Isn't there an election to select every seat in the House of Representatives coming up?
 

It is coming up real soon. Also, who says a new election would give you a better-functioning Congress? The Congressmen who are in real contests right now are the ones who voted against the bailout. It seems they're afraid that if they vote for the bailout, candidates who oppose it will replace them. The ones, on the other hand, who represent safe districts overwhelmingly voted in favor. So maybe what we need is more rotten boroughs.
 

http://www.cindyforcongress.org/article.php?preview=1&cache=0&id=43
 

Krugman (and Levinson) complain about the system we are stuck with. The Constitution we have would help if (a) Nancy Pelosi would put impeachment back on the table or (b) we vote everyone out and start over fresh.
 

Why do Professors Krugman and Levinson think it's appropriate to insult Guatemala and Honduras by comparing them to the United States?
 

Come to think of it, some people have argued for more safe seats; see Thomas Brunell's Redistricting and Representation: Why Competitive Elections are Bad for America.
 

We get the representatives we elect. Some notes of interest from today's vote:

1) Pelosi brings this bill to a vote claiming that she had enough votes to pass it.

2) Dem Congressional Campaign Committee chairman Chris Van Holland brags on NPR before the vote how the Dems were going to use this issue against the GOP during the election.

3) Pelosi cannot wait and delivers a speech blaming the financial crisis on the GOP before the vote.

4) A wide array of Pelosi and Frank's allies in the House, who owe their positions to the Dem leaders, as well as 16 freshman Dems are all allowed to vote no.

5) Pelosi can count votes. She has denied votes for several bills over the past Congress because she knew that the Dems did not have the votes to prevail. Do not tell me Pelosi did not know she was sending this bill to defeat when she called a vote.

6) Why would Pelosi purposefully send this bill to defeat? Pelosi can read the polls. Prior to the emergence of this mess, McCain was leading in the tracking polls. Over the past week during this mess, Obama gained a solid 5 point lead. Van Holland and Pelosi confirmed their purpose on NPR and the House floor today.

A banana republic is a good description for a government willing to sacrifice 1.1 Trillion of their constituents' retirement nest eggs in the markets simply to generate a partisan campaign issue.
 

A banana republic is a good description for a government willing to sacrifice 1.1 Trillion of their constituents' retirement nest eggs in the markets simply to generate a partisan campaign issue.

# posted by Bart DePalma : 9:34 PM


Baghdad, a majority of Dems voted for the bill. A majority of Republicans voted against the bill. If the Dems got a partisan advantage out of this, it was because the Republicans handed it to them.

Seriously, when YOUR side votes AGAINST something, you can't whine when it doesn't pass. You should be happy.
 

Politico's The Crypt reported yesterday evening:

Asked about Monday’s vote on the bailout bill, House Majority Whip Jim Clyburn tells reporters: “We haven’t started whipping.”

Asked if he’s going to start whipping, Clyburn says: “The speaker hasn’t told me yet. I do what I’m told.”

The Dems had no intention of passing this bill. The vote today was a set up.
 

Rep. Peter deFazio (D-OR) told NPR today that the Dem leadership put out the word to their caucus to vote their consciences on the bill. Pelosi and company never even told their caucus to vote for their own bill, nevertheless twisted arms to get it done.
 

Let's consider the situation here. Last week, Pelosi said there would need to be 80-100 Republicans voting for the bill. Today, 140 Dems voted yes. Add 80 to that, and you get a majority vote (220). IOW, Pelosi delivered exactly what she promised last week. The Repubs -- whether that's Bush, McCain, or the House Minority Leadership -- failed.

Now, why did 2/3 of the Republicans vote "no"? There are two possibilities:

1. They thought it was a bad bill and harmful to the country. That's, obviously, a legitimate reason. If this was their reason, however, then all the excuses offered (e.g., Pelosi's speech) make no sense as excuses.

2. They would have voted yes to save the country, but didn't because Pelosi hurt their feelings or whatever. Re-stated, they sent the country down the tubes because of a speech. That's an indefensible position.
 

"Bart" lies again:

Rep. Peter deFazio (D-OR) told NPR today that the Dem leadership put out the word to their caucus to vote their consciences on the bill.

Follow his RW foamer links down a couple levels and you get:

"Congressman Peter DeFazio (D. Or.) said that Nancy Pelosi and the House Democratic leadership always assumed that the bailout bill would pass. As a result, they failed to lean hard enough on people like DeFazio and other House Democrats who were allowed to vote "no" as a matter of conscience."

Note: No actual quotes. But even the paraphrase doesn't say anything near what "Bart" claims.

Also note that Boehner basically said "vote for it if your conscience allows it" ["I’m encouraging every member of our conference – if their conscience will allow them to -- to support this bill,"; see here], (a phrase that is rather intesting seeing what the concept of "conscience" is to Rethuglicans....)

Cheers,
 

Mark Field is lucid as usual. The House Republican leadership openly admitted they tanked the bill because Nancy hurt their feelings. However, Bart is famously uninterested in facts when they don't support his religious beliefs.

"Praise the Lord for Democrats are devils; they're the Mommy party; they show a dangerous tendency to look after the less privileged...Gimme GOP; the Daddy party; the do-it-or-I'll-kick-your-ass party; the how-do-you-like-my-gun-barrel-in-your-face party; the keep your hands off my gold party... Praise the Lord."
 

The Dems had no intention of passing this bill. The vote today was a set up.

# posted by Bart DePalma : 10:16 PM

Numbnuts, the MAJORITY of Dems voted FOR the bill. The Republicans could have avoided being "set up" by also voting FOR the bill. They didn't. You lose. Shut the fuck up.
 

Liberal pundit Mickey Kaus: "If Nancy Pelosi had wanted to screw Sen. McCain, could she have done a better job? Just asking!"
 

Let me see if I get the Pelosi defense correctly:

Bush, Pelosi and the rest of the Dem leadersip panicked the markets by claiming that the banks would fail this week without a bill.

Bush, Pelosi and the Dem leadership crafted the greatest transfer of wealth in government history which was opposed by the House GOP from the outset.

The Dems had the necessary majority to pass their bill, but Pelosi allowed her caucus to vote against it.

