The Bail Out Bill Fails to Pass House Vote

[A's Fever]

The bail out bill has failed and the Dow is down 700+ points.  Why did the Republicans fail to support the bill even though it was proposed by the Republican administration?  Is there such a deep division in the Republican party that they would not support the President?  How will this affect the McCain campaign?  Will the Republicans - should the Republicans - come back with another plan or are they going to let the economy continue to tank?  Scary times, these . . .

[Slogger]

Yes, A's . . . scary times.

IMO, this is a bi-partisan responsibility.  Before the vote, Nancy Pelosi took the time to stick the knife in and twist.  Wonder why she did that? 

The Democrats could have passed the bill, if all their members cooperated.  They did not.  The Democrats do not wish to take full responsibility for the bill.

Congress fiddled while Wall St. sparked.  They didn't react until Bush yelled fire!  This situation was been sparking for quite a while.

John Q. Citizen wished he had stuffed his mattress with marshmallows.  At least, there would be something to do to make use of the flames.  Roasting marshmallows beats watching the bi-partisans beating each other up.

[truthseeker2]

Yes, A's . . . scary times.

IMO, this is a bi-partisan responsibility.  Before the vote, Nancy Pelosi took the time to stick the knife in and twist.  Wonder why she did that? 

The Democrats could have passed the bill, if all their members cooperated.  They did not.  The Democrats do not wish to take full responsibility for the bill.

Congress fiddled while Wall St. sparked.  They didn't react until Bush yelled fire!  This situation was been sparking for quite a while.

John Q. Citizen wished he had stuffed his mattress with marshmallows.  At least, there would be something to do to make use of the flames.  Roasting marshmallows beats watching the bi-partisans beating each other up.

With all due respect...this will tell you exactly who is responsible and who tried to stop it.

http://www.youtube.com/watch?v=NU6fuFrdCJY

This will show you how the concern was received in the House:

http://www.youtube.com/watch?v=_MGT_cSi7Rs

While these may be scarry times...we cannot 'solve' a problem with more of the same.

[WhiskeyGirl]

I remember some time ago, before the bailout watching a program that interviewed some mortgage bankers.

One said, he wished he'd gotten out in 2006, when the 'in' people started leaving.  He got stuck holding the bag of bad investments.  He gave a small speech about how the problem happened.

I wonder what the foreclosure rate is for these substandard / subprime loans?  From memory, I believe it was upwards of 50%.

Who was responsible for originating these loans?  Who did the legwork and investigation of these borrowers?

Who is going to ensure that someone keeps an eye on the originators of these loans?  Make sure there aren't so many future loans that go bad?

It seems like Wall St. (and a number of banks, foreign and domestic) got stuck holding the bag.  The US taxpayer, one way or another is the final resting place of the bag.

I don't know why Wall St. didn't just say "no more" years ago. 

Is this going to be a cycle for taxpayers?  Forever getting stuck with subprime/risky mortgages? 

Who is going to keep an eye on the standards for borrowers?  Loan originators?

Wall St. got greedy, but someone had to sell these people property and someone had to promote these risky loans to these borrowers. 

Was it the right thing to do?  Should this practice continue?

[truthseeker2]

I remember some time ago, before the bailout watching a program that interviewed some mortgage bankers.

One said, he wished he'd gotten out in 2006, when the 'in' people started leaving.  He got stuck holding the bag of bad investments.  He gave a small speech about how the problem happened.

I wonder what the foreclosure rate is for these substandard / subprime loans?  From memory, I believe it was upwards of 50%.

Who was responsible for originating these loans?  Who did the legwork and investigation of these borrowers?

Who is going to ensure that someone keeps an eye on the originators of these loans?  Make sure there aren't so many future loans that go bad?

It seems like Wall St. (and a number of banks, foreign and domestic) got stuck holding the bag.  The US taxpayer, one way or another is the final resting place of the bag.

I don't know why Wall St. didn't just say "no more" years ago. 

Is this going to be a cycle for taxpayers?  Forever getting stuck with subprime/risky mortgages? 

Who is going to keep an eye on the standards for borrowers?  Loan originators?

Wall St. got greedy, but someone had to sell these people property and someone had to promote these risky loans to these borrowers. 

Was it the right thing to do?  Should this practice continue?

The "Community Reinvestment Act".  CRA has to either be abolished if it is not properly administered.  It has not been. 

This cannot be "fixed" with a bailout.  It will require more insurance coupled with natural market corrections.

[A's Fever]

I don't know what the point is of pointing fingers and placing blame at this point - and I'm sure there is plenty to go around.  On TV everyone has an opinion about who is responsible.  But that is not the issue now, it is just a diversion. The state of the economy is the issue and another day has gone by without a solution.  I don't think anyone was looking to this bill to "fix" the economy, but to stabilize the banking system so that the economy can function.   

