'No deal' on Bush bail-out plan

[Sam Spade]

Basically what's going on is this:

Pelosi/Reid won't pass it without a majority of Republicans voting for it because they're afraid of being connected to Bush along with it as it grows even more unpopular.

The Republicans (specifically Cantor, Ryan, Hensarling in the House) realize this and are separately drafting their own plan to push as much as they can in exchange for votes.

My gut says McCain/McConnell and Boehner are giving them cover, at least in private (Boehner is in public).

This is far from over.
http://ukpress.google.com/article/ALeqM5iBXoAH9OxKyRzn6Nl_ZyrJhVDH6w

'No deal' on Bush bail-out plan

President George Bush's emergency meeting to solve the economic crisis in America failed to reach an agreement, a top senator involved has said.

Senator Richard Shelby told reporters outside the White House that he did not believe there was an agreement and that the proposals by US Treasury Secretary Hank Paulson constituted a "bad plan".

Both presidential candidates John McCain and Barack Obama were taking part in the meeting after being invited by Mr Bush on Wednesday.

The president has said a 700 billion dollar (£380bn) rescue plan needs to be agreed "immediately" if the United States is to avoid a "financial panic" and a "long and painful recession".

Spokesmen for House speaker Nancy Pelosi and the US Senate Majority leader Harry Reid told reporters that there were "ongoing discussions" and no statements would be made outside the White House. Asked if there was an agreement, one of the spokesmen shouted: "We're still working on it."

Mr Shelby's comments shocked US political pundits who had widely expected an announcement that the plan had been agreed.

Mr Bush increased pressure on the plan's negotiators on Wednesday night in a prime-time address to the nation, saying that the United States' "entire economy is in danger" and "major sectors of America's financial system are at risk of shutting down".

He met with both presidential candidates and leading US politicians on both sides of the House in a bid to help solve the financial crisis after addressing the nation on Wednesday night.

Earlier, Chris Dodd, chairman of the Senate Banking Committee, said he was "very confident" that the US Congress could now act "expeditiously" and approve the plan following a closed door meeting on Capitol Hill.

He said Democratic and Republican negotiators had reached a "fundamental agreement on a set of principles" for the rescue package, but did not reveal any details.

[Eraserhead]

So will McCaim debate tomorrow?

[Lief 🗽]

Good. We pass this in January with a sane President (Obama) and a more progressive Congress.

[Sam Spade]

Good. We pass this in January with a sane President (Obama) and a more progressive Congress.

And what exactly is your plan?  If it involves spending more money, the populace will like it less.  If it short-circuits the Wall Street bailout, the markets will collapse.

There is a thin line here - maybe not one at all.

[Torie]

If McCain won't debate until there is a deal, there may be no debates, and his campaign will be over.

Note the bit at the end that folks may be refusing to lend as part of a head fake to eucher out a subsidy from the Feds  into their outstretched palms.

Hundreds of Economists Urge Congress Not to Rush on Rescue Plan

By Matthew Benjamin

Sept. 25 (Bloomberg) -- More than 150 prominent U.S. economists, including three Nobel Prize winners, urged Congress to hold off on passing a $700 billion financial market rescue plan until it can be studied more closely.

In a letter yesterday to congressional leaders, 166 academic economists said they oppose Treasury Secretary Henry Paulson's plan because it's a ``subsidy'' for business, it's ambiguous and it may have adverse market consequences in the long term. They also expressed alarm at the haste of lawmakers and the Bush administration to pass legislation.

``It doesn't seem to me that a lot decisions that we're going to have to live with for a long time have to be made by Friday,'' said Robert Lucas, a University of Chicago economist and 1995 Nobel Prize winner who signed the letter. ``The situation may get urgent, but it's not urgent right now. Right now it's a financial sector problem.''

The economists who signed the letter represent various disciplines, including macroeconomics, microeconomics, behavioral and information economics, and game theory. They also span the political spectrum, from liberal to conservative to libertarian.