Pelosi and not the House GOP brought this Dem bill to the floor, knowing it would fail.

Pelosi and the Dems were using the bill vote to blame the GOP for the Dem's own mortgage mess.

And it is the GOP's fault that Pelosi brought a bill for which she knew she lacked the votes?

Right. And I have beach front property in Colorado to sell you.
 

Right. And I have beach front property in Colorado to sell you.

# posted by Bart DePalma : 9:12 AM


That beach front propertly is worth more than the "it's Pelosi's fault" story you are trying to sell.

Hopefully it's also worth more than your 401k.
 

Bart:

Just cutting and pasting the same comments on VC as here? Well, they are still just as weak.

In addition to what others have said, your bizzaro world in which "Bush and the Dems" are on one side conveniently leaves out the fact that *McCain* desperately wanted the bill to pass too. And he couldn't deliver more than 1/3 of Repubs. Some leader, eh?

Also, your story that the Repubs got their feelings hurt by big bad speaker Pelosi and so took their ball and went home to sulk -- thus making the markets tank -- is not only untrue, it's terrible spin from your point of view. It makes Pelosi look masterful and the Repubs look like spoiled children.

Of course it didn't really happen the way you say, but if you're going to spin, you might try spinning in a way that makes your party look competent and adult.

But I guess that's pretty hard, in this case.
 

Re beachfront property in Colorado:
see 9th Cir. opinions 09/29/08 07-35310 USA V. LINCOLN COUNTY, saying that in condemnation cases, US has to pay price of property as lakefront vacations lots even though at the time of the taking there was no lakefront and no lots. So all Bart has to do is have the intention of waiting until global warming develops his property and the government will buy it from him at that price now. Bail out Bart!!
 

Turns out that the RNC had ALREADY cut ads blaming Obama and the Democrats for out-of-control spending in regards to the bailout. The Republicans were hoping the bill would barely pass so they could pivot on to the old Newt Gingrich course and hammer the Democrats with this the moment it passed. Remind us again who was looking to double-cross whom Bart?
 

"Pelosi allowed her caucus to vote against it."

I realize that politics is a messy business, but isn't this the way it should be? I'd much rather have representatives voting the way their conscience permits than staying in formation out of party loyalty.

(You're on to something, Bart: now go tell your party all about it!)
 

Will said...

Turns out that the RNC had ALREADY cut ads blaming Obama and the Democrats for out-of-control spending in regards to the bailout. The Republicans were hoping the bill would barely pass so they could pivot on to the old Newt Gingrich course and hammer the Democrats with this the moment it passed. Remind us again who was looking to double-cross whom Bart?

Does that make this an outside inverted double cross? Or a flanking we-told-you-so inside double cross?
 

"Bart" DeMcCainFlacka says:

Let me see if I get the Pelosi defense correctly:

OK.

Bush, Pelosi and the rest of the Dem leadersip panicked the markets by claiming that the banks would fail this week without a bill.

Nope.

Bush, Pelosi and the Dem leadership crafted the greatest transfer of wealth in government history which was opposed by the House GOP from the outset.

Nope. Note that I'm not "for" the bill; I'd prefer a purely Democratic alternative that does much more to take care of the structural issues deep down. But as I've pointed out, the "Republican alternative" (as well as the crap they tried to shoehorn into the Democrat-modified Paulson plan) is all a shell game to get more deregulation, money for their chums (without admitting to the crime; see my link above), more tax breaks, and nothing else.

The Dems had the necessary majority to pass their bill, but Pelosi allowed her caucus to vote against it.

No.

Pelosi and not the House GOP brought this Dem bill to the floor, knowing it would fail.

No.

Pelosi and the Dems were using the bill vote to blame the GOP for the Dem's own mortgage mess.

No.

And it is the GOP's fault that Pelosi brought a bill for which she knew she lacked the votes?

Yes. You finally got one right. The Republicans (including Boehner and McInsane) were saying the votes were there (McInsane even claimed "victory" in advance, just as he did with his campaign web page for the debate and as he's been doing with Iraq).

Right. And I have beach front property in Colorado to sell you.

No one here believes a word you say, "Bart", and that includes the words "and" and "the".

Cheers,
 

"We, of course, are stuck with the political system that our Constitution constitutes."

Yes it's important to understand that our constitution is a historical document not a Platonic form. But at this point ignoring the few who see America itself as an ideal form, this is seen largely as a given; so it would be better at the moment to deal with the present situation as it is.

Given that preference it would help if you paid enough attention to know that many if not most economists not tied to political parties or to banks, think the bailout was bullshit: and without any evidence to back up the claim that it would work

Less narcissism, more thought.
Please.
 

It's altogether possible that D. Ghirlandaio is correct on the merits, though I supported the bill largely because Barney Frank, whom I've known and respected since graduate school, supported it. He is brilliant and a dedicated public servant, and I'm inclined to trust him. Still, even he wasn't in love with bill; he "only" thought it was necessary to pass it.

Be that as it may, my real point is, I hope, not narcissism--I agree that nothing can be done about constitutional reform in the new future--but simply pointing out that in most political systems the "government of the day" falls upon such a monumental failure as yesterday's. Nothing could say "no confidence" more than that vote. Now, one could go on to argue, probably correctly, that the lack of confidence extends to the Speaker (though only by a minority of Democrats) and to the House Republican "leadership," which lost 2/3 of their own caucus. Ditto John McCain and perhaps even Barack Obama (inasmuch as 1/3 of the Democrats rejected his "tepid endorsement" of the bill).

No given political system could save us from the current mess. And maybe there are some offsetting advantages to the one we have (though I have a hard time seeing them). Overall, I continue to believe that the Constitution exacerbates our problems and, just as we should "learn" from this crisis to redesign some basic financial structures, and from Sept. 11 to redesign some basic national security structures, we should be learning from the last 8 years especially to redesign our constitutional structures. But we probably won't.....
 

As Krugman has admitted, the only reason not to push follow the model of Sweden in 92, is political.
And as is he blames the Republicans without even arguing that the Paulson plan would work. "Acting serious" is not the same as responsible action.

