Bush Announces $17.4B Auto Bailout

On Friday morning, President George W. Bush - yeah, the lame duck - waddled into the Roosevelt Room of the White House to announce his plans for an emergency bailout of the U.S. automakers, namely General Motors and Chrysler.

Ford Motor Company is a better financial position, so they were not included in this plan.

He intimated that under normal circumstances, he would just let the automakers file for bankruptcy, but in justification of his actions, Bush said:

These are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action. The terms and conditions of the financing provided by the Treasury Department will facilitate restructuring of our domestic auto industry, prevent disorderly bankruptcies during a time of economic difficulty, and protect the taxpayer by ensuring that only financially viable firms receive financing. Additional loans may be available in February based on the availability of TARP funds.

Details of the plan are as follows:

• General Motors and Chrysler will receive loans from the federal government in the amount of $13.4 billion ($9.4 billion to GM and $4 billion to Chrysler) this month
  
  
• Financing will be drawn from the $700 billion Troubled Asset Relief Program (TARP) that was organized for the Wall Street bailout
  
  
• The loans are designed to stabilize the two automakers through March 2009, at which time they must show they are financially viable; If the firms have not attained viability by March 31, 2009, the loan will be called and all funds returned to the Treasury
  
  
• Conditions on the loans requires the companies to quickly reduce their debt by two-thirds, mostly through debt-for-equity swaps, and to reach an agreement with the United Auto Workers union to cut wages and benefits so they are competitive with those of employees of foreign-based automakers working in the United States
  
  
• Other conditions on the loans include placing limits on executive compensation and perks such as corporate jets, and requiring the automakers to adhere to fuel efficiency and emission standards and open books to government scrutiny
  
  
• An additional $4 billion will be made available in February, based on the release of funds from TARP

Bush's announcement comes one week after Senate Republicans blocked legislation to aid the automakers that had been negotiated by the White House and Congressional Democrats, and the loan package announced by the president includes roughly the identical requirements in that bill, which had been approved by the House.

Because the bailout legislation failed in Congress, senior administration officials said that the loan package would essentially take the form of a contract between the government and the automakers. Officials said they expected those contract agreements would be signed by the end of the day.

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A New York Times article about the bailout points out, under the plan, Mr. Bush essentially handed off to President-elect Barack Obama what will become one of the first, most difficult calls of his presidency: a political and economic judgment about whether G.M. and Chrysler are financially viable.

Mr. Obama and his economic team will have to make a convincing, public case that the wage cuts, plant closings and creditor agreements so change the landscape of the industry that the carmakers can turn profitable in short order.

But Mr. Obama will be under tremendous political pressure as well, because if his new team concludes that the automakers have not struck the right deals, it would mean a move to bankruptcy court, and likely widespread layoffs that would ripple far beyond the companies themselves.

Mr. Obama was elected partly with the enthusiastic support of the unions, who liked his talk of protecting jobs by renegotiating trade agreements. Now, in his first months, he will be asking them to give back gains they have negotiated over decades.

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plez sez: as expected, bush squeezed the last two drops of political capital from his faded political career to provide a temporary bailout to the us automakers - his post-presidential revisionist spin team will be at the ready to re-write history to show that "the us auto industry failed under Obama's watch!"

gm and chrysler will limp into the new year with a big box of money from uncle george, with both of their plants idle until late january or mid february. and i'm not convinced that chrysler will ever open its plants under the chrysler brand in 2009.

this loan comes with few strings attached (oh, they have to sell the corporate jet that they can't afford to put back in the air. ooooh, whoopie!) and good luck with getting the UAW to offer much in the area of wage concessions, after they've fought tooth-and-nail to get the compensation and nice pension plans their workers now enjoy.

as the new york times article so deftly stated, this stinking automakers bailout turd will be sitting on BARACK OBAMA's desk when he takes over the oval office on january 20th, since george bush has essentially washed his hands of this matter by giving the automakers enough money to keep them afloat until the inauguration of Obama. bush can now go back to packing boxes for his and laura's move to dallas in a few weeks.

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the federal government can't print enough money to keep the big three afloat until the end of this recession. these companies can restructure all they want, there ain't any credit available for few people who want to buy their cars! the reason for the plant shutdowns is that the inventory on hand isn't selling, so there's no need to make more cars.

okay, a show of hands: does anyone seeing this scenario of having few buyers for the glut of cars changing in the next four, eight, or twelve weeks?

...neither does plezWorld!

one of these companies - more than likely chrysler since it is so close to brink - is going to fail.

to my way of thinking, it's better to let them fail now rather than giving away untold billions of dollars that will never be recouped. this is corporate welfare (giving away money with no foreseeable way to retrieve the assets in the future) of the highest magnitude.

~ ~ Citations ~ ~

Read the New York Times article about Bush's bailout for the auto industry.

Read the Atlanta Journal-Constitution article about the auto bailout.

Read the CNN.com article about Bush's automaker bailout plan.

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Auto Company Bailout Dies in Senate

On Thursday night, the US Senate abandoned all efforts to fashion the passed House bill that would rescue General Motors (GM) and Chrysler (Ford claims it has enough cash to stay afloat). Senate Republicans refused to play ball and support a bill endorsed by the White House and Senate Democrats.

The failure to reach agreement on Capitol Hill may spell doom General Motors to a bankruptcy and closure in the coming weeks, with Chrysler potentially following close behind. While Ford Motor has more cash on hand to avoid an immediate crisis, its production could be disrupted by problems in the supplier base, as could the production of overseas automakers with U.S. plants such as Toyota Motor and Honda Motor.

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After Senate Republicans balked at supporting a $14 billion auto rescue plan approved by the House on Wednesday, negotiators worked late into Thursday evening to broker a deal, but deadlocked over Republican demands for steep cuts in pay and benefits by the United Automobile Workers union in 2009. The failure in Congress to provide a financial lifeline for G.M. and Chrysler was a bruising defeat for President Bush in the waning weeks of his term, and also for President-elect Barack Obama, who earlier on Thursday urged Congress to act to avoid a further loss of jobs in an already deeply debilitated economy.

