Sparky: We're camping NPR today to keep you up to date. I'm biased as anyone but I see this as a good thing. I wouldn't give into the GOP fearmongering. Just remember a vote for McCain is a vote for Palin who thinks dinosaurs were Jesus' ponies. Fight those who view us as doomed idiots.
NPR listener scrapiron asks:“Why doesn't anyone address the problem of the mortgages that are about to default? We haven't seen the last of the foreclosures but all it seems the Bush Administration wants to do is bail out Wall Street. Isn't the head of the FDIC evaluating existing loans and attempting to make them viable?
NPR.org, September 29, 2008 · In a shocking defeat that rocked Wall Street, the House of Representatives voted down a $700 billion plan aimed at rescuing banks and unfreezing the world's credit markets.
The news of the 228-205 defeat sent the stock market reeling. The Dow Jones industrial average recorded its biggest closing point drop in history, closing down 777.68 points — or nearly 7 percent — to 10,365.45.
Treasury Secretary Henry Paulson spoke to reporters at the White House after a discussion with President Bush aimed at mapping out the way forward. He said he would keep working to get a bill. "We need to work as quickly as possible," Paulson said. "We need to get something done. We need to put something back together that works."
Market analysts said Paulson and the Bush administration more generally were at least partially to blame for stirring up the sturm und drang that ended with Monday's stock market plunge.
The Bush economic team has been saying for weeks that the financial world as we know it would end if a rescue plan was not put in place in short order. So when the bill failed in the House, investors naturally ran for the closest exits. For all his doom-casting after the vote, Paulson did inject a faint note of confidence. He said the banking system so far "has been holding up very well, considering all of the pressures."
President Bush, with mere months left in office, had staked what little political capital he has left on passage of the bill. He looked a little shell-shocked after the vote.
"I'm disappointed in the vote by the United States Congress on the economic recovery plan," the president said from the Oval Office. "We will work with leaders of Congress on a way forward." House Speaker Nancy Pelosi was just as adamant that the vote "cannot stand."
Instead of adjourning for the year, House leaders say they'll reconvene on Thursday. Sen. Christopher Dodd (D-CT) said that "things need to cool down a little bit" before lawmakers could start resurrecting their financial bailout effort. He said lawmakers needed to settle in and digest what had happened and then move forward. Dodd said he was still confident that Congress would pass a bailout bill in the end.
"This is not an easy vote; our constituents are not happy about this and rightfully so," said Dodd, predicting that it would take another couple of days to work this out. "As angry as they may be right now, they are going to get a lot angrier — and they should — if we don't act."
Recriminations On The Hill
It took little time for the partisan finger-pointing to start.
Republicans said a speech by Pelosi just before the vote led some Republicans to vote against the plan.
House Minority Leader John Boehner of Ohio said that when Pelosi blamed "the Bush administration's failed economic policies" for the current economic mess, she "poisoned" the well. Added Republican Rep. Eric Cantor of Virginia, "There's a reason that this vote failed — and that is Speaker Pelosi's speech."
Rep. Barney Frank, a Massachusetts Democrat, said it wasn't anything Pelosi said. He blamed the Republican side for its lack of coordination. He said Republicans were blaming Pelosi because "they are covering up the embarrassment of not having the votes." Frank said he couldn't imagine any Republican lawmaker would imperil the economy because of something Pelosi might have said. He said he gave Republicans more credit than that.
The day began with the expectation that the vote was going to be a squeaker. The president took the unusual step of addressing lawmakers in a statement outside the Oval Office early Monday morning. He urged passage of what he called a "bold bill" that will "keep the crisis in our financial system from spreading throughout the economy."
Bush said he knew it would be a tough vote to cast, given that most Americans appear to be against bailing out Wall Street financial firms. But he said the only way out of the current crisis was for the Treasury to take on some of the toxic debt that financial institutions have on their balance sheets. The credit system had frozen up, he said, because of all these bad mortgages on the books.
The president did more than just speak to cameras outside the White House. He also called lawmakers before the vote, trying to persuade fence sitters to support the bill, according to White House spokesman Tony Fratto. Clearly, the president's words and lobbying efforts didn't do the trick. By early afternoon, the bill had gone down in flames and the markets went into free fall.
Republican presidential nominee John McCain said it was time to "get back to the drawing board." It is unclear whether he thought they should work on a completely new plan or whether he thought they could tinker at the edges of the current one. McCain said that now was not a good time to assign blame, but that instead, lawmakers needed to focus on fixing the problem.
A Changed Proposal
Even members on the Hill seemed shocked by the bill's failure. Minutes after the vote tally, leaders on both sides of the aisle tried to convert naysayers to put the bill over the top. They even postponed closing the vote in hopes of getting 10 people to change their minds. In the end, after a 40-minute delay, they found only two lawmakers willing to switch their votes.
