesses - and cities - have got into the habit of relying upon credit to conduct day to day business. That goes for individuals as well.

What has happened to common sense?

Jack,

The market is reacting to the perception that the $700 billion "bailout" is likely to be approved later this week. That's hardly proof that Bush's prediction of dire consequences (sans bailout) is untrue.

Latest headlines from around the web:

U.S. Stocks Surge on Speculation Bank-Rescue Plan Will Pass (Bloomberg).

Stocks Rebound on Hopes of Bailout's Revival (LA Times).

Wall Street Rallies on Hopes of Revived Bailout (Financial Times of London)

The real damage continues to be done in the credit markets, where profitable businesses (unrelated to mortgage finance or housing), municipalities, and state governments will pay much higher interest rates to get financing.

Within the realm of mortgage and consumer credit, it's already gone from bad to worse...Wells Fargo is currently quoting 9.00% on a 30 year fixed rate mortgage, assuming it is too large to be purchased by Fannie/Freddie (aka "Jumbo Loan"). If you're looking at a $400,000 mortgage, that would imply a payment that is $820/month higher than a $400,000 mortgage at 6% (instead of 9%). Another way of looking at the same equation: a 9% borrower would need to pay/borrow $102,000 less in order to get the same payment they would have had on a $400,000 loan at 6%. Look out for falling prices.

https://www.wellsfargo.com/mortgage/rates/assumptions

Why many businesses need those lines of credit. They have accounts receivable, a personal service business, manufacturing, farmer's, tree farmers, car, boat, motor home and mobile home dealers. They often borrow against their accounts receivable until they get paid. The car dealers, and so forth pay a big bank to fund the inventory on the lot, they often need to borrow until they sell a few cars. Farmers and so on borrow against their next crop.

These people will be put out of business if they cannot get the short-term loans they need to operate. They are not careless business owners this is simply how they must operate to have any inventory, or plant the next crop and pay workers.

I feel sorry for them, but I still can't support the Wall Street bailout - or excuse me "rescue" there is something that does not pass the smell test.

Oregon's own Peter DeFazio is proposing a plan. Look here and here.

Mike,

Would it be clearer to the public to say for example that someone could receive no more than $20,000,000 from the FDIC over any ten year period and no more than $50,000,000 over a lifetime? This would actually be a reduction in coverage to what is offered today. (This payout limit excludes the proportional distribution of assets remaining in a defunct bank across their depositors.)

The IRS has seemingly mastered the complex task of defining what is or is not a capital gain. The complexity of placing a per person limit on the FDIC-coverage should comparatively be a piece of cake. One need only note at the time of creating an account whether it is covered or not and by how much (five million here and five million there . . ).

I already assume that the entirety of the M2 measure of money supply, 7.7 trillion dollars, is covered. And that this number is the outer limit of FDIC coverage, even in a financial Armageddonist's nightmare scenario that surely must focus instead on notions of notional value that exceed 450 trillion. If all the banks fell tomorrow as a group and had zero dollars to cover depositors then the cost of cover by the government could be as low as the cost of printing and delivering 77 billion 100 dollar bills. The M2 money supply would remain unchanged. Heck, the M3 measure was discontinued, which must surely mean it ceased to be important enough even to warrant the cost of tabulation.

Huh?

Hey, whya not like the plan - Obama and McCain are both pushing it.

My issue is right now I think it is the best solution, but after this if you think anyone in COngress or the Executive (no matter who) has a clue on how to permanently fix the situation, you're kidding yourself.

Politicians can't fix anything.

Chris Massey said:Last night, Kevin Zandi from Moody's was on the Nightly Business Report saying how we have *2 to 3 weeks* until businesses start failing because they won't be able to *make payroll*

I have been a small business owner since 1993 and this BS doesn't pass the smell test for me either. Only one time have I had to tap my LOC to meet payroll and that was due to a large order depleting my cash reserves before I received payment from the customer. Right now, I have October's fixed and labor cost sitting in the bank. That's the way I have always done it.

Since this story smells, I contacted about 20 fellow business owners today at they are having the same reaction as I am. They don't buy it either.

What better way to persuade the public to support this bailout than to scare them into thinking they might not get their next paycheck.