Senate Majority Leader Harry Reid (D-NV) is quoted as saying, "We have worked and worked and we can spend all night tonight, tomorrow, Saturday, and Sunday, and we're not going to get to the finish line. It’s over with. I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight. This is going to be a very, very bad Christmas for a lot of people as a result of what takes place here tonight."

Speaking for the Senate Republicans, Sen. Mitch McConnell (R-KY) said, "We have had before us this whole question of the viability of the American automobile manufacturers. None of us want to see them go down, but very few of us had anything to do with the dilemma that they have created for themselves. The administration negotiated in good faith with the Democratic majority a proposal that was simply unacceptable to the vast majority of our side because we thought it frankly wouldn’t work."

Moments later, the Senate failed to win the 60 votes need to bring up the auto rescue plan for consideration. The Senate voted 52 to 35 with 10 Republicans joining 40 Democrats and 2 independents in favor.

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There is still hope and the struggling automakers may get some money anyway.

CNN.com reports as part of their effort to urge skeptical Republicans to back the deal, Bush officials made clear that if Congress didn't act, the White House would have to step in to save Detroit from collapse with funds from the Troubled Asset Relief Program (TARP), according to the sources familiar with the conversations. One of the sources said that a White House official made it clear to a GOP senator that would be the worst option, because the loan could go to the auto companies with few or no requirements along with it.

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Foreign automakers have been silent on the entire bailout plan. Toyota, Honda, Nissan and nearly all the other foreign companies that build vehicles in the United States have said little publicly concerning whether their American rivals should get the billions of dollars in emergency aid they have requested in recent weeks. To be sure, the companies themselves have little to gain by commenting on the bailout beyond expressing concern about the general health of the industry.

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Asian stocks sank deep into negative territory and the dollar fell to a 13-year low against the Japanese yen on Friday following the collapse of a $14 billion bailout plan for the flailing U.S. auto industry. In Japan, the Nikkei 225 share average ended 5.6 percent lower during morning trading after it became clear that the negotiations to bailout Detroit automakers had failed in the Senate.

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plez sez: much ado about nothing! the last act of the lame duck bush will be to bail out gm and chrysler... there is no way bush is going to let these guys falter before he hands over the reins to PRESIDENT-ELECT BARACK OBAMA on january 20th.

if necessary, the treasury will claw back some of the $700 billion wall street bailout money to keep detroit afloat for at least a few more months. and the bad thing is that this money will come with NO STRINGS ATTACHED! you can bet the gm ceo (wagoner) will hang around long enough to spend the windfall!

without a wholesale overhaul of their business practices, the detroit automakers are only prolonging the agony of their demise. plezWorld is convinced that at least one of the big three will fail within the next 12 months.

~ ~ Citations ~ ~

Read the New York Times article about how Asian markets sunk on news of bailout failure.

Read the New York Times article about the auto bailout failure in the Senate.

Read the New York Times article on the silence of the foreign automakers.

Read the CNN.com article about how Senate Republicans sunk the auto bailout.

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Auto Company Bailout Passes House

CNN.com report on Auto Bailout:

What follows are excerpts from a CNNMoney.com article on the House bill:

The House passed a stopgap $14 billion bailout to U.S. automakers Wednesday evening, but Republican opposition cast doubts about its fate as it moves on to the Senate.

The House vote came in the wake of an agreement on the measure earlier in the day between Democratic Congressional leaders and the Bush administration.

The bill is designed to keep General Motors and Chrysler out of bankruptcy through at least March to give the new Congress and Obama administration a chance to craft a more long-term solution.

The measure passed by a count of 237 to 170 thanks to overwhelming Democratic support. But only 32 Republicans joined Democrats in voting for the bill.

During the House debate, Democrats and Republicans from Michigan both expressed heavy support for the bailout. But virtually all other Republicans who spoke during the debate argued that it would not solve the problems dogging the industry. The White House so far has failed to generate support among Senate Republicans, who have the power to kill the bill when it shows up in the Senate.

The $14 billion is $1 billion less than what was being discussed earlier in the week, and less than half the $34 billion requested by automakers last week. Still it may well be enough to stave off the immediate threat of bankruptcy.

GM has said it needs $4 billion by the end of the month to continue operations, and believes it'll need an additional $6 billion in the first three months of 2009. Chrysler has said it needs $4 billion by the end of the first quarter.

Ford Motor, which has more cash on hand than its U.S. rivals, is not expected to tap into this bailout in the coming months.

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The stopgap measure is designed to let the new Congress and incoming administration of President-elect Barack Obama to craft a longer-term solution. It would also give the companies time to negotiate with creditors and the United Auto Workers union on additional concessions needed to stem their ongoing losses.

But the bill also sets strict oversight of the companies. There would be limits on executive pay, prohibitions for so-called golden parachutes and requirements that the automakers get rid of their corporate aircraft and not pay dividends while loans are outstanding.

The bill also provides for a presidential appointee, popularly referred to as a "car czar," to oversee the company's efforts to restructure their operations. If the car czar determines that the companies have not made progress on cutting costs, the loans would be recalled within 30 days.