If the Democrats were capable of behaving as adults, and if Krugman were willing to argue that they should do so! - they might develop a serious proposal that had enough of a chance of actually working that it would be worth the political risk to shove it down the Republcans' throats.

Taking responsible risk is what defines maturity, political and otherwise.
Frank is not doing that. Krugman is not either.
This crisis is an opportunity for someone to show leadership. So far no one is doing so. No one.

The democrats don't even know what the word means. They were taught in college that leadership is anti-democratic.
 

This comment has been removed by the author.
 

Prof. Levinson:

Leaving aside the wisdom of following Barney Frank in this crisis (who has been about as wrong as can be about everything leading up to this crisis so far) I'm curious to how you come to the conclusion other political systems are "better" at handling this crisis than our present constitutional system is. The credit crisis is global. Banks have failed/been bailed out in Ireland, UK, Iceland, France, Germany, Belgium, Luxumborg and the Netherlands. I don't see their system as either avoiding or responding to the crisis any differently than ours. Absent some kind of real dictatorship, all systems will have political considerations going into important economic decisions. What evidence do you have that their parliamentary system (which I assume you want) are better at dealing with these crises? I'd suggest that there is no such evidence and at the end of the day, a deal will be struck which takes bipartisan input to reach. How this is worse than a one-party parliamentary decision is hard for me to see.

In fact, the bill is mammothly unpopular (as the WSJ said, everyone wants it to pass, no one wants to vote for it) and it would seem that the insulation of our president and 2/3 of the Senate makes it easier to do what must be done.
 

I had a link to
http://talkingpointsmemo.com/news/2008/09/bailout_plan_reactions.php
at TPM.
Quotes from a number of economists, but it's more of a mixed bag than I thought, though the quotes are also chosen sloppily. DeLong agrees with Krugman. And I liked to Roubini's opinion;

"Is Purchasing $700 billion of Toxic Assets the Best Way to Recapitalize the Financial System? No! It is Rather a Disgrace and Rip-Off Benefitting only the Shareholders and Unsecured Creditors of Banks"
 

Mr Krugman's comment about the USA having become "a banana republic" may have been more apposite than he intended.

Just three US corporations, Del Monte, Chiquita and Dole, control two thirds of the world trade in bananas. They maintain their dominance by anti-union activities, the use of hazardous pesticides and many other abuses and it is from their corporate activities in Central and Latin America that the expression "banana republic" comes.

Chiquita is, of course, the creature of the well-known "Banana Republican" Carl H. Lindner of Cincinnati, an associate of Charles Keating whose law firm did work for Lindner's conglomerate, American Financial Corp and became its vice president. A few years later, the Securities and Exchange Commission charged Keating and Lindner with defrauding stockholders. American Financal Corporation spawned American Continental Corporation which bought Lincoln Savings the failure of which gave rise to the Keating Five scandal and its Legacy.

So, it could rightly be said that the present crisis is the consequence of corporate greed, absence of proper regulation and the "greed is good/soak the poor"economic theories adopted by Reagan, Thatcher and their political successors of whom McCain is certainly one.

I would just add this: the UK was forced to bail out another mortgage lender over the weekend and the Benelux had to rescue Fortis. The Republic of Ireland was forced to take similar action: Financial crisis: Ireland’s banks are rescued and France and Belgium had to bail out another banking group European governments bail out Dexia in €6.4bn rescue deal.

On a very early post on this issue, I suggested that there was a strong element of "witchdoctoring" in calming financial markets. The US Treasury proposals had a strong element of that. Under the existing legislation, the Treasury could have simply issued more US Treasury securities to bail out failing institutions on a piecemeal basis. But what was needed was something akin to the Irish solution: backing the banking system with the faith and credit of the US Government. Should the Congress fail to come up with something, the contagion of fear will spread.

According to BNP Paribas the benchmark 10-year credit-default swaps on US Treasury Bonds has increased 4 and it is now double the rate on government debt sold by Austria, Finland or Sweden.

In other words, the willingness of foreigners to finance the US deficit is being eroded, especially since the swaps themselves are increasingly of questionable value as security.

Fear in financial markets is a funny thing - there's a kind of herd instinct. The failure of the Government/Congress to come up with something quick and decisive is adding to the fear and increasing the prospect of serious recession. Shades of 1929.
 

will said...

Turns out that the RNC had ALREADY cut ads blaming Obama and the Democrats for out-of-control spending in regards to the bailout. The Republicans were hoping the bill would barely pass so they could pivot on to the old Newt Gingrich course and hammer the Democrats with this the moment it passed. Remind us again who was looking to double-cross whom Bart?

What double cross? This was a Dem bill which the House GOP almost universally opposed from the beginning. Why shouldn't the House GOP cut ads giving credit/blame for this bill where it lies - with the Dems who drafted it?
 

This comment has been removed by the author.
 

pms_chicago said...

BD: "Pelosi allowed her caucus to vote against it."

I realize that politics is a messy business, but isn't this the way it should be? I'd much rather have representatives voting the way their conscience permits than staying in formation out of party loyalty?

Not after you panicked the markets with the fabrication that the banks would be failing like during the Great Depression if this bill was not passed on Monday. If you bring a rescue bill to a vote after laying that kind of marker, you damn well pull out all stops to pass it to avoid tanking the markets and destroying people's life savings.
 

mourad said...

So, it could rightly be said that the present crisis is the consequence of corporate greed, absence of proper regulation and the "greed is good/soak the poor"economic theories adopted by Reagan, Thatcher and their political successors of whom McCain is certainly one.

This is a complete and utter lie, albeit an effective one by the look of the horse race polls. McCain is finally hitting back with help from a prior mea culpa from Bill Clinton, but will it be too late?
 

What double cross? This was a Dem bill which the House GOP almost universally opposed from the beginning. Why shouldn't the House GOP cut ads giving credit/blame for this bill where it lies - with the Dems who drafted it?

# posted by Bart DePalma : 4:56 PM


Numbnuts, the Republican leadership (Bush, McCain, Boehner) all supported the bill. Like you, they all deserved to get crushed when the Republican ranks defeated it.
 