I wonder what the administration can do without involving Congress.  Does the SEC have the authority to suspend mark to market accounting rules?  That could help stabilize things.  Can the Fed do anything to take this toxic debt off the banks' balance sheets - or to somehow neutralize it for the time being?  Can the Fed somehow guarantee this debt without actually buying it and thus remove it from the balance sheet?

Without intervention, I fear for the future of the economy.  We will continue to see banks fail.  Over $1 trillion was lost today, and that means you and I, our retirement plans, savings, 401K's, etc are losing value and will continue to do so.  If banks are not lending, the economy will slow, meaning severe job losses.  I fear for those in their 50's and 60's who may not have time to recover lost savings, or recover from job loss, before retirement.  Something needs to be done, and soon.  I truly hope that our pols can put their partisan issues aside and put the best interest of the average American first. 

[WhiskeyGirl]

I don't understand where all this toxic debt came from.

If the U.S. Government is backing this debt as I've read (Freddie & Fannie, maybe some other scheme), Why not let the U.S. provide relief as was intended?  

Why does there need to be a bail-out?

Maybe the best thing to do is put things aside and look at the problem from a new perspective?

If there was a free market to begin with (one not backed by the US government and taxpayers) I have to believe that the originators of these loans would have been more prudent in doling out the money.  IMHO they would have expected borrowers to pay the money back.

It seems like when the US is backing something, it becomes a "free for all" with regard to irresponsible behavior. 

Oh no...not a problem to loan $500,000 to your dog.  The US TAXPAYER will back up that loan.  It's the 'new math' in practice!  No, nobody teaches the old math anymore, and no one learns math anyway.  That's what we have internet programs for.

 

The dog probably bought a house at an inflated price, someone profited by selling the house, and making fees on the loan.

I believe how somethings ends is just as important as how it began. 

Where are the roots to the problem?  Mess?  Future stability?

Old saying that goes something like this ~

"Those who fail to remember history are bound to repeat it."

Politicials are bound to go on and on and on...just watch CSPAN.

There are people in the 50's and 60's and better that lost and never recovered with all the previous scandals - Enron (and dozens of others at the same time), dot.coms, etc. 

Will the bailout just put off the end for another month?  Year?

When will common sense return to the financial system? 

No more risky business paid for by the US Taxpayer? 

[WhiskeyGirl]

Is there anyone who will offer something other than finger pointing or words?

Where is the savior?  When will salvation come for the taxpayers?

If salvation is available in January 2009, why not today?

I'm thinking taxpayers will have to wait until January 2009 for help from the candidates...that sound like a Jim Jones thing.  The end is coming and you must follow me...drink more Kool-Aid.

Who will step up to the plate this week for taxpayers?

Where is the political party that walks the walks, and does something more than talk?

[crazybabyborg]

Yes, A's . . . scary times.

IMO, this is a bi-partisan responsibility.  Before the vote, Nancy Pelosi took the time to stick the knife in and twist.  Wonder why she did that? 

The Democrats could have passed the bill, if all their members cooperated.  They did not.  The Democrats do not wish to take full responsibility for the bill.

Congress fiddled while Wall St. sparked.  They didn't react until Bush yelled fire!  This situation was been sparking for quite a while.

John Q. Citizen wished he had stuffed his mattress with marshmallows.  At least, there would be something to do to make use of the flames.  Roasting marshmallows beats watching the bi-partisans beating each other up.

With all due respect...this will tell you exactly who is responsible and who tried to stop it.

http://www.youtube.com/watch?v=NU6fuFrdCJY

This will show you how the concern was received in the House:

http://www.youtube.com/watch?v=_MGT_cSi7Rs

While these may be scarry times...we cannot 'solve' a problem with more of the same.

Thank you for the links. I'll add this one without further comment other than to say, thank God for the technology to record history,

http://www.youtube.com/watch?v=VgctSIL8Lhs

[truthseeker2]

Those who are concerned about others palcing blame are missing the point.  The bailout failed because the democrats lead by Pelosi could not bring the needed votes to pass it.  There were twelve more votes needed and out of the thirty-seven members of Barney Frank's committee twelve voted against their own bill.  Why??? 

Look deep people.  In order to understand what happened yesterday we need to understand how it got that way in the first place. 

Sound bite information does not tell the story.  Bottomline they tried to pass a bill that the people did not want.  They tell us that we are wrong and that they should have done a better job 'selling' it.  Comeon folks.  We are smarter than that.  Understanding the solution will involve understanding the root causes.  Until the causes are eliminated there cannot be a viable solution.  I'm not trying to make this political.  It has to be about the truth.

