Breakthrough reached in negotiations on bailout

[pnwmom]

Source: New York Times

WASHINGTON — Congressional leaders and the Bush administration reached a tentative agreement early Sunday on what may become the largest financial bailout in American history, authorizing the Treasury to purchase $700 billion in troubled debt from ailing firms in an extraordinary intervention to prevent widespread economic collapse.

Officials said that Congressional staff members would work through the night to finalize the language of the agreement and draft a bill, and that the bill would be brought to the House floor for a vote on Monday.

The bill includes pay limits for some executives whose firms seek help, aides said. And it requires the government to use its new role as owner of distressed mortgage-backed securities to make more aggressive efforts to prevent home foreclosures.

In some cases, the government would receive an equity stake in companies that seek aid, allowing taxpayers to profit should the rescue plan work and the private firms flourish in the months and years ahead.

Read more: http://www.nytimes.com/2008/09/28/business/28bailout.html?partner=rssnyt&emc=rss

---

This is the first I've heard that the bill includes provisions to "prevent home foreclosures." Hope it works.

[ixion]

1. ah, but read the fine print

"make more aggressive efforts to prevent..."

which translates to lip service, and nothing more. It's just "making an effort" which in bureaucrat speak mean "Yeah, right. We'll look into that."

[FreakinDJ]

6. Sadly - Tax dollars will be used to fuel foreclosures

[UpInArms]

21. some details:

http://www.reuters.com/article/ousivMolt/idUSTRE48Q2TI20080927?sp=true

- The bill would create a Troubled Assets Relief Program (TARP) to purchase mortgage-related assets originated or issued on or before March 14, or any assets if needed to promote financial stability.

- $700 billion overall to be authorized in installments of $250 billion. That could be increased to $350 billion upon notification to Congress by the president.

- Assets could be purchased from any financial institution having significant operations in the United States.

- Government to get warrants for equity in participating companies as a way of protecting taxpayers and allowing them to benefit from any profit gains.

- Foreclosure mitigation for Americans at risk of losing home. However, a provision House Democrats had sought to help save homes in bankruptcy proceedings has been dropped.

- Restrictions on executive compensation at companies that participate.

- Incorporates House Republican proposal to allow for private-sector funded mortgage insurance program as an option for Treasury secretary.

- Financial Stability Oversight Board comprised of the chairmen of the Federal Reserve, Securities and Exchange Commission and Federal Deposit Insurance Corp, and two members appointed by Congress to oversee activities of the program.

- Requires a government investigation into causes of crisis, with report delivered to Congress by June 2009.

- Regular and detailed reports on transactions and other activities under the rescue program.

- Establishes a congressional oversight panel that would also submit a report on regulatory reform no later than January 20, 2009, the date a new president takes office.

- Would direct 20 percent of any future profits from the bailout fund to the Affordable Housing Fund and the Capital Magnet Fund to meet U.S. housing needs. House Republicans, however, have made clear they oppose this provision.

- Authorizes a temporary money market mutual fund guarantee program for up to one year. Requires U.S. Treasury to restore any funds to the Exchange Stabilization Fund that had been used for that purpose and prohibits their further use.

- Requires federal financial regulatory agencies to cooperate with federal law enforcement to investigate fraud or misrepresentation with respect to financial products.

- Investors who sold preferred stock in mortgage finance giants Fannie Mae and Freddie Mac, between January 1, 2008, and before September 7, 2008, to pay higher ordinary income taxes on any gains rather than the lower capital gains tax. The government announced the seizure of Fannie Mae and Freddie Mac on September 7.

[earthside]

2. A Vote Tomorrow!

Legislation of this magnitude is going to be railroaded through the Congress in one day?

That is just plain wrong in a democratic republic. We the people have a right to know, understand and communicate to our representatives how we feel about important, momentous legislation like this ... it is wrong for this to be rushed.

Even if you think something like this has to pass, we should all be screaming to our Representatives and Senators that there be a full debate on this Wall Street-Bush Bailout plan. We should all have the opportunity to know what we are getting ourselves into.

[liberalmuse]

4. I would like to see the bill as well.

You are absolutely right. The citizenry are paying for this, so we should be privy to what is in it before it passes. If we're basically going to be screwn, I'd like to know how far and how fast.

I hope the Dems do not vote until the 'pubs have voted. I'm not all that convinced that this is the solution.

[texastoast]

16. We need a line by line veto

"The bill includes pay limits for some executives whose firms seek help" from the article. SOME EXECUTIVES?? Which ones?

What about this? Source: Business Week

Washington Mutual Inc.'s new CEO, Alan Fishman, will be eligible for at
least $12.65 million or more in salary and bonuses next year, the
company said Thursday in a securities filing.