I will concede that there is no particularly good reason to believe that any given political system would be particularly efficacious in resolving what seems to be shaping up as a world-wide economic crisis. One might quote Marx here about the economy basically being in control of the polity rather than the other way around. At best, this would lead me to concede that parliamentary systems might not be much better right now. So perhaps I ought simply to ask if there's any reason at all to believe that we are actually advantaged by having the particular system we do, which, by the way, includes a particularly stong form of bicameralism that gives each house an absolute veto over the other.
 

Not after you panicked the markets with the fabrication that the banks would be failing like during the Great Depression if this bill was not passed on Monday

I suspect that most blame George W Bush for that.
 

"So perhaps I ought simply to ask if there's any reason at all to believe that we are actually advantaged by having the particular system we do, "

I'm more interested in the question of how to foster more adult behavior in the system we have, but yes -indeed of course- yours is a very good question.


And this one's for Bart
http://www.ft.com/cms/s/0/8780c35e-7e91-11dd-b1af-000077b07658.html

from Mike Oxley,
 

D.Ghirlandaio's post refers to a FT article that is, I think, very relevant:-

Oxley hits back at ideologues

Congressman Oxley lays part of the blame for the Fannie Mae Freddie Mac debacle on Alan Greenspan whose opposition to regulation is well documented.
 

d. ghirlandaio said...

And this one's for Bart...from Mike Oxley,

Oxley was part of the problem. The 2005 Federal Housing Finance Reform Act which he pushed through with Frank was largely toothless and was also larded up with a tax diverting 5% of profits to Dem groups like ACORN Housing.

Compare Frank's support for the Oxley bill with his reaction to the McCain bill, which Frank decried for cutting off his non-creditworthy Dem constituents.

The problem was not a lack of regulation per se, but a lack of regulation that would address the root problem of Congress through Freddie and Fannie extending hundreds of billions in loans to those who could never pay them back and putting the tax payers on the hook for the results.
 

I don't see their system as ... responding to the crisis any differently than ours.

In general, their Central Banks bought preferred stock as a means of re-capitalizing the banks. That's what many economists here are recommending as the best solution.
 

I went and took a look at the TPM selection of quotes from economists to which D. Ghirlandaio refers above Bailout-Burnout.

I don't know the work of some of the people quoted, but I did like the solution propounded by Professor Brad DeLong:-

As I said, raze the Republican Party to the ground. Plough it under. Scatter salt in the furrows so it can never grow back.

We need another, very different opposition party to face the Democrats. We need it now.

The Conservative Party in the UK had to rediscover its "one nation" roots to make itself potentially re-electable. Is it possible the Republican Party may have to go
through some "wilderness years" and do the same ?
 

ROFLMAO....

"Bart" DeClueless says:

Oxley was part of the problem. The 2005 Federal Housing Finance Reform Act which he pushed through with Frank was largely toothless and was also larded up with a tax diverting 5% of profits to Dem groups like ACORN Housing.

Compare Frank's support for the Oxley bill with his reaction to the McCain bill, which Frank decried for cutting off his non-creditworthy Dem constituents.

Here's the two bills:

H.R. 1461

Titles:
Subtitle A--Improvement of Safety and Soundness

Sec. 101. Establishment of the Federal Housing Finance Agency.
Sec. 102. Duties and authorities of Director.
Sec. 103. Housing Finance Oversight Board.
Sec. 104. Authority to require reports by regulated entities.
Sec. 105. Disclosure of charitable contributions by enterprises.
Sec. 106. Assessments.
Sec. 107. Examiners and accountants.
Sec. 108. Prohibition and withholding of executive compensation.
Sec. 109. Reviews of regulated entities.
Sec. 110. Regulations and orders.
Sec. 111. Risk-based capital requirements.
Sec. 112. Minimum and critical capital levels.
Sec. 113. Review of and authority over enterprise assets and liabilities.
Sec. 114. Corporate governance of enterprises.
Sec. 115. Required registration under Securities Exchange Act of 1934.
Sec. 116. Financial Institutions Examination Council.
Sec. 117. Guarantee fee study.
Sec. 118. Conforming amendments.

Subtitle B--Improvement of Mission Supervision

Sec. 121. Transfer of program and activities approval and housing goal oversight.
Sec. 122. Review by Director of new programs and activities of enterprises.
Sec. 123. Conforming loan limits.
Sec. 124. Annual housing report regarding regulated entities.
Sec. 125. Revision of housing goals.
Sec. 126. Duty to serve underserved markets.
Sec. 127. Monitoring and enforcing compliance with housing goals.
Sec. 128. Affordable housing fund.
Sec. 129. Consistency with mission.
Sec. 130. Enforcement.
Sec. 131. Conforming amendments.

Subtitle C--Prompt Corrective Action

Sec. 141. Capital classifications.
Sec. 142. Supervisory actions applicable to undercapitalized regulated entities.
Sec. 143. Supervisory actions applicable to significantly undercapitalized regulated entities.
Sec. 144. Authority over critically undercapitalized regulated entities.
Sec. 145. Conforming amendments.

Subtitle D--Enforcement Actions

Sec. 161. Cease-and-desist proceedings.
Sec. 162. Temporary cease-and-desist proceedings.
Sec. 163. Prejudgment attachment.
Sec. 164. Enforcement and jurisdiction.
Sec. 165. Civil money penalties.
Sec. 166. Removal and prohibition authority.
Sec. 167. Criminal penalty.
Sec. 168. Subpoena authority.
Sec. 169. Conforming amendments.

Subtitle E--General Provisions

Sec. 181. Boards of enterprises.
Sec. 182. Report on portfolio operations, safety and soundness, and mission of enterprises.
Sec. 183. Conforming and technical amendments.
Sec. 184. Study of alternative secondary market systems.
Sec. 185. Effective date.

S. 190

Subtitle A--Improvement of Safety and Soundness Supervision

Sec. 101. Establishment of the Federal Housing Enterprise Regulatory Agency.
Sec. 102. Duties and authorities of Director.
Sec. 103. Federal Housing Enterprise Board.
Sec. 104. Authority to require reports by regulated entities.
Sec. 105. Examiners and accountants; authority to contract for reviews of enterprises.
Sec. 106. Assessments.
Sec. 107. Regulations and orders.
Sec. 108. Prudential management and operations standards.
Sec. 109. Limitation on nonmission-related assets.
Sec. 110. Risk-based capital test for enterprises.
Sec. 111. Limit on golden parachutes.
Sec. 112. Reporting of fraudulent loans.

