Rolf Englund IntCom internetional
Plan A: $700 billion rescue plan
Ambrose Evans-Pritchard - Black Swan - Edmund Conway - The Economist - Bert Ely - Bill Fleckenstein - James Grant - Bill Gross - Gary D. Halbert - Suzy Jagger - Paul Krugman - John McCain - John Mauldin - Wolfgang Munchau - Barack Obama - John Plender - Richard W. Rahn - Robert J. Samuelson - Dominique Strauss-Kahn - Martin Wolf
In one form or another, the package will surely be passed in the next few days,
At first, nobody could quite believe Mr Paulson was incompetent.
Why did the bail-out bill fail?
Votes in the House of Representatives are not official until the Speaker's gavel is lowered and - for what felt like an eternity - the speaker's gavel remained suspended above the desk. News services waited for several minutes before calling the result - a rare enough occurrence in a world of instant information.
Rumours began to circulate that attempts were being made to change the minds of some of the members who had voted "no".
Those whom the gods would destroy, they first make mad
Opposition to the proposal came from two different sources.
A larger body of nay-voters consists of populist rabble-rousers or, worse, politicians who know better but follow the whims, fancies and passions of their constituents, even when this means that before long the real economy risks falling off a cliff.
The Beltway Crash
The majority party is responsible for assembling a majority vote, and Speaker Nancy Pelosi failed in that fundamental task.
House Republicans share the blame, and not only because they opposed the bill by about two-to-one, 133-65. Their immediate response was to say that many of their Members turned against the bill at the last minute because Ms. Pelosi gave her nasty speech. So they are saying that Republicans chose to oppose something they think is in the national interest merely because of a partisan slight.
Once they were "masters of the universe," corporate jets at the ready.
What Went Wrong -- Forces Lined Up Against Bailout
The defeat of the extraordinary $700 billion financial rescue package represented a perfect collision of the forces of modern politics -- a fast-moving Internet campaign, vulnerable incumbents, a weakened and unpopular president, and a roiling presidential campaign -- all working against the so-called Masters of the Universe.
Have the Masters of the Universe lost their super powers?
When novelist Tom Wolfe used the term to describe Wall Streeters with too much money and not enough humility, he was borrowing the name of a line of action figures and a comic book series popular with kids in the 1980s.
Bonfire of the insanities
The defeat in Congress of a proposed $700 billion economic-rescue package followed an intense outpouring of voter anger,
fanned by politicians, interest groups and media on the left and right,
"The vast majority of my voters looked at this as a bailout for Wall Street," said Rep. Darrell Issa of California, one of the most outspoken Republican critics of the proposal.
House Republicans demanded changes in the plan last week, got some of them, and yesterday delivered just 65 votes -- a third of their members -- for a rescue package that their party's president, their party's Treasury Secretary and their party's House and Senate leadership all called vital to the nation.
Let me explain now in more detail why we are now back to the risk of
US can ride out financial turbulence if it follows lessons of Swedish crunch
This is a difficult time to defend free markets. Nevertheless they must be defended,
Stopping a Financial Crisis, the Swedish Way
Millenniets värsta börsras
Stating that the passage of the bailout bill would only make the problem worse, the Congressman from Texas said, “This has nothing to do with free market capitalism, this has to do with a managed economy, an inflationary system, corporatism, a special interest system, and this has nothing to do with the failure of our free markets and capitalism.”
“Long term this is disastrous,” continued the Congressman, “we’ve already pumped in $700 billion dollars, here’s another $700 billion dollars - this is going to destroy the dollar - that’s what you should be concerned about - if you destroy the dollar you’re going to destroy a worldwide economy and that’s what we’re on the verge of doing.”
Paul expressed his frustration that free market economists who predicted the crisis were being ignored while the people who created the problem were being given the responsibility to offer a solution. The Congressman was not afforded the time to read his full prepared remarks, but they were entered into the Congressional record and can be read at Paul’s Campaign For Liberty website.