Fishman, who replaced Kerry Killinger as CEO on Monday, also received a
$7.5 million signing bonus for joining the company, according to a
regulatory filing made with the Securities and Exchange Commission.

<http://www.businessweek.com/ap/financialnews/D934QLJO0.htm>

Not one fucking executive should get more than 10 times his lowest paid worker, in my opinion. These, after all, are distressing financial times, and those suckers should suffer along with the rest of us. This makes me sick. Everyone should be fighting this and making it go through a review process. We are about to be had.

[ananda]

3. not sure about the help for homeowners

"the plan would require the government to try renegotiating the bad mortgages it acquires with the aim of lowering borrowers' monthly payments so they can keep their homes."

This is kind of vague and I don't know if I would trust the government to do this.

What's wrong with letting bankruptcy judges take care of this.

It's as though those dammed legislators and officials want people to suffer, although it probably has more to do with dancing on strings of their rich and corporate puppetmasters.

[WriteDown]

5. A lot is wrong....

Loans pretty much consist of two classes. Fee based and non-fee based or they are sometimes called risk-based and non-risked based. Fee based loans are the more common of the two. In basic terms they work like this. You have an investor and a servicer. The investor actually makes the loan, but the servicer is hired to take payments, make collection calls, etc. Kind of like a property management company and a rental home that you own. There is a pass through rate established so if the loan has a 5% interest rate. 4 of the 5% may go to the investor and the other to the servicer. If a judge were to lower the interest rate to 3% then the servicer would actually take a LOSS each month. Many people do not realize that this is in play and why it is not easy to just "reduce" an interest rate.

[amandabeech]

18. What provisions are in the mortgage contract that govern the situation

in which the loan will not be paid in full? A decently done contract provides for contingencies, and a contingency for partial payout would not necessarily mean that the servicer would take the entire hit with a problem loan.

Have you seen several actual contracts for both types of loans?

If not, on what are you basing your statements, which I have seen you post previously?

[WriteDown]

27. Not sure what you are asking here...

I have seen servicing contracts where guidelines are established such as the # of days an account can become delinquent before an account is referred to foreclosure, # of collection calls that have to be made, modifications allowed, etc. Worked in the industry a long time.

[amandabeech]

40. I found an article in another thread that answered my question.

Many commercial contracts contain provisions governing what happens if the contract cannot be fulfilled by either of the parties. For example, in a contract in which a guarantee is involved, there may be provisions for determining what happens between the original obligor and the guarantor if the obligor can make partial as opposed to full performance on the contract. I used to be a corporate lawyer, and I've seen lots of variations.

As I understand it, there are lots of contracts involved in these mortgage deals: for example, the original mortgage contract, the setup of the trust, the servicing agreement, the investment contracts, etc. My question to you was whether there is any contract language in these agreements about how a general inability of the mortgagors to pay the entire amount of the loans that underlie this house of cards.

From the article, I learned that it is extremely if not impossible for the entire contractual system of the MBS to deal with a partial default of original borrowers or some other major problem in the cash flow from these mortgages. It sounds like an incredibly rigid system in which no one thought about what would happen if things went south. According to the article, only a bankruptcy court would be able to readjust this mess, and that the feds would not be able to do anything really if they were to actually acquire the majority of the securities outstanding rooted in the trust.

After reading that article, this looks like an even worse mess than I had thought.

[WriteDown]

45. Ah, I understand now...

Sounds like you found what you were looking for. It is an impossible know to untangle. Its similar to if you ran a bakery and a judge said you needed to cut your biscuit cost by 50% because your best customer declared bankruptcy. But then your flour supplier demanded his payment in full. Then he sued, put a lien on your bakery, etc.

[mbperrin]

22. It'd be simple to reduce it proportionally. Each would get 60% of their

former share, for example.

The whole servicer notion is one of the reasons for the debacle, anyway. When you only get paid when loans are made, and the money loaned is not yours, fraud is sure to follow.

Back in 10 million BC, investors met and evaluated those who wished their aid. Due diligence was not just making sure all the page numbers were in order. Due diligence meant making sure YOUR money was going to someplace reasonable.

But if we must have them, proportional reductions would be simple. Every calculator I see has a % button.

[WriteDown]

28. If you want to nationalize the mortgage industry...

then that is fine, but beyond that, it would be impossible. You are dealing with domestic and foreign investors and you would pretty much have to seize the asset to do that. Please do tell how servicers caused any of this when their sole job is to follow guildlines set down to them :eyes:. By your logic, property management properties shouldn't be allowed to exist because if you can't take and process rent payments yourself, then you shouldn't own property. For that matter most stores shouldn't be allowed to exist. If they can't manufacturer their own products then they should not be selling them.

[last1standing]

38. Judges ARE part of the government.

At least that's what I recall from my political science class.