Some lawmakers are already citing the letter as reason not to endorse the Paulson plan. Today Senator Richard Shelby, a Republican from Alabama, said he has ``five pages of the leading economists in America that wrote to me and the leadership saying the Paulson plan is a bad plan. It will not solve problems. It will create more problems.''

`How Capitalism Works'

The letter, initially conceived by economists at the University of Chicago, was signed by professors from dozens of American universities and several outside the U.S.

David I. Levine, a professor of economics at University of California-Berkeley, says the current plan being discussed has the wrong structure.

``The structure is designed for the Treasury to be the first line of defense,'' said Levine, who studies organizations and incentives. ``A whole lot of people made money supposedly by putting their capital at risk, and those are supposed to be the first line of defense, that's how capitalism works.''

Jeffrey Miron, a Harvard University professor and self- described libertarian, objects to what he says is `` a stunningly broad, aggressive government intervention without appropriate precedents.''

He advocates allowing the normal process of business failure and bankruptcy to run its course. ``It's just nothing like the calamity the administration is making it out to be,'' he said.

Unprecedented Power

Erik Brynjolfsson, of the Massachusetts Institute of Technology's Sloan School, said his main objection ``is the breathtaking amount of unchecked discretion it gives to the Secretary of the Treasury. It is unprecedented in a modern democracy.''

Advocates for a rescue plan this week point to a seizing up of credit markets, reflected in elevated inter-bank lending rates, as reason for action. Some economists are unconvinced.

``I suspect that part of what we're seeing in the freezing up of lending markets is strategic behavior on the part of big financial players who stand to benefit from the bailout,'' said David K. Levine, an economist at Washington University in St. Louis, who studies liquidity constraints and game theory.

To contact the reporters on this story: Matthew Benjamin at mbenjamin2@bloomberg.net

[Eraserhead]

Good. We pass this in January with a sane President (Obama) and a more progressive Congress.

And what exactly is your plan?  If it involves spending more money, the populace will like it less.  If it short-circuits the Wall Street bailout, the markets will collapse.

There is a thin line here - maybe not one at all.

Our plan involves an electric monkey, three radiators and a brown shovel.

More later.

[Lunar]

So will McCaim debate tomorrow?

Amie Parnes:
One of John McCain’s aides has just told reporters in the traveling press that the campaign will be leaving Washington in the morning. Details to come tonight — and, at the moment, destination unknown.

[exopolitician]

So will McCaim debate tomorrow?

Amie Parnes:
One of John McCain’s aides has just told reporters in the traveling press that the campaign will be leaving Washington in the morning. Details to come tonight — and, at the moment, destination unknown.

Fail. So was the over dramatics really worth it?

[Mr.Phips]

These Congressional Republicans are an absolute joke.  Let them take the blame when the Dow drops 500 points tommorrow. 

[Lunar]

McCain is in VA:

    McCain left ABC at 5:46 pm after speaking to all the nets inside. He arrived at his residence at 5:57 pm.

    Speaking for the campaign, [press aide] Kimmie [lipscomb] says : "We're optimistic that Senator McCain will bring House Republican's on board without driving other parties away, resulting in a successful deal for the American taxpayer."

From the Pool, reported on Politico.

[Lief 🗽]

Good. We pass this in January with a sane President (Obama) and a more progressive Congress.

And what exactly is your plan?  If it involves spending more money, the populace will like it less.  If it short-circuits the Wall Street bailout, the markets will collapse.

There is a thin line here - maybe not one at all.

The markets aren't going to collapse if they don't get a trillion dollars tomorrow. We can and should wait long enough to draft a better solution. The vast majority of Americans do not want this; the vast majority of Americans understand that spending ~1.5 trillion on bailing out corporations is a stupid, short term fix that will only screw over the taxpayer in the long run.

[Lunar]

Lief - what is your economic background/experience with the financial system?

I think there's a convincing argument than an imperfect plan passed now will boost confidence in the right places and a plan that's quibbled and debated for a month, but ends up how we want it, will reduce confidence and could, in fact, be counter-productive.  I'm not arguing this though, haha, just saying that it's not necessarily intuitive that the markets will be fine and dandy if we debate about this for four months.