In addition, the government would receive warrants - the right to buy a stake in the companies at a certain price - equal to 20% of the loan's value.

plez sez: horse whoo-ee! the house democrats have lost their collective minds.

fourteen billion dollars is not going to save detroit... not even for a couple of weeks! this is putting the proverbial band-aid on a cancer. one of the big three is going down and they'll be taking $7-10 billion of our dollars with them.

this is a market correction exacerbated by this recession. one of the big three is not supposed to survive and a lifeline is not going to save them. and because of this act, the house democrats may be looking at BARACK OBAMA presiding over the demise of the US auto industry as we know it, instead of them failing on george bush's watch!

the mortgage companies that got fat and then got skinny with those sub-prime loans... got a bailout!

the wall street brokerage houses that got fat and then got skinny propping up those sub-prime loans for the mortgage companies... got a bailout!

the US auto manufacturers got real fat and are now looking really skinny after foisting their "less than stellar" wares on a US public that now has numerous alternatives to their shitty products... is halfway there to getting a bailout!

the 1.7 million people - like plezWorld - who worked hard but watched their jobs blow away like sand on a hurricane ravaged beach since the recession began in December 2007 (there were 533,000 job losses in November 2008 alone)... get no relief, get no sympathy, and damn sure get NO BAILOUT!

who's next? what is the next industry with a powerful lobby in washington, dc that is going to belly up to the goodwill trough in congress. we're staring at over one trillion dollars in bailout cash heading to special interest groups without ONE PENNY of relief to the people who pay their taxes. there is something wrong with this picture... something is eerily wrong here!

i will be contacting my senators to urge them to vote against ANY bill that bails out the auto industry! i'll be checking tonight to ensure that my congressman (rep. hank johnson) voted against this bill.

~ ~ Citations ~ ~

Read and download a draft version of the auto industry bailout bill here.

Read the New York Times article about House passage of the bill.

Read the CNNMoney.com article about the bailout legislation.

Read the November 2008 Bureau of Labor Statics report and then see if you support floating GM and Chrysler for another two or three months before they come back to washington looking for another handout.

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Senate Passes Sweetened Emergency Economic Stabilization Act of 2008

By a vote of 74-25 (Sen. Ted Kennedy was not present), the US Senate passed an updated version of the Emergency Economic Stabilization Act of 2008 (EESA) that was voted down 2 days earlier by the House of Representatives. Over the past two days, Sen. Chris Dodd (D-CT) led a bipartisan effort to create a bill that would easily pass the Senate and bring along a sufficient number of disaffected House members when they address the bill on Friday (they are currently observing the Jewish New Year).

Senators McCain, Obama, and Biden all voted for passage of the bill. Suprisingly, the Republican ranking committee member Sen. Shelby (R-AL) voted against the bill.

The federal government would provide up to $700 billion in a far-reaching plan to rescue the nation's troubled financial system; the updated Senate version includes a few "sweetners" that would hopefully move the 12 House members necessary for it to pass in that legislative body.

The "sweeteners" in the updated bill include:

• An increase in the amount that the Federal Deposit Insurance Corporation will insure in bank accounts: to $250,000, up from $100,000
  
  
• A fix that would prevent middle-class taxpayers from paying the alternative minimum tax
  
  
• A number of tax extensions favored by either Republicans or Democrats
  
  
• Tax exemptions for renewable energy
  
  
• A measure that would require health insurers to treat mental health issues the same way they treat physical illnesses

Read and download a pdf version summary of
the Senate version of the "Emergency Economic Stabilization Act of 2008":

SUMMARY:SUMMARY OF THE “EMERGENCY ECONOMIC STABILIZATION ACT OF 2008”

I. Stabilizing the Economy
The Emergency Economic Stabilization Act of 2008 (EESA) provides up to $700 billion to the
Secretary of the Treasury to buy mortgages and other assets that are clogging the balance sheets
of financial institutions and making it difficult for working families, small businesses, and other
companies to access credit, which is vital to a strong and stable economy. EESA also establishes
a program that would allow companies to insure their troubled assets.

II. Homeownership Preservation
EESA requires the Treasury to modify troubled loans – many the result of predatory lending
practices – wherever possible to help American families keep their homes. It also directs other
federal agencies to modify loans that they own or control. Finally, it improves the HOPE for
Homeowners program by expanding eligibility and increasing the tools available to the
Department of Housing and Urban Development to help more families keep their homes.

III. Taxpayer Protection
Taxpayers should not be expected to pay for Wall Street’s mistakes. The legislation requires
companies that sell some of their bad assets to the government to provide warrants so that
taxpayers will benefit from any future growth these companies may experience as a result of
participation in this program. The legislation also requires the President to submit legislation
that would cover any losses to taxpayers resulting from this program from financial institutions.

IV. No Windfalls for Executives
Executives who made bad decisions should not be allowed to dump their bad assets on the
government, and then walk away with millions of dollars in bonuses. In order to participate in
this program, companies will lose certain tax benefits and, in some cases, must limit executive
pay. In addition, the bill limits “golden parachutes” and requires that unearned bonuses be
returned.

V. Strong Oversight
Rather than giving the Treasury all the funds at once, the legislation gives the Treasury $250
billion immediately, then requires the President to certify that additional funds are needed ($100
billion, then $350 billion subject to Congressional disapproval). The Treasury must report on the
use of the funds and the progress in addressing the crisis. EESA also establishes an Oversight
Board so that the Treasury cannot act in an arbitrary manner. It also establishes a special
inspector general to protect against waste, fraud and abuse.

Read and download a pdf version of the section-by-section analysis of
the Senate version of the "Emergency Economic Stabilization Act of 2008":

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION:

Section 1. Short Title.
“Emergency Economic Stabilization Act of 2008.”

Section 2. Purposes.
Provides authority to the Treasury Secretary to restore liquidity and stability to the U.S. financial system and to ensure the economic well-being of Americans.

Section 3. Definitions.
Contains various definitions used under this Act.

Title I. Troubled Assets Relief Program.
Section 101. Purchases of Troubled Assets.
Authorizes the Secretary to establish a Troubled Asset Relief Program (“TARP”) to purchase troubled assets from financial institutions. Establishes an Office of Financial Stability within the Treasury Department to implement the TARP in consultation with the Board of Governors of the Federal Reserve System, the FDIC, the Comptroller of the Currency, the Director of the Office of Thrift Supervision and the Secretary of Housing and Urban Development.
Requires the Treasury Secretary to establish guidelines and policies to carry out the purposes of this Act.
Includes provisions to prevent unjust enrichment by participants of the program.