I think knocking "the government" before we know the details of this bill and how it will be administered are not helpful. I'd even so so far as to call that attitude reactionary and knee-jerk. It comes very close to the repubs view of social security and medicare.

Let's find out the full story before trashing it, OK?

[awnobles]

7. Another Rip-Off

That's all it is, our money to go to big business no matter how you disguise it. No relief for consumers, just the assholes who screwed them.

[Phred42]

8. A Breakthrough in THIS context means you and I are FUCKED

[lonestarnot]

13. Exactly what that means!

[lostnotforgotten]

9. Naomi Klein "The Shock Doctrine"

http://blip.tv/file/521421

[Democat]

10. Make the Republicans vote first, to be sure this isn't a trap!

Obama should not vote before McCain. We control the House/Senate, so put that to use you wimpy Democrats!

[HughMoran]

11. Well, that's done

Hopefully Obama can fix it up later. Let's get elected!

[lonestarnot]

12. Tentative? I just heard a piglicon standing next to Dodd speak of the bailout in the past tense.

He said "was." So basically any input we may have will be thrown into the trash pile along with the Wall Street trash!

[galileoreloaded]

14. Republicans stage walkout at vote, we lose in the court of public opinion....

this sucks.

[Democat]

15. Who is "we"?

As long as McCain signs onto this, he's the one that's screwed. What will Rush say? :evilgrin:

[galileoreloaded]

29. Thats why I said walkout. I know Repubs, unfortunately, and they HATE..

this bill, and they hate to lose. What I gather from friends is that the R's are in full blown meltdown, and the base has the money to get people tossed. It's gonna be a coup over there if this goes, and ANY Repub votes aye. They are freaking out.
Just saying, wouldn't put it past them to force a partyline vote, and keep their jobs. Remember most on the right would gain handsomely from heavy cash positions and cheap "stuff" in a deflationary cycle.

[last1standing]

39. If the repubs walk out then the Dems pull the bill.

Every Democrat in the house is up for re-election. They're not going to stick their necks out on an unpopular bill unless they know the repubs are standing on the gallows with them.

[MannyGoldstein]

17. Too Many "Somes" In The Fuckin' Thing

"The bill includes pay limits for some executives whose firms seek help"... "In some cases, the government would receive an equity stake in companies that seek aid"

Bullshit, bullshit, bullshit.

We've been sodomized again.

If anyone wants to join me in the streets with pitchforks and torches, let me know.

[mbperrin]

23. Pitchforks and torches while we can still afford 'em is a good idea!

And since there are only 3 ways to pay for this Billionaire Bailout program, let's see what happens next!

Taxes could pay for it - so a family of 4 would need to pony up $10,000 next week. Hmm, that might dampen consumer demand.

We could just print it. Yeah, that worked out good for the Weimar Republic, cept for that highest inflation of all time thingy.

We could borrow it, at the cost of crowding out all other borrowers and throwing interest rates into the next county. Yeah, that'll loosen up some credit. No, wait, higher rates would hurt business and individual borrowers.

Hmmm...sounds like Madame Defarge may need to warm up those old knitting needles!

[btpull1]

44. The 4th way sale our soles to the Chinese

Which is apparently what we are doing

[azurnoir]

19. Basically the "distressed homepwners" are going to be forced

to pay doubley for being foreclosed on, and yes this gives banks and mortgage companies every reason to speed up the process, they're covered by the same people they're making homeless and they get fat salaries besides-keep in mind BOTH candidates approved of this do not fool yourselves no one in this so called government by and for the people has the people in mind except as a means of maintaining their own wealth and the wealth of their cronies

[tccturtle]

20. WOW! Pelosi actually got SOME work done.

First the bailout portion of the package that was "her" idea, per CNN story this morning. And now she actually agreed to work with India on their nuclear power......I mean their nuclear for power program. See girl, you are good for something after all. Its a shame it took you this many year to realize it.

[texastoast]

24. Too bad

the Dems couldn't stop this Repig looting of the national treasury, and they want to be able to continue to do it after all this is said and done, rather than get at one of the roots of the problem which is inflated home prices. And to show what balls all these asses have, they left the hard part of the task to the next president to decide how the taxpayers would avoid getting scammed when buying out bad investments.

"Among the last sticking points was an unexpected and bitter fight over how to pay for any losses that taxpayers may experience after distressed debt has been purchased and resold.

"Democrats had pushed for a fee on securities transactions, essentially a tax on financial firms, saying it was fitting that they contribute to the cost.

"In the end, lawmakers and the administration opted to leave the decision to the next president, who must present a proposal to Congress to pay for any losses."

http://www.nytimes.com/2008/09/28/business/28bailout.html?_r=1&th&emc=th&oref=slogin

Pussies, one and all.