[TomC]

These Congressional Republicans are an absolute joke.  Let them take the blame when the Dow drops 500 points tommorrow. 

I disagree- I think the concept of keeping this more market based rather than a govt buyout is a good one. However, the way the actions they are taking to get this as part of the compromise seems very unlike bipartisanship. They've got good ideas, but they seem to be using them to stall rather than move forward.

[Reds4]

If there is nothing but fighting going on at the same time tommorrow I'm guessing the stock market has a VERY ugly day tommorrow.

[Sam Spade]

Good. We pass this in January with a sane President (Obama) and a more progressive Congress.

And what exactly is your plan?  If it involves spending more money, the populace will like it less.  If it short-circuits the Wall Street bailout, the markets will collapse.

There is a thin line here - maybe not one at all.

The markets aren't going to collapse if they don't get a trillion dollars tomorrow. We can and should wait long enough to draft a better solution. The vast majority of Americans do not want this; the vast majority of Americans understand that spending ~1.5 trillion on bailing out corporations is a stupid, short term fix that will only screw over the taxpayer in the long run.

So, if you believe that a plan can be maintained that does not bail out the corporations with all the toxic debt instruments, yet ensures that those corporations will survive the huge losses, what is it? 

Additionally, you didn't answer what type of spending and government involvement will the government have.

[Sam Spade]

These Congressional Republicans are an absolute joke.  Let them take the blame when the Dow drops 500 points tommorrow. 

I disagree- I think the concept of keeping this more market based rather than a govt buyout is a good one. However, the way the actions they are taking to get this as part of the compromise seems very unlike bipartisanship. They've got good ideas, but they seem to be using them to stall rather than move forward.

If you saw my outline above, stalling it is the only way they will be heard.  Pelosi/Reid only wants their votes, not their ideas.

[Lief 🗽]

Lief - what is your economic background/experience with the financial system?

I'm 18 years old? So... none? But people much smarter and more knowledgeable than me when it comes to economics agree:

http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm
http://robertreich.blogspot.com/2008/09/deal.html
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/24/AR2008092403033.html

[Lief 🗽]

Good. We pass this in January with a sane President (Obama) and a more progressive Congress.

And what exactly is your plan?  If it involves spending more money, the populace will like it less.  If it short-circuits the Wall Street bailout, the markets will collapse.

There is a thin line here - maybe not one at all.

The markets aren't going to collapse if they don't get a trillion dollars tomorrow. We can and should wait long enough to draft a better solution. The vast majority of Americans do not want this; the vast majority of Americans understand that spending ~1.5 trillion on bailing out corporations is a stupid, short term fix that will only screw over the taxpayer in the long run.

So, if you believe that a plan can be maintained that does not bail out the corporations with all the toxic debt instruments, yet ensures that those corporations will survive the huge losses, what is it? 

Additionally, you didn't answer what type of spending and government involvement will the government have.

I have no idea if there's such a plan. I have no idea if giant government intervention is even needed. In the past week, the Bush administration invented some random number ($700 billion) and started yelling that if we didn't hand it over to them the economy would collapse. Now, the last two times this happened, we got a war in Iraq and the PATRIOT act. We shouldn't jump headfirst into another Bush administration/his corporate buddies power-grab/treasury give-away.

[Sam Spade]

Good. We pass this in January with a sane President (Obama) and a more progressive Congress.

And what exactly is your plan?  If it involves spending more money, the populace will like it less.  If it short-circuits the Wall Street bailout, the markets will collapse.

There is a thin line here - maybe not one at all.

The markets aren't going to collapse if they don't get a trillion dollars tomorrow. We can and should wait long enough to draft a better solution. The vast majority of Americans do not want this; the vast majority of Americans understand that spending ~1.5 trillion on bailing out corporations is a stupid, short term fix that will only screw over the taxpayer in the long run.

So, if you believe that a plan can be maintained that does not bail out the corporations with all the toxic debt instruments, yet ensures that those corporations will survive the huge losses, what is it? 

Additionally, you didn't answer what type of spending and government involvement will the government have.