Section 102. Insurance of Troubled Assets.
If the Secretary establishes the TARP program, the Secretary is required to establish a program to guarantee troubled assets of financial institutions.
The Secretary is required to establish risk-based premiums for such guarantees sufficient to cover anticipated claims. The Secretary must report to Congress on the establishment of the guarantee program.

Section 103. Considerations.
In using authority under this Act, the Treasury Secretary is required to take a number of considerations into account, including the interests of taxpayers, minimizing the impact on the national debt, providing stability to the financial markets, preserving homeownership, the needs of all financial institutions regardless of size or other characteristics, and the needs of local communities. Requires the Secretary to examine the long-term viability of an institution in determining whether to directly purchase assets under the TARP.

Section 104. Financial Stability Oversight Board.
This section establishes the Financial Stability Oversight Board to review and make recommendations regarding the exercise of authority under this Act. In addition, the Board must ensure that the policies implemented by the Secretary protect taxpayers, are in the economic interests of the United States, and are in accordance with this Act.
The Board is comprised of the Chairman of the Board of Governors of the Federal Reserve System, the Secretary of the Treasury, the Director of the Federal Home Finance Agency, the Chairman of the Securities and Exchange Commission and the Secretary of the Department of Housing and Urban Development.

Section 105. Reports.
Monthly Reports: Within 60 days of the first exercise of authority under this Act and every month thereafter, the Secretary is required to report to Congress its activities under TARP, including detailed financial statements.
Tranche Reports: For every $50 billion in assets purchased, the Secretary is required to report to Congress a detailed description of all transactions, a description of the pricing mechanisms used, and justifications for the financial terms of such transactions.
Regulatory Modernization Report: Prior to April 30, 2009, the Secretary is required to submit a report to Congress on the current state of the financial markets, the effectiveness of the financial regulatory system, and to provide any recommendations.

Section 106. Rights; Management; Sale of Troubled Assets; Revenues and Sale Proceeds.
Establishes the right of the Secretary to exercise authorities under this Act at any time. Provides the Secretary with the authority to manage troubled assets, including the ability to determine the terms and conditions associated with the disposition of troubled assets. Requires profits from the sale of troubled assets to be used to pay down the national debt.

Section 107. Contracting Procedures.
Allows the Secretary to waive provisions of the Federal Acquisition Regulation where compelling circumstances make compliance contrary to the public interest. Such waivers must be reported to Congress within 7 days. If provisions related to minority contracting are waived, the Secretary must develop alternate procedures to ensure the inclusion of minority contractors.
Allows the FDIC to be selected as an asset manager for residential mortgage loans and mortgage-backed securities.

Section 108. Conflicts of Interest.
The Secretary is required to issue regulations or guidelines to manage or prohibit conflicts of interest in the administration of the program.

Section 109. Foreclosure Mitigation Efforts.
For mortgages and mortgage-backed securities acquired through TARP, the Secretary must implement a plan to mitigate foreclosures and to encourage servicers of mortgages to modify loans through Hope for Homeowners and other programs. Allows the Secretary to use loan guarantees and credit enhancement to avoid foreclosures. Requires the Secretary to coordinate with other federal entities that hold troubled assets in order to identify opportunities to modify loans, considering net present value to the taxpayer.

Section 110. Assistance to Homeowners.
Requires federal entities that hold mortgages and mortgage-backed securities, including the Federal Housing Finance Agency, the FDIC, and the Federal Reserve to develop plans to minimize foreclosures. Requires federal entities to work with servicers to encourage loan modifications, considering net present value to the taxpayer.

Section 111. Executive Compensation and Corporate Governance.
Provides that Treasury will promulgate executive compensation rules governing financial institutions that sell it troubled assets. Where Treasury buys assets directly, the institution must observe standards limiting incentives, allowing clawback and prohibiting golden parachutes. When Treasury buys assets at auction, an institution that has sold more than $300 million in assets is subject to additional taxes, including a 20% excise tax on golden parachute payments triggered by events other than retirement, and tax deduction limits for compensation limits above $500,000.

Section 112. Coordination With Foreign Authorities and Central Banks.
Requires the Secretary to coordinate with foreign authorities and central banks to establish programs similar to TARP.

Section 113. Minimization of Long-Term Costs and Maximization of Benefits for Taxpayers.
In order to cover losses and administrative costs, as well as to allow taxpayers to share in equity appreciation, requires that the Treasury receive non-voting warrants from participating financial institutions.

Section 114. Market Transparency.
48-hour Reporting Requirement: The Secretary is required, within 2 business days of exercising authority under this Act, to publicly disclose the details of any transaction.

Section 115. Graduated Authorization to Purchase.
Authorizes the full $700 billion as requested by the Treasury Secretary for implementation of TARP. Allows the Secretary to immediately use up to $250 billion in authority under this Act. Upon a Presidential certification of need, the Secretary may access an additional $100 billion. The final $350 billion may be accessed if the President transmits a written report to Congress requesting such authority. The Secretary may use this additional authority unless within 15 days Congress passes a joint resolution of disapproval which may be considered on an expedited basis.

Section 116. Oversight and Audits.
Requires the Comptroller General of the United States to conduct ongoing oversight of the activities and performance of TARP, and to report every 60 days to Congress. The Comptroller General is required to conduct an annual audit of TARP. In addition, TARP is required to establish and maintain an effective system of internal controls.

Section 117. Study and Report on Margin Authority.
Directs the Comptroller General to conduct a study and report back to Congress on the role in which leverage and sudden deleveraging of financial institutions was a factor behind the current financial crisis.