Subtitle B--Improvement of Mission Supervision

Sec. 121. Transfer of program approval and housing goal oversight.
Sec. 122. Review of enterprise programs, and activities.
Sec. 123. Authority to require reports by enterprises.
Sec. 124. Monitoring and enforcing compliance with housing goals.
Sec. 125. Assumption by director of other HUD responsibilities.
Sec. 126. Administrative and judicial enforcement proceedings.

Subtitle C--Prompt Corrective Action

Sec. 141. Capital classifications.
Sec. 142. Supervisory actions applicable to undercapitalized regulated entities.
Sec. 143. Supervisory actions applicable to significantly undercapitalized regulated entities.
Sec. 144. Authority over critically undercapitalized enterprises.

Subtitle D--Enforcement Actions

Sec. 151. Cease-and-desist proceedings.
Sec. 152. Temporary cease-and-desist proceedings.
Sec. 153. Removal and prohibition authority.
Sec. 154. Enforcement and jurisdiction.
Sec. 155. Civil money penalties.
Sec. 156. Criminal penalty.
Sec. 157. Notice after separation from service.

Subtitle E--Other Reporting Regarding Regulated Entities

Sec. 161. Reporting regarding regulated entities.

Subtitle F--General Provisions

Sec. 171. Conforming and technical amendments.
Sec. 172. Presidentially appointed directors of enterprises.
Sec. 173. Effective date.

"Bart" luuuuuvvvvvss himself the McCain bill (and flogs this like McCain's visions here are like the Sermon on the Mount). But the Oxley bill, substantially the same, was "part of the problem"....

Had the two bills passed, they would have been reconciled in conference.

Each would have potentially allowed closer oversight of the Macs and possibly prevented the necessity of bailouts (but as I've posted earlier, don't have specific requirements that credit limits be tightened).

Go figure.

Cheers,
 

Not to mention, the Macs are hardly the problem here; it's the banks and other financial institutions that are failing....

Cheers,
 

Not after you panicked the markets with the fabrication that the banks would be failing like during the Great Depression if this bill was not passed on Monday.

After who panicked what now?

Let's take a time machine to last Tuesday, shall we?

Bernanke: The financial markets are in quite fragile condition and without action they will surely get worse...This will be a major drag on the U.S. economy and be a major drag on the ability of the economy to recover."


Wednesday

Katie Couric: If this doesn't pass, do you think there's a risk of another Great Depression?

Sarah Palin: Unfortunately, that is the road that America may find itself on. Not necessarily [that]this, as it's been proposed, has to pass or we're gonna find ourselves in another Great Depression. But there has to be action taken, bipartisan effort...

Reuters:The head of the Congressional Budget Office, Peter Orszag, warned lawmakers of possible "chaos" if Congress does nothing resulting in a meltdown, "maybe on the magnitude of the Great Depression," he said.

GWB: The government's top economic experts warn that, without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold...More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically.

Sunday:

GWB: And this plan sends a strong signal to markets around the world that the United States is serious about restoring confidence and stability to our financial system. Without this rescue plan, the costs to the American economy could be disastrous.

Physician, heal thyself!

In short, members of both parties have been looney psycho-go-nuts when speaking in public about this subject, simultaneously repeating and forgetting the old cliche that the markets run on confidence in the market.
 

PMS_Chicago:

"... the markets run on confidence..."

There's some wags that would end that sentence: "... games."

Of course, classical free market theory assumes that no "confidence" is needed. There was an economics Nobel awarded to the guy that pointed out that this was nonsense; people are non-rational actors ... not to mention jerks and crooks at times. So much for laissez faire, eh?

Cheers,
 

PMS:

This is not the Dems vs. Bush. This is the Dems and Bush teamed up vs. the House GOP.

That team of the Dems and Bush panicked the markets with dooms day scenarios. The House GOP did not.

The Dems had the responsibility to back up their doomsday scenarios with votes for their bill which they brought to the floor. The House GOP owed nothing to the Dems to pass their bill and to bail them out from panicking the markets.

No matter how you want to spin this, when you run the Congress the buck stops with the majority.
 

The SEC just adopted one of the House GOP proposals by writing the insane "mark-to-market" accounting requirement out of the Sarbanes Oxley bill under the guise of a "clarification."

Under generally accepted accounting practices, valuation of assets under reasonable estimates of future sales was perfectly acceptable. However, under "mark-to-market," all assets must be valued at what they can currently fetch on the market.

Because of the panic, no one is buying mortgage backed securities, so they have to be valued at zero under "mark-to-market." This means that banks with MBSs do not have collateral on their books to get day to day loans.

By returning to generally accepted accounting practices, the banks should now be able to show a more realistic asset picture, regain liquidity and avoid the need for much if not all of the buyout.

BTW, this is deregulation at work.

The next target for deregulation should be to break up the government mortgage monopolies Fannie and Freddie and sell off their assets to private banks.
 

"This is not the Dems vs. Bush. This is the Dems and Bush teamed up vs. the House GOP."
I'm sorry Bart, but yesterday the Republican House leadership blamed Pelosi's speech, for driving the Republicans away. Today even Republicans said that was bullshit. Word also got out that Gingrich was storming against the bill until the last minute, playing games towards Gingrich 2012.
Not everyone here follows the day to day, but somehow I assume you do.
Here's some more fun with Papa John
 

"Bart" DeRegulata:

The SEC just adopted one of the House GOP proposals by writing the insane "mark-to-market" accounting requirement out of the Sarbanes Oxley bill under the guise of a "clarification."

"I'm Agent 007. I have a license to steal."

Under generally accepted accounting practices, valuation of assets under reasonable estimates of future sales was perfectly acceptable....

Typo there. Should be "Under rising or at least stable markets, valuation of assets under reasonable estimates of future sales was perfectly acceptable..."

IOW, as long as things keep going up, we won't be caught on margin....

... However, under "mark-to-market," all assets must be valued at what they can currently fetch on the market.