I have no idea if there's such a plan. I have no idea if giant government intervention is even needed. In the past week, the Bush administration invented some random number ($700 billion) and started yelling that if we didn't hand it over to them the economy would collapse. Now, the last two times this happened, we got a war in Iraq and the PATRIOT act. We shouldn't jump headfirst into another Bush administration/his corporate buddies power-grab/treasury give-away.

I think you and I are closer to being on the same page, although I dislike most of the three plans you posted (as I find them not terribly effective and may require more government spending than the present plan).

I agree with the no blank check and I'm starting to oppose any massive government interference, because it'll likely cost more money than it's planned to (that's the way these things work).

Anyway, more to talk about later.

[War on Want]

I am split on this. I think the markets can wait to get a bailout plan so it can be better reformed and include more regulations, rules etc, but waiting too long will just make it so the plan won't accomplish much and it will be too late for lots of the bump that the plan would have on the economy.

[○∙◄☻¥tπ[╪AV┼cVê└]

So will McCaim debate tomorrow?

Amie Parnes:
One of John McCain’s aides has just told reporters in the traveling press that the campaign will be leaving Washington in the morning. Details to come tonight — and, at the moment, destination unknown.

There's a good chance he'll pull a Perot and un-drop out.

[NOVA Green]

Good. We pass this in January with a sane President (Obama) and a more progressive Congress.

And what exactly is your plan?  If it involves spending more money, the populace will like it less.  If it short-circuits the Wall Street bailout, the markets will collapse.

There is a thin line here - maybe not one at all.

The markets aren't going to collapse if they don't get a trillion dollars tomorrow. We can and should wait long enough to draft a better solution. The vast majority of Americans do not want this; the vast majority of Americans understand that spending ~1.5 trillion on bailing out corporations is a stupid, short term fix that will only screw over the taxpayer in the long run.

So, if you believe that a plan can be maintained that does not bail out the corporations with all the toxic debt instruments, yet ensures that those corporations will survive the huge losses, what is it? 

Additionally, you didn't answer what type of spending and government involvement will the government have.

I have no idea if there's such a plan. I have no idea if giant government intervention is even needed. In the past week, the Bush administration invented some random number ($700 billion) and started yelling that if we didn't hand it over to them the economy would collapse. Now, the last two times this happened, we got a war in Iraq and the PATRIOT act. We shouldn't jump headfirst into another Bush administration/his corporate buddies power-grab/treasury give-away.

I personally am not crazy about the idea of the government taking over this kind of debt, even though many economists have argued that there is a good chance it will mostly pay for itself in the long term.

I do think that urgent action is needed, although I am not convinced this is necessarily the best plan and am quite uneasy about the potential consequences.... the government has to ensure the flow of capital to the private sector in the near future or the situation will most likely worsen. There is a good chance that the markets, in particular the financial sector, will take significant hits next week if no deal is reached, as well as a serious credit crunch for manufacturing companies and small businesses.

The problem is that the government waited until the crisis had reached these levels before taking action, and we are now forced to accept some variant of the current plan with a gun to our head and no good alternatives that can be crafted for the immediate solutions that are required.

Unfortunately, doing nothing will most likely be worse than passing a deeply flawed and imperfect piece of legislation.

[Torie]

Lief - what is your economic background/experience with the financial system?

I'm 18 years old? So... none? But people much smarter and more knowledgeable than me when it comes to economics agree:

http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm
http://robertreich.blogspot.com/2008/09/deal.html
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/24/AR2008092403033.html

One of the names on the list was my corporate finance prof a zillion years ago.

[Zarn]

If you do not undestand the implications of these businesses failing, maybe I can out it into perspective for you.

No bailout = imminent depression

The failure of banks and the real estate business will have a ripple effect throughout the developed world. The PRC would also be hit hard.

[Lief 🗽]

If you do not undestand the implications of these businesses failing, maybe I can out it into perspective for you.

No bailout = imminent depression

The failure of banks and the real estate business will have a ripple effect throughout the developed world. The PRC would also be hit hard.

Well, that's the administration's talking point. I'm inclined to not believe anything they say anymore, however.