Defazio proposal rocks. Peter D for the win!

DRAFT

No BAILOUTS Act

Bringing Accounting, Increased Liquidity, Oversight and Upholding Taxpayer Security

1. Require the Securities and Exchange Commission (SEC) to require an economic value standard to measure the capital of financial institutions.

This bill will require SEC to implement a rule to suspend the application of fair value accounting standards to financial institutions, which marks assets to the market value, no matter the conditions of the market. When no meaningful market exists, as is the current market for mortgage backed securities, this standard requires institutions to value assets at fire-sale prices. This creates a capital shortfall on paper. Using the economic value standard as bank examines have traditionally done will immediately correct the capital shortfalls experienced by many institutions.

2. Require the Securities and Exchange Commission to restricting naked short sells permanently

This bill will require SEC to implement a rule that blocks naked selling, selling a stock short without first borrowing the shares or ensuring the shares can be borrowed. Such practices many times harm the companies represented in the sales and hurt their efforts to raise capital. There is no economic value produced by naked short sales, but significant negative effects.

3. Require the Securities and Exchange Commission to restore the up-tick rule permanently.

This bill will require SEC to implement a rule that blocks short sales without an up-tick in the market. On September 19, 2008, the SEC approved a temporary pause of short selling in financial companies "to protect the integrity and quality of the securities market and strengthen investor confidence." This rule prevents market crashes brought on by irrational short term market behavior.

4. "Net Worth Certificate Program"

This bill will require FDIC to implement a net worth certificate program. The FDIC would determine banks with short-term capital needs and the ability to financially recover in the foreseeable future. For those entities that qualify, the FDIC should purchase net worth certificates in these institutions. In exchange, these institutions issue promissory notes to repay the FDIC, counting the amount "borrowed" as capital on their balance sheets. This exchange provides short term capital, with not cash outlay. Interest rates on the certificates and the FDIC notes should be identical so no subsidy is necessary.

Participating banks must be subject to strict oversight by the FDIC including oversight of top executive compensation and if necessary the removal of poor management. Financial records and business plans should be subject to scrutiny while participating in the program.

In 1982, Congress approved a program, known as the Net Worth Certificate Program, that allowed banks and thrifts to apply for immediate capital assistance. From 1982 to 1993, banks with total assets of $40 billion participated in the program. The majority of these banks, 75%, required no further assistance beyond the certificate program.

5. Increase the FDIC Insurance limit from $100,000 to $250,000.

The bill will require the FDIC raise its limit to provide depositors confidence that their money is safe and help eliminate runs on banks which are destabilizing to the industry.

1. Require the Securities and Exchange Commission (SEC) to require an economic value standard to measure the capital of financial institutions.

This bill will require SEC to implement a rule to suspend the application of fair value accounting standards to financial institutions, which marks assets to the market value, no matter the conditions of the market. When no meaningful market exists, as is the current market for mortgage backed securities, this standard requires institutions to value assets at fire-sale prices. This creates a capital shortfall on paper. Using the economic value standard as bank examines have traditionally done will immediately correct the capital shortfalls experienced by many institutions.

I'm not sure I'm buying that one. I'm sure "economic value" leaves a lot more room for accounting hanky-panky than "fair value." We need more transparency, not less.

Does anyone seriously think the public has any real choice in how our tax revenue is spent/squandered? As a result, some form of bailout ("rescue plan") is going to pass.
If I had some clout, I would fashion a plan which starts with those who stand to lose their residence despite having the ability to pay a reasonable 35 year mortgage. The Govt role would be to purchase that paper at a discount and simply re-amortize the debt with a 5% interest rate. The FHA could administer the program.
For those who stripped the equity from their real property and cannot afford their mortgage, or even a restructured one, they deserve to lose- sorry.
Next, the innocent investor class should receive increased FDIC coverage capping their losses. These are principally money market investors. These two elements stress fairness/equity for those victimized by the plunge in collateral value.
Opening up the credit spigot should not take the form of a handout. Instead provide low interest loans to pump up liquidity. To obtain this money, the lender should be willing to limit use to loan funding and agree to cap it's earnings on those funds.
Just one of many examples of a rescue from the "bottom up" .