Which is how you keep things from snowballing when the market takes a dump; firms can at least liquidate while going out of business without defaulting on loans to the next bank down the line....

Because of the panic, no one is buying mortgage backed securities, so they have to be valued at zero under "mark-to-market." This means that banks with MBSs do not have collateral on their books to get day to day loans.

TS. If they stuck to simple mortgages instead of highly leveraged (30-1 or so), they might not have been wiped out when the masrket took a 20% dump. They'd still have assets ad the reserves to cover them.

What's the matter with valuing stuff at the price it will fetch on open market. "Bart", I'm asking this question as commie to capitalist....

By returning to generally accepted accounting practices, the banks should now be able to show a more realistic asset picture, regain liquidity and avoid the need for much if not all of the buyout.

Where "more realistic asset picture" is defined as "rosy and fantastic models that housing booms can extend indefinitely and that there's an infinite amount of money to sustain this bubble's inflation indefinitely".

Sure, let's relax the valuation rules and the reserve requirements so we can get ourselves into more of this pile'o'crapola we're in precisely because of this particular financial legerdemain.....

BTW, this is deregulation at work.

Combined with fraud and massive confidence games. Yes, indeed. I thought we were supposed to be trying to figure out how to dig ourselves out from the big sh*tpile that resulted.

The next target for deregulation should be to break up the government mortgage monopolies Fannie and Freddie and sell off their assets to private banks.

They're private companies, "Bart". Even as GSEs. How do you sell off what you don't own? ... that is, unless you seize them first. But that would be socialist, wouldn't it?

Cheers,
 

Bart writes:
BTW, this is deregulation at work.

No it isn't. Its an accounting change that might help some hard hit banks recover a degree of solvency. However, looking at how wall street has handled the last 15 years or so of deregulation, its likely to lead to more sever problems in the future. A big part of the reason that nobody will loan anyone else money right now is because of obscured valuation of assets. This change may temporarily ease some liquidity, but not the larger problem.
 

For a good criticism of changing the mark to market rule, see here.
 

Obama is claiming without evidence that the mortgage mess was caused buy Clinton and Bush era deregulation. In fact, the evidence is mounting that government efforts to lower lending standards for non-creditworthy borrowers could obtain mortgages is the root cause of this mess.

Economist Steven Malanga of the Manhattan Institute added to this evidence today with a very interesting post at RealClearMarkets detailing the Fed's role in pushing lower lending standards onto the banks with links to Fed documentation.

Rather than additional future toxic government intervention into the mortgage marketplace, we apparently need further deregulation to remove the government from these markets.
 

mark field said...

For a good criticism of changing the mark to market rule, see here.

Actually, the author offers one of the better explanations of the problems with this rule by an economist he trusts, then proceeds to ignore what he was told:

OK -- there is a legitimate issue buried here. I asked University of Oregon economist Mark Thoma, who keeps track of the state of economic thinking on the relevant issues of the day better than anyone I know, whether there was a basis to the sudden upswell of criticism of mark-to-market accounting. Here's what he told me:

"One way to think about it is that when there is market failure of some sort that is temporary, values will be distorted during that time period and will not reflect the true value at maturity.

...I think the idea is that when the market is in a bubble, marking to market (instead of to fundamentals...) inflates the asset values, and that drives further demand, raises the values, and thus chases price upward.

If the price were marked to fundamentals instead, then the value of the asset wouldn't follow the market up, and that would have a stabilizing effect relative to the mark-to-market approach.

Now they are making the same argument on the other side. The true, fundamental values are different from the values we see today, so, it's like a negative bubble in that sense. Prices chase values down, this becomes self-reinforcing, and makes the problem worse. If prices held at their fundamental values, then there would be more stability."

So, mark-to-market accounting contributes both to credit bubbles, which no one on Wall Street ever complains about because they are too busy raking in the cash, and credit busts, at which point, Something Must Be Done.

In sum, the mark to market rule causes banks to take unsound risks when the market is rising and then grossly exaggerates the losses when the bill comes due on the risks.

Apart from driving the financial sector to the abyss of economic depression, there is nothing wrong with the rule.

Yet another argument that the government caused this mess and deregulation rather than further toxic government intervention is the solution.

There's just one big fat honking problem. If mark-to-market rules are suspended, what replaces them?

You go back to the pre Sarbanes Oxley generally accepted accounting standards which were in place for decades.
 

Wachovia went out with a book value of $75 billion. Citi paid $2 billion. Could it be that asset values are overstated, not understated?

-Michael Rapoport, Dow Jones

http://bigpicture.typepad.com/comments/2008/10/quote-of-the-da.html#comments
 

@Mark Field, thanks for introducing me to Economist's View.

It seems quite in keeping with other trends that these folks only want a rule such as mark-to-market enforced when it makes them money, much like disingenuous cries about "free markets" in the first place. When the chips are down even the Street wants a little welfare legislation---so long as they're the recipient.
 

Mark Field, thanks for introducing me to Economist's View.

I think it's the best of the econ blogs. Thoma is very thoughtful and doesn't overstate his case. He pretty much calls 'em as he sees 'em.
 

It should be pointed out that fear is a more compelling emotion than greed, thus the potential for precipitous falls but no such precipitous bubbles. That being said, the panic is usually short-term. When "mark-to-market" values emerge at the bottom of the panic, they are no longer based on either optimism or panic, but rather on a more rational (albeit less exuberant) valuation of the fundamental worth of the asset. What's the matter with that? If you want to know if you've been left standing after the big hit. that's the number you want.

Cheers,
 

Arne,

Part of the mark-to-market issue is that we're not talking about folks wanting to know where they stand after the big hit. That kind of thinking is fine for us plebes, but the guys making the real money know where they stand and are simply looking for ways to a) make it better, b) make it look better (as a way to make it better). "Buy low, sell high" is still the name of the game, and mark-to-market was embraced when it helped sell high. Now that mark-to-market means sell low, "they" want to scrap it.

As for panics being short term, I've been saying all week, "Potter isn't selling. He's buying!"
 