Section 118. Funding.
Provides for the authorization and appropriation of funds consistent with Section 115.

Section 119. Judicial Review and Related Matters.
Provides standards for judicial review, including injunctive and other relief, to ensure that the actions of the Secretary are not arbitrary, capricious, or not in accordance with law.

Section 120. Termination of Authority.
Provides that the authorities to purchase and guarantee assets terminate on December 31, 2009. The Secretary may extend the authority for an additional year upon certification of need to Congress.

Section 121. Special Inspector General for the Troubled Asset Relief Program.
Establishes the Office of the Special Inspector General for the Troubled Asset Relief Program to conduct, supervise, and coordinate audits and investigations of the actions undertaken by the Secretary under this Act. The Special Inspector General is required to submit a quarterly report to Congress summarizing its activities and the activities of the Secretary under this Act.

Section 122. Increase in the Statutory Limit on the Public Debt.
Raises the debt ceiling from $10 trillion to $11.3 trillion.

Section 123. Credit Reform.
Details the manner in which the legislation will be treated for budgetary purposes under the Federal Credit Reform Act.

Section 124. Hope for Homeowners Amendments.
Strengthens the Hope for Homeowners program to increase eligibility and improve the tools available to prevent foreclosures.

Section 125. Congressional Oversight Panel.
Establishes a Congressional Oversight Panel to review the state of the financial markets, the regulatory system, and the use of authority under TARP. The panel is required to report to Congress every 30 days and to submit a special report on regulatory reform 4
prior to January 20, 2009. The panel will consist of 5 outside experts appointed by the House and Senate Minority and Majority leadership.

Section 126. FDIC Enforcement Enhancement.
Prohibits the misuse of the FDIC logo and name to falsely represent that deposits are insured. Strengthens enforcement by appropriate federal banking agencies, and allows the FDIC to take enforcement action against any person or institution where the banking agency has not acted.

Section 127. Cooperation With the FBI.
Requires any federal financial regulatory agency to cooperate with the FBI and other law enforcement agencies investigating fraud, misrepresentation, and malfeasance with respect to development, advertising, and sale of financial products.

Section 128. Acceleration of Effective Date.
Provides the Federal Reserve with the ability to pay interest on reserves.

Section 129. Disclosures on Exercise of Loan Authority.
Requires the Federal Reserve to provide a detailed report to Congress, in an expedited manner, upon the use of its emergency lending authority under Section 13(3) of the Federal Reserve Act.

Section 130. Technical Corrections.
Makes technical corrections to the Truth in Lending Act.

Section 131. Exchange Stabilization Fund Reimbursement.
Protects the Exchange Stabilization Fund from incurring any losses due to the temporary money market mutual fund guarantee by requiring the program created in this Act to reimburse the Fund. Prohibits any future use of the Fund for any guarantee program for the money market mutual fund industry.

Section 132. Authority to Suspend Mark-to-Market Accounting.
Restates the Securities and Exchange Commission’s authority to suspend the application of Statement Number 157 of the Financial Accounting Standards Board if the SEC determines that it is in the public interest and protects investors.

Section 133. Study on Mark-to-Market Accounting.
Requires the SEC, in consultation with the Federal Reserve and the Treasury, to conduct a study on mark-to-market accounting standards as provided in FAS 157, including its effects on balance sheets, impact on the quality of financial information, and other matters, and to report to Congress within 90 days on its findings.

Section 134. Recoupment.
Requires that in 5 years, the President submit to the Congress a proposal that recoups from the financial industry any projected losses to the taxpayer.

Section 135. Preservation of Authority.
Clarifies that nothing in this Act shall limit the authority of the Secretary or the Federal Reserve under any other provision of law.

Section 136. Temporary Increase in Deposit and Share Insurance Coverage. Raises the FDIC and the National Credit Union Share Insurance Fund deposit insurance limits from $100,000 per account to $250,000 until December 31, 2009. Temporarily raises the borrowing limits at the Treasury for the FDIC and the National Credit Union Share Insurance Fund.


Title II—Budget-Related Provisions
Section 201. Information for Congressional Support Agencies.
Requires that information used by the Treasury Secretary in connection with activities under this Act be made available to CBO and JCT.

Section 202. Reports by the Office of Management and Budget and the Congressional Budget Office.
Requires CBO and OMB to report cost estimates and related information to Congress and the President regarding the authorities that the Secretary of the Treasury has exercised under the Act.

Section 203. Analysis in President’s Budget.
Requires that the President include in his annual budget submission to the Congress certain analyses and estimates relating to costs incurred as a result of the Act; and

Section 204. Emergency Treatment.
Specifies scoring of the Act for purposes of budget enforcement.


Title III—Tax Provisions
Section 301. Gain or Loss From Sale or Exchange of Certain Preferred Stock.
Details certain changes in the tax treatment of losses on the preferred stock of certain GSEs for financial institutions.

Section 302. Special Rules for Tax Treatment of Executive Compensation of Employers Participating in the Troubled Assets Relief Program.
Applies limits on executive compensation and golden parachutes for certain executives of employers who participate in the auction program.

Section 303. Extension of Exclusion of Income From Discharge of Qualified Principal Residence Indebtedness.
Extends current law tax forgiveness on the cancellation of mortgage debt.

Read and download the 451 page pdf version of the entire Senate version of the the Senate version of the "Emergency Economic Stabilization Act of 2008".

Read the CNN.com article about what the Senate added to make the bill more attractive to House Republicans here and here.

Read the CNNMoney.com article about Senate version of the Emergency Rescue Bill here.

Read the New York Times article about the US Senate and the Emergency Rescue Bill here.

plez sez: well, the Senate passed the legislation as promised. unfortunately, it is a lot easier to marshall 100 US Senators than the widely disparate 438 Congressman!

this bill still feels like a bailout of the companies that got us in the mess, without much for those who were victimized and lost their homes to foreclosure. as odious as it seems, plezWorld predicts that politics will prevail and this thing will pass in the House by the slimmest of margins on friday!

