The American People Have Spoken
September 30, 2008 8 Comments
Once again the American people have been heard. Remember last year when Congress tried to pass an immigration reform bill that the citizens of this great country opposed. At the end of the day the collective voices of millions of Americans resulted in a resounding defeat of a bad bill. That feat has been repeated once again. Today the $700 billion dollar bailout failed 228 to 205.
In the aftermath the partisan bickering picked up once again as Democrats blamed Republicans for the defeat and Republicans blamed Democrats for the defeat. In all actuality, neither was at fault for the defeat. Sure Nancy Pelosi showed why she was a Donkey, I mean Democrat. Sure Republicans were offended by her. In the end there is one reason and one reason alone that this monstrosity went down in defeat. The American people. The American people voiced their displeasure of the bill and their representatives listened to them.
Nancy Pelosi did what she does best, blame the Republicans. Sorry Nancy, 93 of your Democrats voted with the 133 Republicans in voting against this despicable bill. And 64 Republicans voted with 140 Democrats in voting for it. That is not partisan politics. If the vote had been split down party lines I could buy your partisanship excuse. This vote was very bipartisan in both the for and against column. I guess it has never occurred to her that some congressmen actually listen to their constituents. That just goes to show you that she doesn’t listen to her own people. Maybe it is time for the people of California to replace the wicked witch of the west with someone more responsive to their needs.
Now we wonder how we can deal with the congressmen that voted for the bail out. The best way to deal with them is to vote against them in the general election in November. Remember the members of the Iowa delegation that voted for the bill. Leonard Boswell and Dave Loebsack. Remind them that the American people have spoken.
Being one of those out of work people, whose unemployment was caused by the real estate meltdown, I’ve spent considerable time educating myself on this issue. CNBC and Bloomberg became my textbooks along with other print mediums.
Given that we are now in this financial mess, I don’t see a way out of it unless the federal government steps in. There are a few ideas being broached today about having the FDIC and Federal Reserve take a more active role in calming the financial markets, but everyone with any knowledge of financial markets agrees that it would be only serve as a stop gap.
What is needed to open the frozen credit market is to remove a good many of those bought and sold, sliced and diced, repackaged mortgage securities from the books so banks feel comfortable lending again. Right now, banks are hoarding their cash to show the FDIC that they’re liquid enough to stay in business as well as their being afraid to loan to other banks for fear of not getting their money back, given how many banks are on the threshold of being taken over.
However, once the government purchases those securities — and no one knows what they’re really worth which is part of the problem — then the government can break up the packages, hold them until stability returns to the mortgage/real estate market, and sell the securities at the new market value. Potentially, the sale will bring money into the Treasury.
For example, (very simplistically) the Government buys a mortgage security that was originally worth $250K but because real estate has dropped in value so much the security is now work $125K. So the Government buys it for $125K (or less at fire sale prices). The government then holds the security until the market returns to value and sells the security for the original $250K. The government just made a 100% profit (or more) on its investment.
Now if the government buys up the so-called toxic securities, it means that the government is buying the foreclosures caused by bad, inappropriate loans. Those homes are selling at highly reduced prices so they, at this time, are worth considerably less than market value right now. For example, a $500K house might sell for $100K. These types of fire sale homes make up the toxic securities. Unfortunately, the toxic securities are mixed in with good securities. Therein lies the challenge for the Treasury. How do you price the securities packages accurately when they’re all mixed up? And who will have the authority and oversight to make sure the prices are accurately set when no one knows what the mix is or what the securities are worth? (Treasury or some other board? That’s a major sticking problem for Congress.)
Nevertheless, that’s part of — if not all — of the argument against the mark-to-market argument in Congress. Mark-to-market means marking the price of something — a building or a security or some other asset — to the price it would get today, not sometime in the future or sometime in the past. Right now, banks assets, including buildings, are being assessed on a mark to market rule by bank examiners. Since real estate overall has decreased in value as well as their real estate mortgage holdings, banks are finding themselves with a less equity to liquidity (cash/deposit/profit availability) ratio than the FDIC wants them to have.