The current problem has less to do with panic selling than with information asymmetry. Each bank probably has a rough idea what its holdings are worth, but it's too difficult for outsiders to judge the accuracy of that valuation. Thus, buyers have to treat them all as "lemons" in order to be safe. This is a classic market failure; see here.
 

Bart writes:
In fact, the evidence is mounting that government efforts to lower lending standards for non-creditworthy borrowers could obtain mortgages is the root cause of this mess.

Lowering lending standards is one of the root causes of the mortgage crisis. Deregulation is a much larger one, unless you think subprime loans are just a minor part of the situation. Neither should have been allowed. Bart is correct when he asserts that the government should not have pushed to lower lending standards. However, in the last 7 years, it wasn't just the government pushing to lower standards. Lenders did plenty of that themselves with a combination of exotic loan packages, insane teaser rates, and outright fraudulent lending practices.

Deregulation is also why the mortgage crisis has spilled over into the credit and commercial paper markets and now threatens to literally put the brakes on the economy.
 

Bit:

You are really reaching.

The Garn-St. Germain Depository Institutions Act of 1982 which permitted adjustable mortgages is over a quarter century old and did not reduce the standards for extending credit.
 

"Bart" DePalma:

["Bart" writes, citing an article that tries to pawn off the blame here on minorities, or at least on efforts to increase minority participation]: In fact, the evidence is mounting that government efforts to lower lending standards for non-creditworthy borrowers could obtain mortgages is the root cause of this mess.

As I've posted previously, the Rethuglican covert race-baiting garbage is wrong. The CRA did not cause a flood of undercapitalised mortgages that are now non-performing.

The problem is not the CRA. It is not low-to-moderate income borrowers. It's the freakin' predatory sub-prime mortgages that all the financial insttutions wanted to sell because in the housing boom everyone was buying, and they're "safe" as long as prices are going up, up, up ... not to mention the added 'bonus' of AMRs that can be jacked up to bleed the last drop of blod out of people as necessary (followed by foreclusure, not a bad deal in a rising market, for those that couldn't keep up). Sub-primes with ARMs were taken by all sorts of people, and were aggressively flogged by the various lending institutions (Countrywide's ad campaigns are exemplary of this).

Cheers,
 

@Mark Field, you seem bound and determined to educate me, for which, thanks. "Information asymmetry" indeed. I note the referenced article isn't universally accepted. (What is?) Can you say if there's a tendency toward acceptance/rejection based on liberal/conservative ideological lines?
 

arne:

The Dem "lenders are predators and borrowers are morons" schtick is contrary to all reality.

Lenders LOSE MONEY when their borrowers cannot pay their mortgages and then the Lender has to spend a great deal of money in foreclosure followed by taking a loss on a foreclosure sale.

It is not in the Lender's interest for a mortgage to fail, which is why it took more than a decade of government pressure and subsidy to change decades old conservative mortgage banking practices to advance loans to non-creditworthy and largely Dem borrowers.
 

Bart says:

"...largely Dem borrowers."

Given the areas in which the subprime crisis is most acute also typically go red, or at least have in the past couple of elections, I am curious where you come up with the idea that these are "largely Dem borrowers." Arizona, Texas and Florida, for example, are not exactly Democratic hotbeds...
 

Mike:

Every state has a mixture of Red and Blue voters.

There is a reason why the Dems fought like hell against the 2005 McCain proposal to raise lending standards while the GOP supported it. If it were Red borrowers getting cut off, the votes in Congress would have been reversed. Politicians protect their voters.
 

"Bart" DePalma:

The Dem "lenders are predators and borrowers are morons" schtick is contrary to all reality.

No.

Lenders LOSE MONEY when their borrowers cannot pay their mortgages and then the Lender has to spend a great deal of money in foreclosure followed by taking a loss on a foreclosure sale.

Not when bundled up, and sold off to someone else. Then it's someone else's "problem".

See my link above. Community banks lending under CRA are doing better than the big ones.

Not to mention, in a rising market, it doesn't hurt to do bad loans. You gobble up the house, and then sell it for a profit.

It is not in the Lender's interest for a mortgage to fail, which is why it took more than a decade of government pressure and subsidy to change decades old conservative mortgage banking practices to advance loans to non-creditworthy and largely Dem borrowers.

Huh?!?!?

It's such things as ARMs, no-equity loans, and interest-only loans that have been really toxic. But these are neither required nor encouraged by the CRA and other such laws. The bright guys that came up with those things are the big bankers and such that wanted to keep lending and lending, and selling and selling, raking in money hand-over-fist while the bubble continued. Well, party's over. Let's not do it again; I can't endure the hangover.

Cheers,
 

"Bart" DePalma:

The Dem "lenders are predators and borrowers are morons" schtick is contrary to all reality.

Oh. I thought it was the credit card companies, for instance, that set the teaser "0% for a year" terms, and the other clauses hidden deep within the bowels of a long 6 point type form that said that rates could be changed for just about any reason at all, that twiddled the billing dates so people wouldn't know when they had to pay by, and then jacked the rated up to close to 30% APR for the slightest infraction. <*sheesh*> These folks would make Mafiosi like Don Gotti blush in their audacity and heartlessness....

Cheers,
 

From my fax machine, 4:13PM today:


Jumbo and Super Jumbo
First or Second Mortgage
No Seasoning
No Doc
In Trust or Probate
OK Listed for Sale
Owner and Non Owner occupied
We will cross collateralize
In Foreclosure or Bankruptcy OK

Call for quote

Yeah, lenders aren't predators...

(Do you have any idea what the starting interest rate would have to be to accomodate that risk?)
 

Bart writes:
You are really reaching.

The Garn-St. Germain Depository Institutions Act of 1982 which permitted adjustable mortgages is over a quarter century old and did not reduce the standards for extending credit.

I didn't say that Garn-St. Germain lowered lending standards, if you read without the political agenda goggles glued to your face. And, in case you haven't been reading the news, ARMS and similar derived instruments have been the principal poison in the the mortgage bubble crash.

Earlier bart said:In fact, the evidence is mounting that government efforts to lower lending standards for non-creditworthy borrowers could obtain mortgages is the root cause of this mess.

What are the percentages of the defaulted and defaulting loans that resulted directly from the issues raised that the article you cited?
 