[truthseeker2]

I wonder what the administration can do without involving Congress.  Does the SEC have the authority to suspend mark to market accounting rules?  That could help stabilize things.  Can the Fed do anything to take this toxic debt off the banks' balance sheets - or to somehow neutralize it for the time being?  Can the Fed somehow guarantee this debt without actually buying it and thus remove it from the balance sheet?

I do believe mark to market can be suspended or changed.  In fact I believe that may be happening today.  It's a step toward stabilization for now.  I don't believe in writing off the debt.  Too many people lose that way.  Neutralizing it for a period of time was what they were trying, in a way, to do with the bill.  They just had too large of a price tag for something that 'might' be profitable.  The bill was a risk and the people have said no.  For once, elected officials were listening.

[Slogger]

Yes, A's . . . scary times.

IMO, this is a bi-partisan responsibility.  Before the vote, Nancy Pelosi took the time to stick the knife in and twist.  Wonder why she did that? 

The Democrats could have passed the bill, if all their members cooperated.  They did not.  The Democrats do not wish to take full responsibility for the bill.

Congress fiddled while Wall St. sparked.  They didn't react until Bush yelled fire!  This situation was been sparking for quite a while.

John Q. Citizen wished he had stuffed his mattress with marshmallows.  At least, there would be something to do to make use of the flames.  Roasting marshmallows beats watching the bi-partisans beating each other up.

With all due respect...this will tell you exactly who is responsible and who tried to stop it.

http://www.youtube.com/watch?v=NU6fuFrdCJY

This will show you how the concern was received in the House:

http://www.youtube.com/watch?v=_MGT_cSi7Rs

While these may be scarry times...we cannot 'solve' a problem with more of the same.

Thank you for the links. I'll add this one without further comment other than to say, thank God for the technology to record history,

http://www.youtube.com/watch?v=VgctSIL8Lhs

Thank you, both!  We need to know more, be more aware.

[Slogger]

Fannie, Freddie disclose subpoenas, investigations:

By ALAN ZIBEL, AP Business Writer
Tue Sep 30, 5:33 AM ET
 


WASHINGTON - Adding to their woes, mortgage finance giants Fannie Mae and Freddie Mac are facing a federal grand jury investigation into their accounting practices.

ADVERTISEMENT
 
The mortgage finance companies said Monday that a federal grand jury in New York is investigating accounting, disclosure and corporate governance issues at Washington-based Fannie and McLean, Va.-based Freddie.

More :   //news.yahoo.com/s/ap/mortgage_giants_investigations   

[Slogger]

I wonder what the administration can do without involving Congress.  Does the SEC have the authority to suspend mark to market accounting rules?  That could help stabilize things.  Can the Fed do anything to take this toxic debt off the banks' balance sheets - or to somehow neutralize it for the time being?  Can the Fed somehow guarantee this debt without actually buying it and thus remove it from the balance sheet?

I do believe mark to market can be suspended or changed.  In fact I believe that may be happening today.  It's a step toward stabilization for now.  I don't believe in writing off the debt.  Too many people lose that way.  Neutralizing it for a period of time was what they were trying, in a way, to do with the bill.  They just had too large of a price tag for something that 'might' be profitable.  The bill was a risk and the people have said no.  For once, elected officials were listening.

I think increasing FDIC to $250K would promote some confidence.  Overextending could be a problem, but building confidence would help.

Mark to Market:  I'm struggling to understand this one, but several have mentioned Mark to Market as a problem.  Suspending it, temporarily, could be helpful.  We could see the results almost immediately.  Is that correct?

[truthseeker2]

Slogger,

Here is mark to market:

Mark to Market.......

1. The act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value.

2. In terms of mutual funds, a MTM is when the net asset value (NAV) of the fund is valued upon the most current market values.

1. This is done most often in futures accounts to make sure that margin requirements are being met. If the current market value causes the margin account to fall below its required level, the trader will be faced with a margin call.

2. Mutual funds are marked to market on a daily basis at the market close so that investors have an idea of the fund’s NAV.


According to some calculations making a change will make a difference.  If you trust Newt Gingrich, which I know some people do not like him, changing this to a 3 year rolling average could free up to 500 billion.  It's difficult to tell if that is a good number without seeing the internals that he used.  But, I think it should be considered.

[truthseeker2]

Fannie, Freddie disclose subpoenas, investigations:

By ALAN ZIBEL, AP Business Writer
Tue Sep 30, 5:33 AM ET
 


WASHINGTON - Adding to their woes, mortgage finance giants Fannie Mae and Freddie Mac are facing a federal grand jury investigation into their accounting practices.