If September 11, 2001 was the day that we had to reassess our ideas about America's role in world politics,
What would financial Armageddon look like?
The US government's $700bn (£376bn) bail-out package is designed to avert a complete financial meltdown.
BBC News 23 September 2008
The crisis: A timeline
A shocking series of events that forever changed the financial markets
The money markets on the verge of a nervous breakdown
Enligt demokraterna rådde kaos i överläggningarna sedan det framkommit vid mötet i Vita huset
Markets braced as bail-out talks hit deadlock
Once President George W. Bush had warned the American people in near-apocalyptic language that, if Congress failed to approve his $700billion bank bail-out, the entire US economy was in peril, it became hard to conceive of the deal being blocked.
Such once-in-a-lifetime threats can never be made — or taken — lightly. So, despite immense reservations on Capitol Hill, on both sides of the aisle, about the implications of the rescue package and the alarmingly slapdash way in which it appears to have been constructed, no one was under any illusion last night that, if it is not approved, the impact on world markets will be catastrophic.
Ireland leads euroland into recession as property crashes
Ireland has become the first country in the eurozone to slide into recession as the torrid housing boom of recent years turns into a deep slump.
Construction was 21pc of GDP at the peak last year, which is even worse than Spain (18pc) and far worse than America (11pc) at the height of the bubble,
Ambrose Evans-Pritchard Daily Telegraph 25 Sep 2008
The banking system needs another $500 billion to survive beyond the $700 billion rescue plan being contemplated by Congress, said Pimco founder Bill Gross.
Gross said on CNBC that the government bailout plan will help free up bank balance sheets so they can start lending again, but will provide only about $50 billion in real capital to the system.
"The plan goes far but it doesn't go far enough in terms of recapitalization," he said. "The banking system and the investment banking system in total really requires about $500 billion more. Where that comes from is still up in the air."
Bert Ely: Bailout Not Necessary, Industry Can Take Losses
Bert Ely, one of the leading experts on banking and finance in the Washington policy community. An accountant by training, Ely has specialized in deposit insurance and banking structure issues since 1981. In 1986, he became an early predictor of the S&L crisis and a taxpayer bailout of the FSLIC. In 1991, he was the first person to correctly predict the non crisis in commercial banking. In 1992, he predicted an eventual taxpayer bailout of the Japanese banking system.
If a bank truly is solvent, it can raise additional capital or sell itself, if its present owners are realistic about what their bank is worth. The reason solvent banks have a problem raising capital, or selling themselves to a stronger bank, is that they set their price too high, as did AIG. As an aside, I am glad to see AIG's shareholders getting whacked by the warrants associated with the Fed's taxpayer's loan to AIG. There is absolutely no need for the taxpayer to subsidize banks so they can stay independent, provided no barriers are erected to prevent new entrants into bank or specific banking markets.
I can think of three good reasons that our representatives should take big, calming breaths before committing $700 billion of our money.
If we don't nail down these details, we risk:
At the end of 2007, no less than $9.4 trillion in dollar-denominated securities were sitting in the vaults of foreign investors.
For years, liberal Democrats in Congress and some Republicans pushed for banks and other institutions to make home loans to unqualified borrowers, and suddenly we find many of these people cannot repay their loans.
The reaction from members of Congress, like the "surprised" Speaker Nancy Pelosi, is to demand investigation of "greedy bankers," while ignoring the fact that it was her left-wing colleagues who created the Community Reinvestment Act (CRA) that required the banks to lend to people who were poor credit risks in the name of "housing rights." A Chicago "public interest" lawyer named Barack Obama was active in this movement.
A majority of members of Congress seemed to be surprised that Fannie Mae and Freddie Mac became insolvent when many of the subprime mortgages they had been pressured to buy (by members of their oversight committees, such as Barney Frank and Chris Dodd) became nonperforming. Some members of Congress (including John McCain) did try to pass legislation to limit the size of Fannie and Freddie, but it was blocked by - surprise, surprise - Rep. Frank and Sens. Dodd, Charles Schumer, Barack Obama, et al. who just happened to have taken major contributions from Freddie and Fannie
Många har förundrats över över hur vårdslös utlåning till låginkomsthushåll i USA kan dra in världsekonomin i en allvarlig kris.