Bart writes:
It is not in the Lender's interest for a mortgage to fail, which is why it took more than a decade of government pressure and subsidy to change decades old conservative mortgage banking practices to advance loans to non-creditworthy and largely Dem borrowers.

Lenders did this all by themselves. Unless you think making ARMS legal is 'government pressure', which I don't. And by the way, can you explain your impish need to demonize democrats, even those who vote democratic or live in democratic districts? As it stands right now, you're not a substantive contributor by any stretch of the imagination. If anything, its your behavior here that perfectly exhibits what weakens this country: rabid political ideological divisiveness.
 

Bart writes again:
2005 McCain proposal to raise lending standards

Besides creating a new bureaucracy and gutting reporting requirements for securities activities by lending institutions, what measures did the Federal Housing Enterprise Regulatory Reform Act propose to raise lending standards?
 

bitswapper:

[Bart writes again]:
2005 McCain proposal to raise lending standards ...

Yeah, he writes it again and again is if it were true. But as I've pointed out and he's ignored, that 2005 bill didn't "raise lending standards" (and neither did the contemporaneous House bill).

Cheers,
 

So, stated otherwise, Bart, you have absolutely nothing to back your assertion that these are "largely Dem borrowers".
 

bitswapper said...

Bart writes: The Garn-St. Germain Depository Institutions Act of 1982 which permitted adjustable mortgages is over a quarter century old and did not reduce the standards for extending credit.

I didn't say that Garn-St. Germain lowered lending standards, if you read without the political agenda goggles glued to your face. And, in case you haven't been reading the news, ARMS and similar derived instruments have been the principal poison in the the mortgage bubble crash.

There is nothing wrong with ARMs. We have been using them without problems for a generation. The problem was extending ARMs to the non-creditworthy without any money down or worse in interest only vehicles where the borrower does not gain equity.

BD: Earlier bart said:In fact, the evidence is mounting that government efforts to lower lending standards for non-creditworthy borrowers could obtain mortgages is the root cause of this mess.

What are the percentages of the defaulted and defaulting loans that resulted directly from the issues raised that the article you cited?

The difference between the normal low rate of default and the current higher rate. We extended loans to people who could not pay them back under the terms of the loan without relying upon ever increasing prices.

BD: ...2005 McCain proposal to raise lending standards...

Besides creating a new bureaucracy and gutting reporting requirements for securities activities by lending institutions, what measures did the Federal Housing Enterprise Regulatory Reform Act propose to raise lending standards?

I have posted the standards before. Go read the bill yourself.
 

Those who claim that the cause of the current financial problems are due to any particular thing (except regulatory failure, which is clearly seen) seem to be suffering from a particularly virulent form of the "post hoc, ergo propter hoc" fallacy.

It is particularly egregious to claim, as Bart did just now, that the "difference between the normal low rate of default and the current higher rate" is entirely due to Democratic policy initiatives. It completely leaves out the fact that weakened lending oversight created a vacuum, into which many agencies, both innocuous and pernicious, expanded.

I personally know more than one mortgage broker who got quite a financial boost selling sub-prime mortgages and are now playing tag with legal problems (one of them left the country, whether to avoid the law or just because he could now afford to take his family on a two-year Caribbean vacation I cannot say.)
 

Bart writes
We have been using them without problems for a generation. The problem was extending ARMs to the non-creditworthy without any money down or worse in interest only vehicles where the borrower does not gain equity.

As the credit markets crash into the ground because of them. ARMS really only work when property values are fast on the rise. When that stops or when the fed raises the rates, ARMS cause very high percentages of failure, irrespective of the creditworthiness of the pool of borrowers. But you're right that they should never have been offed to marginal borrowers. Nobody else either. And offering them with no money down or as interest only wasn't a result of government pressure - lenders did that all by themselves. As to government pressure to offer them to people with low credit ratings, I'd would be interested in what specifically that pressure was. Did the fed offer some financial incentive to offer loans to people with low credit scores?

I asked:
What are the percentages of the defaulted and defaulting loans that resulted directly from the issues raised that the article you cited?

Bart replied:
The difference between the normal low rate of default and the current higher rate.

I think I may have misstated the question. Since you appear to be trying to assert that lowered lending standards is the only substantive cause of the mortgage crisis and cited an article about attempts to alleviate lending discrimination, I was wondering if you knew, out of all the failed mortgages, what percentage of them was caused by the lowered lending standards cited in the article.

I asked Bart to explain what specific measures the Federal Housing Enterprise Regulatory Reform Act proposed to raise lending standards.

Bart quipped:
I have posted the standards before. Go read the bill yourself.

I did, and didn't find anything other than ambiguous "promise to be responsible lenders" types of language (nothing specific like minimum debt-to-income ratios or even recommended ones). Since you made the claim, I asking you to point out where those increase standards for creditworthiness of mortgage borrowers are, and what they are.

Just saying "I posted them so go read it yourself" can be reasonably read as "I don't know". You can, of course, easily dispel that by pointing to those specific raised lending standards for home mortgages in the bill.
 

This comment has been removed by the author.
 

[bitswapper]: Besides creating a new bureaucracy and gutting reporting requirements for securities activities by lending institutions, what measures did the Federal Housing Enterprise Regulatory Reform Act propose to raise lending standards?

["Bart"]: I have posted the standards before. Go read the bill yourself.

No, you haven't. Because they aren't there.

Cheers,
 

"Bart" DePalma:

There is nothing wrong with ARMs. We have been using them without problems for a generation. The problem was extending ARMs to the non-creditworthy without any money down or worse in interest only vehicles where the borrower does not gain equity.

Actually, people do gain equity in such mortgages ... IF the housing market is going up. And this is enough for the banks to say, "hey, no problem if you haven't got the money".... If it's going down ....

So how do we make sure the housing market is going up? Why, you stoke demand, and push people to buy as much as they can afford (or more than they can reasonably afford ... if and when the housing market or economy or both take a dump). If it's in danger of doing so, you just try harder to keep fluffing it, hoping that you can get your bonuses and commissions before the legerdemain is exposed and the Ponzi scheme collapses....

Cheers,
 

So how do we make sure the housing market is going up?

I expected "ownership society" to be the punchline...