Rep. Paul Ryan (R-WI) gave voice to what many lawmakers were saying more privately. "We're all worried about losing our jobs," he said, noting that the vote took place just weeks before all 435 House members face re-election. "Most of us say, 'I want this thing to pass, but I want you to vote for it, not me.' "
The final 110-page bill was a far cry from the no-strings-attached bill that Treasury Secretary Henry Paulson had offered Congress just a week ago. The administration ended up accepting limits on executive pay for those who take advantage of the bailout and more oversight of the Treasury's implementation of the bailout plan.
Democrats had wanted bankruptcy judges to be able to rewrite mortgages for homeowners who bit off more mortgage than they could swallow, but that provision was not in the final legislation. Republicans wanted the federal government to insure, rather than buy, the debt. That program did make it to the final bill, but it is optional.
With contributions by NPR staff and wire reports
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Comments from the NPR Community
"(Their) voting for or against shouldn't be tied to (the Representatives) fear of being reelected... They are in Congress to make decisions based on sound knowledge of the bill and its consequences."
"Let us hope that we can trust elected officials to vote their conscience, vote what is right, and dare I say, vote for what is bigger than their district."
"Let's not toss overboard the fundamentals of government and finance which has given the US its leadership position on the world for many years. Rather, let the market correct itself."
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All Things Considered, September 29, 2008 · While the U.S. faces a market meltdown as Congress attempted to pass a $700 billion bailout plan — and failed — Europe is engaged in its own bank rescue bailouts.
The governments of Belgium, Netherlands and Luxembourg rescued financial firm Fortis over the weekend with $16 billion to prevent a dominolike spread of failure after no serious commercial bidder could be found.
And Britain nationalized troubled mortgage lender Bradford & Bingley. With that move, every single one of the country's "building societies," or smaller regional banks, has now been taken over either by the government or another big traditional bank.
The only cries louder than those of the shareholders who have lost everything are the sounds of the analysts shouting: "I told you so."
British Prime Minister Gordon Brown sought to soothe troubles nerves by reiterating that his government will stand as the bank of last resort.
"The first economic duty of government is the stability of the system, and I have said, 'We will do whatever it takes to ensure the stability of the British financial system,' " Brown said.
The History Of Building Societies
At one time in Britain — as in so many places — the building societies helped people buy a house.
Like the old savings and loans in the U.S., they existed on a quaint old-fashioned idea, whereby for every pound of sterling of hard-earned savings deposited with them, they would lend out one pound sterling, and make a profit on charging more to their borrowers than they offered to their savers.
Then, in the go-go days of the '80s and '90s, fast-money men came along and said the quaint old-fashioned building societies should become banks, and then they'll be able to raise money on international capital markets. And so they did.
"It was clear they would expand their balance sheet fast, which took place," said Will Hutton, a columnist for The Guardian. "It was clear they'd be so hungry for short-term profit that they'd make mistakes. It was clear they'd get taken over, and we'd lose our regional financial system. And it's happened."
Contagion Spread To Europe
All of this came just as the contagion spread to continental Europe with the news that banking and insurance giant Fortis will also be partially nationalized.
Fortis' Chief Executive Filip Dierckx said rumors and speculation were partly to blame, but he did admit the bank had overreached itself.
"But I'm also not going to deny that if you look at some of the decisions, which were taken in the past, then you can say that probably they were done at the wrong moment. That the timing was not correct," Dierckx said.
Elsewhere in Europe, Germany's No. 2 commercial property lender became the first German blue chip company to seek a bailout from the government. The government in Iceland said it has taken control of that country's third-largest bank.
Not All Doom And Gloom
But on Monday, on the streets of the financial district in London, known as the Square Mile, it wasn't all doom and gloom.
City workers Sergio Baratesta and Tom Hodges even suggested that the worst may have have passed.
"I don't think it will get any worse," Baratesta said. "I think we got to the bottom at the moment. It cannot get worse. It's looking like its going to be tough — hard to recover — but I think it is going to get better, from now on."
Hodges said he thinks people are getting used to not borrowing and spending as they used to.
Perhaps banks are even returning to some of those quaint, old-fashioned concepts of banking.
A Look At The European Banking Situation
European governments moved to rescue some major banks over the weekend, in an effort to contain the financial turmoil that has spread from the U.S.
Here's a list of some of the banks that got lifelines, some that may be struggling, and some that may stand to profit from the mess in the long run.
Fortis — The giant European banking and insurance company was partly nationalized this week by the Benelux countries, Belgium, the Netherlands and Luxembourg. Finance ministers from the three countries agreed to rescue the failing giant with an investment of more than $16 billion. Fortis' CEO Filip Dierckx said the company got in over its head when it bought part of a struggling Dutch bank last year.