ADVERTISEMENT
 
The mortgage finance companies said Monday that a federal grand jury in New York is investigating accounting, disclosure and corporate governance issues at Washington-based Fannie and McLean, Va.-based Freddie.

More :   //news.yahoo.com/s/ap/mortgage_giants_investigations   

While this is a good thing don't get your hopes up that anything will happen with this.  Here's an interesting article from back in 2000.  Check this out: 

http://www.motherjones.com/news/outfront/2000/07/outfrontja00.html

Here's a snippet:

"The industry certainly had plenty of clout on Capitol Hill. From 1991 to 1994, lenders handed out $2.3 million in campaign contributions, and the investment paid off. At a meeting of the Mortgage Bankers Association in 1993, the FHA unveiled a “lender select” policy allowing bankers to choose appraisers. The news was greeted by a standing ovation."

Nothing seems to have happned then.  If a lot of the bad paper FM/FM bought and sold is a result of flipping who knows if anything will actually be done.

[Slogger]

Slogger,

Here is mark to market:

Mark to Market.......

1. The act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value.

2. In terms of mutual funds, a MTM is when the net asset value (NAV) of the fund is valued upon the most current market values.

1. This is done most often in futures accounts to make sure that margin requirements are being met. If the current market value causes the margin account to fall below its required level, the trader will be faced with a margin call.

2. Mutual funds are marked to market on a daily basis at the market close so that investors have an idea of the fund’s NAV.


According to some calculations making a change will make a difference.  If you trust Newt Gingrich, which I know some people do not like him, changing this to a 3 year rolling average could free up to 500 billion.  It's difficult to tell if that is a good number without seeing the internals that he used.  But, I think it should be considered.

Thanks, Truth.  The above does give me a little better idea of the subject.  Trust Newt, trust a politician, is a "trust . . . but verify" proposition.  I am hearing that Mark to Market is being discussed.

BTW, I like your signature line!   

[islandmonkey]

Slogger,

Here is mark to market:

Mark to Market.......

1. The act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value.

2. In terms of mutual funds, a MTM is when the net asset value (NAV) of the fund is valued upon the most current market values.

1. This is done most often in futures accounts to make sure that margin requirements are being met. If the current market value causes the margin account to fall below its required level, the trader will be faced with a margin call.

2. Mutual funds are marked to market on a daily basis at the market close so that investors have an idea of the fund’s NAV.


According to some calculations making a change will make a difference.  If you trust Newt Gingrich, which I know some people do not like him, changing this to a 3 year rolling average could free up to 500 billion.  It's difficult to tell if that is a good number without seeing the internals that he used.  But, I think it should be considered.

Thanks, Truth.  The above does give me a little better idea of the subject.  Trust Newt, trust a politician, is a "trust . . . but verify" proposition.  I am hearing that Mark to Market is being discussed.

BTW, I like your signature line!   

I work in the Capital Markets industry and sell MBS (Mortgage Backed Securities), agencies, municipal bonds and corparate bonds, but the bulk are MBS. They are bundled and packaged together in tranches and sold. They factor down every month on principal and interest until they pay off. The mark market accounting system is almost impossible to do accurately as on pool # of a MBS could hold 1200 or more mortgages-it's next to impossible to value that as a security daily. So, when the market is up they are valued higher, but in a down market the firm holding the inventory has really no way to value them as an asset, so they will write the down to zero. There really is value behind the assets, the homes themselves. If you suspended mark to market which could be done without legislation, the companies that hold these assets woldn't have to borrow money to have the proper leverage ratio. It would change the entire scenario for all the holding companies with these assets on there books. Hope that helps explain it better.

[Slogger]

Thanks, Island!

I have no idea what the drawbacks would be.

[A's Fever]

I heard some CNBC pundits discussing the drawback of suspending the mark to market rule that it would allow banking execs wide discretion in valuing these assets, which obviously could cause other problems down the road.  Some are calling for the assets to be sold on the open market, that is, creating a market for those investors who wish to bid on them.  That way, the process would be transparent, the open market would establish value and all parties would be on the same page.  If this could be accomplished it could make a floor for RE values currently spiraling downward.

I agree also that increasing the FDIC limits would go a long way to stop runs on banks.  I think Sheila Bair, Chairman of the FDIC, is on record saying she is for it.  Today the Irish government moved to insure all deposits in that country. 

It is very heartening to see this crisis being taken seriously and seeing all these ideas surfacing in lieu of the rescue plan.  Perhaps with a revived rescue of some sort, and these other creative ideas, we can get the credit markets to function again.  We still have a long way to go, probably years, to sort out this mortgage mess, but if we can keep the economy at least limping along a lot of jobs will be saved.  Does anyone think an interest rate cut could help here?  Any other ideas that would  help without putting a lot of taxpayer dollars on the line?