Oxford, MS Debate: Obama vs. McCain

The debate that almost wasn't came off without a hitch on Friday night. Sen. John McCain had threatened to boycott the debate in favor of staying in Washington, DC until the details of the bailout plan were complete. When Sen. Barack Obama called his bluff and made plans to be in Oxford, Mississippi for the debate, McCain hightailed it down south this afternoon to meet the challenge.

High expectations greeted Barack Obama... would he do better than he had done against the innumerable debates against Sen. Hillary Clinton? would he be able to connect with a general election crowd, rather than the purely Democratic audiences from the primaries? would he be able to succinctly enunciate his views and plans for his presidency? would he be able to command a grasp of foreign affairs, the light-in-the-pants area of his albeit thin resume? would he be able to hold his own against the mix-it-up style of John McCain?

The expectations for John McCain were markedly lower since he had seemingly abandoned his campaign 72 hours ago in favor of "working" on the economy in Washington, DC. Since his strong suit was foreign affairs and the planned discussion at this debate was foreign affairs, he would be "in his element." And it is believed that he is a stronger debater than Obama, so combined with his experience and the relatively low expectations for his appearance, he seemingly had the upper hand.

The debate opened on the global economy and Jim Lehrer (the moderator) seemed perplexed as to how to rev up the energy and get these two guys engaged. There were tepid jabs, but no direct shots. The moderator practically had to beg them to ask questions of one another.

Things warmed up considerably when they went into the area of foreign policy and the War in Iraq. See excerpts of the debate coverage from CNN.com below:

During the first 30 minutes of the debate, the candidates focused on the economy, even though the debate was supposed to be centered on foreign policy.

For a while, it seemed like the debate might not even take place because McCain said he would not show up unless Congress came to an agreement on the government's proposed $700 billion bailout plan.

McCain said Friday that enough progress has been made for him to attend the debate, even though Congress has not made a deal.

Here's a snapshot of what the candidates said.

On government spending:

McCain said he would consider a spending freeze on everything but defense, veterans affairs and entitlement programs in order to cut back on government spending.

Obama disagreed, saying, "The problem is you're using a hatchet where you need a scalpel.

"There are some programs that are very important that are currently underfunded," Obama said.

He agreed that the government needs to cut spending in some areas, but he said other areas, such as early childhood education, need more funding.

McCain repeated his call to veto every bill with earmarks. Watch the candidates spar over earmarks »

Obama said the country "absolutely" needs earmark reform but said, "the fact is, eliminating earmarks alone is not a recipe for how we are going to get the middle class back on track."

On the bailout proposal:

Obama said that the United States was facing its worst financial crisis since the Great Depression.

McCain said he was encouraged that Republicans and Democrats were working together to solve the crisis.

Obama refused to be pinned down on whether he would support a $700 billion plan proposed by President Bush's top economic advisers, saying the final details of the proposal were not yet known.

McCain said he hoped to be able to vote for it.

On the likelihood of another terrorist attack:

McCain that another attack on the scale of the September 11 hijackings is "much less likely" now than it was the day after the terrorist attacks.

"America is safer now than it was on 9/11," he said, "But we have a long way to go before we can declare America safe."

Obama agreed that the United States is "safer in some ways" but said the country needed to focus more on issues such as nuclear non-proliferation and restoring America's image in the world.

On relations with Russia:

Obama called for a re-evaluation of the United States' approach to Russia in light of the country's recent military action in the Caucasus.

"You cannot be a 21st-century superpower and act like a 20th-century dictatorship," he said.

McCain accused Obama of responding naively to Russia's invasion of neighboring Georgia last month by calling on both sides to exercise restraint.

McCain said he would support the inclusion of Georgia and Ukraine in NATO.

On Iran:

McCain said Iranian nuclear weapons would be an "existential threat to the state of Israel" and would encourage other countries in the Middle East to seek nuclear weapons as well.

"We cannot allow another Holocaust," he said.

Obama agreed that the United States "cannot tolerate a nuclear Iran," calling for tougher sanctions from a range of countries including Russia and China.

McCain called for a new "league of democracies" to stand firm against Iran.

On Iraq:

McCain said the next president will have to decide when and how to leave Iraq and what the United States will leave behind.

The Republican candidate said that the war had been badly managed at the beginning but that the United States was now winning, thanks to a "great general and a strategy that succeeded."

"Sen. Obama refuses to acknowledge that we are winning in Iraq," McCain said.

Obama responded, "That's not true; that's not true."

He blasted McCain as having been wrong about the war at the start, saying McCain had failed to anticipate the uprising against U.S. forces and violence between rival religious groups in the country. Watch Obama tell McCain he was 'wrong' »


"At the time when the war started, you said it was quick and easy. You said we knew where the weapons of mass destruction were," Obama said, citing the key White House policy justifying the 2003 invasion.

"You were wrong. You said that we were going to be greeted as liberators. You were wrong," he said.

Read the entire CNN.com wrapup of the debate here and here.

Read the debate wrapup in the New York Times here and here.

Read the Baltimore Sun article about the Obama-McCain debate here.

Read the Washington Post article about the Obama-McCain debate here.

Read about Chris Rock talking politics on Larry King Live here.

plez sez: ninety minutes later and if you were an Obama supporter, you probably thought he won, and if you were a mccain supporter, you probably thought he won!

that's how close it was. whatever drew you to Obama as your candidate of choice was on full display this evening... cool, calm, calculated, cerebral, and pragmatic.

if you were impressed with mccain as a candidate, he would not disappoint this evening, as both men stuck to their assigned scripts and delivered. the only real difference was that Obama was far more combative and assertive than he'd been against hillary clinton. and Obama spoke with a certainty and clarity that had not been on display in previous debates during the primary season.

if you are an undecided voter... i cannot see anything tonight that would've swayed your perspective on either candidate, since nothing new was revealed, except Barack Obama has a far greater grasp of foreign affairs than most of the media gives him credit for. but if you are still undecided in late September (after more than 19 months of campaigning), then Obama's display of intelligence and approach to issues won't be a deciding factor in who you'll vote for... your decision will probably lean on something much more basic.

it was technically a draw, which probably did little to change the views of voters around the country.