Bradford & Bingley — The British government has confirmed that it will take over the major mortgage lender Bradford & Bingley. The government is buying about $92 billion worth of B&B's mortgages and loans, and it is selling the bank's branches and its savings deposits to the Spanish bank Santander. Officials say people who put their savings into the bank will be protected.
Hypo Real Estate — The German government agreed to back a consortium of banks that put together a $51 billion bailout package for Hypo, the second-largest commercial-property lender in Germany. Analysts said Hypo was likely to suffer big losses on its real estate loans.
Glitnir — Iceland's central bank bought a 75 percent share in the country's third-largest bank, saying that Glitnir was about to collapse. The government put nearly $900 million into the bank, which has operations in 10 countries.
And here are some other banks and institutions feeling the pinch:
Dexia — Rumors swirled through the European banking sector that this Brussels-based bank could be looking for a rescue. Dexia shares dropped more than 28 percent in trading on Monday. Other banks drawing investor scrutiny were the Royal Bank of Scotland, whose shares fell more than 8 percent, and Swiss-based UBS, which was down more than 5 percent.
Ping An Insurance — Analysts say Fortis' troubles will hurt its biggest shareholder, the Chinese insurance company Ping An. Its shares fell nearly 10 percent on Monday.
HSBC — The London-based bank HSBC announced that it will cut about 1,100 jobs worldwide, about half of them in the United Kingdom. The bank, which has a global workforce of around 335,000 people, announced the cuts after it was forced to write off about $14 billion in bad debts, most of them in the U.S. In February 2008, The Banker magazine declared HSBC the world's most valuable banking brand.
And some banks may be poised to get bigger by absorbing weaker banks:
Banco Santander — This Spanish-based bank got a bargain by picking up Bradford & Bingley's 197 branches for about $1.1 billion. The branches come with nearly $30 billion worth of deposits. Santander is the second-largest bank in Europe, and analysts say it is well-capitalized and could expand further.
Barclays Bank — Barclays shares were down nearly 9 percent on Monday, but analysts say the London-based company is among Europe's better-capitalized banks and could be among the bargain hunters as weaker banks are sold off. Barclays picked off some of the operations of the bankrupt Lehman Brothers.
BNP Paribas — The giant French bank was hit by the subprime mortgage crisis last year but remains the second-largest bank in the Eurozone in terms of market capitalization, according to The Banker. There has been speculation that BNP Paribas could be looking at a merger with Societe Generale, the France-based bank that was shaken last year by a fraud case.
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Democrat Doggett On Saying No To Bailout Bill
Day to Day, September 29, 2008 · The House of Representatives rejected the $700 billion bailout plan Monday. Rep. Lloyd Doggett (D-Texas) was one of 228 congressmen who voted against the plan.
"I listened to my constituents and to my own thinking that now is not the time to call on people across the country to bail out Wall Street," he told Madeleine Brand shortly after the vote. "I thought this was very much like the Iraq War, like the Patriot Act, like several other things in Congress that had been fueled by fear and hinged on haste. This was really one idea about how to address this problem to the exclusion of all others."
He said he felt a "sense of urgency to act," but he felt frustrated by hearing "our ideas for alternatives rejected."
He offers his suggestions for what Congress could do today to help solve the problem.
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Oregon Democrat: Bailout Bill A 'Fake Lease'
All Things Considered, September 29, 2008 · The House of Representatives rejected the $700 billion bailout plan Monday. Rep. Peter DeFazio (D-OR) was one of 228 lawmakers who voted against the plan — and said he was stunned it failed, even though he voted against it.
DeFazio told NPR's Melissa Block that there are "credible alternatives out there," and "this was never a slam dunk."
"It was a fake pay for — a fake lease," DeFazio said. "It said five years from now a president will propose to Congress a way to pay back the taxpayers. That's ridiculous. There could be a real sea on stock transactions that would pay for the cost of this bill.
"It did take away golden parachutes, and then instead it gave execs camouflage parachutes — you know, loophole written. The Republican insurance part was very dangerous, and it still gave phenomenal clout — unprecedented clout — to this treasury secretary and appointee of George Bush. And should we trust these people as far as we can throw them?"
As the final votes were tallied and the markets dropped, a few members of Congress were trying to get those who voted "no" to change their vote.
DeFazio called the pandemonium "absurdity."
"How could anybody change their vote on something as important as this?" he said. "I hope everyone voted on whatever side they were on with tremendous conviction. I told them to calm down a little bit. Markets go up, markets go down, you know, we can come back with a more reasonable proposal."