It's going to make me smile, though, to watch it hit my puke neighbors right alongside me. Those who voted for these "must deregulate" in the name of "capitalism" fucks get what they deserve. Those who were against it all along do not. How stupid to let the fox watch the henhouse, eh? It's bittersweet that revenge on the Bush and Phil Gramm voters will visit those who voted for them along with the rest of us.

Funny how the capitalists are really liking this socialistic bailout idea. They make me sick. And the bad part is that the whole damn thing is nothing but a Band-Aid on gangrene.


I really hope the Republican fiscal conservatives are able to shut this down on Monday. Somebody needs to step up for the taxpayers and their children.

[yurbud]

25. oddly, only the government will have to renegotiate mortgages they buy, not the private lenders

[texastoast]

26. And we pay for the folks who do this

Staffing does not come from the poor distressed private firms, correct? It is taxpayer-paid government employees?

[BlueJessamine]

30. Breakthrough Reached in Negotiations on Bailout

Source: New York Times

WASHINGTON — Congressional leaders and the Bush administration reached a tentative agreement early Sunday on what may become the largest financial bailout in American history, authorizing the Treasury to purchase $700 billion in troubled debt from ailing firms in an extraordinary intervention to prevent widespread economic collapse.

Officials said that Congressional staff members would work through the night to finalize the language of the agreement and draft a bill, and that the bill would be brought to the House floor for a vote on Monday.

The bill includes pay limits for some executives whose firms seek help, aides said. And it requires the government to use its new role as owner of distressed mortgage-backed securities to make more aggressive efforts to prevent home foreclosures.

In some cases, the government would receive an equity stake in companies that seek aid, allowing taxpayers to profit should the rescue plan work and the private firms flourish in the months and years ahead.



Read more: http://www.nytimes.com/2008/09/29/business/29bailout.html?_r=1&hp&oref=slogin

[TwilightGardener]

31. That sounds about as good as it's going to get. I will be watching

the Senate debates over this to see what they say.

[Doctor_J]

32. Thanks God McSame was there to stter the ship to safety

:rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl:
:rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl:

[last1standing]

33. If what the NYT is reporting is accurate then it's not a bad deal.

We get oversight, limited compensation at the top and the chance of at least not losing the entire wad of cash.

Now we need to work on some real regulation.

[mrJJ]

34. Link to the 106 page bill

http://money.cnn.com/2008/09/28/news/pdf/index.htm

[BlueJessamine]

36. Thanks for the link!

:thumbsup:

[On the Road]

35. When Jim Cramer Said That

all the billionaires he knows had taken their money of banks and purchaed T-bills, I started to get very, very concerned.

As long as the Democrats control the terms and conditions, this is not a bad deal. It should result in the restoration of confidence and fewer failures.

[ShortnFiery]

37. Noo!!! this is still a pig in a poke. Don't do it Congress!

Like "Impeachment" tell Pelosi "Wall Street Bail-out" is OFF OF THE TABLE!!!

This money is going ORIGINALLY to the BushBotBorg. Do you trust THEM?!?

[btpull1]

41. This is truly scary

We have become dependent on China and the Middle East for our financial safety:

From this afternoon's edition of the WSJ online- http://online.wsj.com/article/SB122262725903283485.html?mod=testMod

"WASHINGTON -- The success of the pending rescue of the U.S. financial system probably depends as much on the central banks of China and the Middle East as on the U.S. Congress and Federal Reserve.

The U.S. is turning to foreign governments and other overseas investors to buy a good chunk of the $700 billion in Treasury debt that would be sold to finance the bailout. Foreign investors are also needed to shore up the depleted capital of the nation's financial institutions, as evidenced by the plan of Japan's Mitsubishi UFJ Financial Group to buy a large stake in Morgan Stanley, which is weighed down by bad debt and market distrust.

....

The financial crisis makes clear how much the interests of foreign lenders have become a top concern in Washington. A big reason the Fed and Treasury stepped in to rescue mortgage giants Fannie Mae and Freddie Mac, say U.S. financial officials, was to reassure China, which holds roughly $1 trillion in U.S. debt, that U.S. securities were safe..."

[roamer65]

42. This evetually will amount to $3T to $5T.

T stand for trillion.

[IndianaGreen]

43. "More people will lose their jobs, foreclosures will go up, paychecks will be strained"

Even with the bailout of the banks, this is what will happen:

Americans should be braced to feel economic pain well into next year.

More people will lose their jobs, foreclosures will go up, paychecks will be strained and home values — people's single biggest asset — will keep falling, experts predict.

Even if the plan is successful, many predict the economy will probably shrink in the final quarter of this year and in the first quarter of next year, meeting the classic definition of a recession. The unemployment rate — now at a five-year high of 6.1 percent — is expected to hit 7 or 7.5 percent by late 2009. That would be the highest jobless rate since after the 1990-91 recession.

http://www.msnbc.msn.com/id/26929443/