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it didn't escape the attention of plezWorld that for 90 minutes, John McCain never so much as glanced in Barack Obama's direction... he kept is eyes on either his talking points or the moderator! even when prompted to engage each other by the moderator, mccain refused to look Obama's way.

when they came out and shook hands, mccain couldn't look at Obama. after the debate, their wives came on stage and each couple went to opposite sides of the stage. after waving briefly, the Obama's - the class act that they are - walked hand-in-hand to the other side of the stage and exchanged pleasantries with the mccains. it appears that the mccains could've easily walked off stage without speaking!

this may be a hard fought political battle, but these two guys are colleagues in the US Senate... there is no need to be bitter and rude!

Bush Economic Bailout Plan. Go. No Go.

President George W. Bush spoke of dire circumstances in his speech on Wednesday night (read about it here). He invited the congressional leadership (house leader and senate majority leader, and the minority leadership), as well as, Sen. John McCain and Sen. Barack Obama to the White House to summit on Thursday afternoon.

Prior to the meeting taking place, there were reports that an agreement had been reached. But during the meeting with the president, House Minority Leader John Boehner scuttled all progress with issues from conservative Republicans that negotiators thought had been settled. Boehner said that he needed more time to get agreement from House Republicans, a senior administration official said. Obama asked whether the House Republicans' proposals fit in with the four principles that the leadership had agreed on, but Boehner couldn't answer that, a Democratic source said.

Multiple sources said McCain didn't say much. Two Democratic leadership aides said he didn't speak until 43 minutes into the meeting.

The gist of the meeting, according to sources, was that these members "aren't there yet" on the plan the Senate Banking Committee worked out and say there needs to be greater protection for taxpayers. One Republican aide said that "not much has changed in the last 24 to 48 hours. I think it has to be pretty radically altered for House Republicans to support it."

This aide stressed, "at the end of the day, these members represent the people who sent them here, and the people who sent them here are so overwhelmingly opposed to this." This aide said the calls coming into GOP offices are 90 to 1 against the plan.

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The Bush Administration Plan:

• The Treasury will buy troubled assets from US-based financial institutions, with the primary target being mortgage-backed securities that have lost significant value because of foreclosures and declining home values
  
  
• The governement will hold on to these assets until the markets improve, then the Treasury would then sell the assets and potentially earn a profit
  
  
• The goal is that by taking the bad assets away from financial institutions will allow them to shore up their balance sheets and begin to lend money again
  

Obama's Conditions for Bailout:

• Help the "millions of families facing foreclosure" and not just Wall Street ("help Main Street as well as Wall Street")
  
  
• Create an "independent, bipartisan board to ensure accountability and complete transparency"
  
  
• Have Wall Street repay taxpauers for the bailout
  
  
• Have an independent, bipartisan board to oversee the bailout
  
  "This plan cannot be a welfare program for CEOs who greed and irresponsibility has contributed to this crisis."
  

McCain's Recommendations for the Bailout Plan:

• Allow for greater accountability, including a bipartisan board to "provide oversight of the rescue"
  
  
• Help for taxpayers to recover the $700 billion
  
  
• Complete transparency in regards to crafting and implementation of any legislation
  
  
• Cap on executive pay for companies getting federal help
  
  
• Ban on earmarks and pork barrel legislation added to this plan
  

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In a related story, JPMorgan Chase acquired the banking assets of Washington Mutual (WaMu) in a fire sale late Thursday after the troubled thrift was seized by federal regulators, marking the biggest bank failure in the nation's history and the latest stunning development in the ongoing credit crisis.

Under the deal, JPMorgan Chase will acquire all the banking operations of WaMu, including $307 billion in assets and $188 billion in deposits for a payment of $1.9 to Federal Deposit Insurance Corporation. Separately, JPMorgan announced plans to raise $8 billion in additional capital through the sale of stock as part of the deal. Earlier this year, JPMorgan Chase acquired Bear Stearns.

Read what my friend over at Raw Dawg Buffalo wrote about this economic mess here.

Read the CNN.com article about Congress's efforts to get a bailout bill to the President here.

Read the CNN.com article about the contentious White House Meeting that included Obama & McCain here.

Read the CNNMoney.com article about how a deal draws closer here.

Read the New York Times article about how things fared at the White House with Obama & McCain here.

Read the CNNMoney.com article the JPMorgan purchase of WaMu here.


plez sez: so, john mccain suspended his campaign so that he could hang out at the white house and barely participate in the negotiations! he sits in a "contentious meeting" that is scuttled by his party for 43 minutes with no input, no leadership? isn't that reason why he was back in washington, to provide his leadership to this cause?

or was his campaign suspension a ploy for support from his base? or is he in cahoots with the fringe of his party in a backhanded attempt to scuttle these negotiations until the time for this debate passes? would john mccain go to such lengths to avoid debating barack obama? would john mccain go to such lengths to avoid having sarah palin debate joe biden? we'll all know the answer to these questions if he backs out of the debate on friday evening because of this "financial crisis" that he has done nothing to fix!

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it's funny that wall street perked up (jumping close to 200 points) when word was leaked that an agreement in principle had been reached. i wonder what will happen when the markets open on friday when it appears that some republicans have torpedoed the agreement with eleventh hour demands that will preclude an agreement before the weekend.