But where does Congress draw the line? If mark-to-market is eliminated then any securities purchases would be much higher and not affordable. If kept, banks are stuck with not being able to provide loans because they need to hang onto their cash reserves to show liquidity.
Otherwise the bill appears very sound. It provides all the oversight needed and punitive measures against the original speculators. It allows the government to take an equity position (hold stock) in the company that sells securities to the government, thus potentially realizing a profit from an increase in stock prices. It allows the government to hold onto the securities until the real estate market stabilizes. It allows banks to buy industry-paid-for insurance, covering their mortgage securities, rather than opt into selling to the government and hold onto them until such time as they can be sold at a profit or covering them if they lose money on the sale. It provides some relief to homeowners to renegotiate their mortgages. And in addition, if the government doesn’t make all its original investment back within five years, the government is required to go back to the original sellers of the securities for a “make good” on the price.
Where Congress is getting hung up is less on the faulty details than on figuring out how to sell the whole plan to their constituents. While a few, like Sen. Shelby, are adamantly opposed to any government intervention in the markets, most are probably weighing their jobs (re-election) against a negative public sentiment. And the public, apparently, really doesn’t understand what is involved. They only see Wall Street getting bailed out and made whole again at their expense. The truth could not be further from their perception, though.
Im surprised. My Rep, Democrat Bruce Braley voted against it!
I have a new found respect for him!
Valerie, what I want to know is what will happen to the people who still owe money for their houses. Will their debt be wiped out? I paid for my house and so should they. Stupid decisions should not be rewarded, especially when decisions are based on greed and not neccessity!
Sam, I am also surprised with Braley. I think David Hartsuch is a much better candidate, but I don’t know about his chances of beating Braley now.
And cable news is reporting how many Democrats were told by Nancy Pelosi that it was “ok” for them to vote against the bail out.
I am wondering… what was Pelosi’s motive in giving such a partisan speech and her permission to vote “NO” to so many of her own party?
I hope we hear some believable answers to all the spin that is coming at us at record speed.
Do we really believe that it was the lack of “marketing” or explaining this bill that was the problem? If as Chuck Todd on MSNBC said- Bush should have brought out some graphs to show us then the voters could have better understood the bail out?
Or let’s not call it a bail out- let’s call it a “rescue package” as if a change in terminology will help the dumb voters get it?
It’s okay for some representatives to vote NO but not okay for others? That some democrats voted NO because the bill did not include enough money or specifics for additional places to help…
Would Christians be put down if all of the crisis mess needed work on Christmas Day?
From what I have seen this AM on the 3 cable news networks- it just depends on which show I watched, which ‘expert’ was interviewed- there is no consensus… and sadder still- I do not see a true leader stepping up at a great time of need.
callmecrusader, yes we do need a leader in this time. However, both McCain and Obama do not strike me as someone who can do it. They don’t seem to represent “us”. Also, what the media is ignoring is that there is no blame to be laid. The politicians were doing their job………..listening to the people who elected them. Media and party elites seem to forget about “we the people” and the power that we have. You would think they would have learned by now.
I really wonder about Pelosi and her motives in all of this bailout mess. The more I hear, the more I smell something very foul.
So much happening behind closed doors.
Where are the hearings so that we can all hear and see what is being done?
I do not like all this secrecy.
And what really irks me is that the very ones who got us into this mess (Dodd and Franks) are the ones out pointing fingers, dishing out the blame, and attempting to make Americans think they are the ones to fix things.
Iowans Rock:
The bill supposedly had provision in it to allow homeowners to renegotiate their home loans. Plus, Obama wants to push through later a bill that will force banks and mortgage holders to sit down and help homeowners renegotiate loan interest rates.
I don’t think anyone who bought a [too expensive] home should be let off the hook. But some ARM interest rates have skyrocketed. It amounts to usury. That just ain’t right! Plus, if people can have their rates adjusted, they can continue to stay in their homes and pay the mortgages and keep everyone’s home values up.
Valerie,
I am sorry but I don’t think that the mortgages should be renegotiated. These people took a gamble that interest rates wouldn’t raise and lost.