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believe it or not, plezWorld isn't a big advocate for welfare. i don't agree with it for poor people. and i am certainly against spending taxpayer money to prop up rich folk. but in the interest of the public good and the avoidance of a financial catastrophe, i think we can spare a trillion dollars!

but this money should be attached to strings. those "fat cats" on wall street, yeah, the ones who basically pimped and embezzeled the deregulated financial markets for personal gain over the past 2 decades while the economy tanked should be looking at some severe punitive action for their malfeasance. a whole bunch of new asses need to be preparing for a 5- to 10-year sentence in the nearest penitentiary (i heard Sing Sing has a few open beds)!

to be honest, if 100 CEO's and CFO's and C-insert_letter_here-O's made their way into the united states penal system as collateral for this big ass welfare check for wall street (700 billion bills), instead of their usual golden parachutes... i'd be one happy camper. plezWorld would be first to call and congratulate his congressman for growing a pair!

this bailout should be painful (jail time, selling off of personal assets, confiscation of houses, jewelry, off-shore property, and cars, liquidation of trust funds, etc.). the fat cats on wall street should be shaking in their boots at the thought that the Feds were gonna come bail them out. and if this bailout was painful enough, it would be a LONG TIME before some *ISH* like this was ever permitted to happened again!

The Feds Rescues AIG With $85 Billion Bailout

AIG has had a very tough year.

Rocked by the subprime crisis, the company has lost more than $18 billion in the past nine months and has seen its stock price fall more than 91% so far this year. It already raised $20 billion in fresh capital earlier this year.

Its troubles stem from its sales of credit default swaps and from its subprime mortgage-backed securities holdings.

AIG has written down the value of the credit default swaps by $14.7 billion, pretax, in the first two quarters of this year, and has had to write down the value of its mortgage-backed securities as the housing market soured. The insurer could be forced to immediately come up with $18 billion to support its credit swap business if its ratings fall by as little as one notch.

This year's results have also included $12.2 billion in pretax writedowns, primarily because of "severe, rapid declines" in certain mortgage-backed securities and other investments.


Acting to avert a possible financial crisis worldwide, the Federal Reserve reversed course on Tuesday and agreed to an $85 billion bailout that would give the government an ownership stake in the troubled insurance giant American International Group, according to people briefed on the negotiations.

The decision, only two weeks after the Treasury took over the quasigovernment mortgage finance companies Fannie Mae and Freddie Mac, is the most radical intervention in private business in the central bank’s history.

With time running out after AIG failed to get a bank loan to avoid bankruptcy, Treasury Secterary Henry M. Paulson Jr. and the Fed chairman Ben S. Bernanke convened a meeting with House and Senate leaders on Capitol Hill about 6:30 p.m. Tuesday to explain the rescue plan.

They emerged just after 7:30 p.m. with Mr. Paulson and Mr. Bernanke looking grim but top lawmakers generally expressing support for the plan. But the bailout is likely to prove controversial, because it effectively puts taxpayer money at risk while protecting bad investments made by AIG and other institutions does business with.

What frightened Fed and Treasury officials was not simply the prospect of another giant corporate bankruptcy, but AIG’s its role as an enormous provider of financial insurance, which effectively requires it cover losses suffered by other institutions in the instance of defaults of securities that they have purchased. That means AIG is potentially on the hook for securities that were once considered safe.

If AIG had collapsed — and been unable to pay all of its insurance claims — institutional investors around the world would have been instantly forced to reappraise the value of billions of dollars in debt securities, which in turn would have reduced their own capital and the value of their own debt.


With an ear to the ground, waiting to see what would happen with AIG, Bloomberg.com reports that Asian stocks rose, helping the regional benchmark index rebound from the steepest plunge in eight months, after the Federal Reserve invoked emergency powers to save American International Group Inc. from collapse.


Read the New York Times article about the Fed takeover of AIG here.

Read the CNN.com article about the AIG bailout here.

Read the Bloomberg.com article about the worldwide reaction to the AIG bailout here.


plez sez: a band-aid was applied to another fragile house of cards on tuesday evening. how long will it be before there are no more band-aids for the rickety house of cards from XYZ financial firm (like lehman brothers)? plezWorld gets the strange feeling that the selective "saving" of these private firms that have our entire financial market by the shorthairs is only extending the day when the whole house of cards tumbles into the gutter of wall street, causing a catastrophic collapse of all world markets.

i'm no financial guru, but to my uninitiated eye, this AIG bailout appears to be the third or fourth "rescue" of financial institutions in last couple of weeks (Freddie Mac, Fannie Mae, Merril Lynch, Lehman Brothers, etc.). all of these companies fell victim to the slow bullet that was sub-prime mortgages that were given away like free coupons over the past decade... basically, the chickens are coming home to roost for the terribly bad decisions on the part of the institutions who are entrusted with maintaining the integrity of our economy. tuesday's bailout feels like warm jell-o being poured into a sieve, a lot is still oozing through the holes. how many more hits can my dwindling 401(k) and IRA take?

the millions of homeowners who are no longer in their homes have paid for this mistake. my subdivision is still littered with the overpriced unaffordable homes that were purchased and subsequently abandoned by overzealous speculators and equity-poor saps who signed the mortgage papers. when are the financial institutions that promoted this bad practice going to pay for their gross error? the economy is already in the crapper, these band-aids aren't making things any better, i would opine that these massive bailouts are only prolonging the inevitable "correction" that our economy so desperately needs. aren't economic downturns supposed to hurt? when are the folk on wall street going to feel the REAL PAIN that the rest of us are feeling?

and guess what? plezWorld hasn't been making a bunch of money this year while launching a new company in this very tenuous economy. WHO do i talk to about my bailout? for one thousandth of one percent (0.00001) of what the fed gave to AIG (less than a million dollars), plezWorld can be bailed out of my economic woes!

i can argue that my economic collapse will have dire consequences for my neighborhood and community... get back to me when ya'll have cut my check!