It was two years ago that Nicholas Taleb wrote those words in his book The Black Swan:
In a week, the financial crisis of 2008 changed everything
Europe's vulnerable banks
Strains on capital will also intensify if European economies stall more severely than expected. The rates of deterioration in certain markets are striking. Bank of Ireland issued a starkly gloomy trading statement on September 17th, forecasting rising loan losses and cutting its dividend by half. In Spain the poorly diversified savings banks are warning that non-performing loans could rise sixfold from their levels in mid-2007. In Denmark the central bank felt obliged to bail out a small lender on September 22nd.
Questions abound over a $700 billion rescue plan for Wall Street
The treasury secretary’s decisions “may not be reviewed by any court of law or any administrative agency.”
A fact sheet later distributed by the Treasury broadened it to include “other assets, as deemed necessary to effectively stabilise financial markets.” The government could, in effect, buy anything it wanted: student or car loans, loans, equities, entire companies.
The fundamental problem with the Paulson scheme is that it is neither a necessary nor an efficient solution.
Over the past few weeks three experiences have helped clear my mind on this crisis.
DEBUNKING THE PAULSON PLAN
The Case-Shiller national home price index has already declined by 25 per cent in real terms since the start of the crisis. Another 15-25 percentage point drop would bring US house prices back towards their long-term trend.
The public will be less able and willing to service debts while house prices are falling and unemployment is rising. As the recession gets worse, corporate bankruptcies will increase, as will the default rate on corporate bonds. This, in turn, will reverberate in the market for credit default swaps, an insurance market in which buyers can protect themselves against payment default.
Uncle Sam's $700+ Billion Toxic Securities Fund
We are now past the issue of "moral hazard," in my opinion. We are now truly in a financial crisis that could easily spiral out of control very quickly. Something major needs to be done quickly, and there is no time for political games. People are on the verge of panic, and the stock markets may continue to plunge. Expect volatility to remain sky-high for a while longer.
I now believe this financial crisis will send us into a recessio
I now believe that the housing/financial crisis and the massive government bailout may hand the presidential election to Barack Obama in November. The general public does not fully understand the seriousness of the credit crisis, and will deem the massive bailout as just one more example of President Bush bailing out his rich cronies on Wall Street
A systemic crisis demands systemic solutions
US dollar set to be major casualty of Hank Paulson's bailout
Whether or not tomorrow’s accounts of today’s turmoil prove David Owen of Dresdner Kleinwort right; whether or not this is the beginning of the end of the dollar’s pre-eminence in the world’s central banks and foreign exchanges, the economic landscape has undoubtedly changed forever.
The US taxpayer bail-out of America’s banking sector is an event whose significance will reverberate for many years. What it means for free markets, for the way Western economies are run, for the prosperity of the world economy, must remain to be seen.
Capitalism in convulsion:
In the space of just two momentous weeks, the landscape of global finance has been dramatically transformed. President George W. Bush’s administration has mounted a multi-billion-dollar rescue of the financial system at the cost of inflicting severe damage on the US model of free-market capitalism.
The crisis began with losses in the $1.3 trillion market for "subprime" mortgages, many of which were "securitized" -- bundled into bonds and sold to investors.
Maybe we can let Wall Street implode and Main Street would escape largely unscathed.
Cash for Trash
That’s what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets. It’s also what happened with Fannie and Freddie. (And by the way, that rescue has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover.)
But Mr. Paulson insists that he wants a “clean” plan. “Clean,” in this context, means a taxpayer-financed bailout with no strings attached — no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review “by any court of law or any administrative agency,” and this adds up to an unacceptable proposal.
This is one of the most extraordinary periods in U.S. financial history.
An almighty crash has been averted, very narrowly.
End of the Wall Street investment bank
Goldman Sachs and Morgan Stanley last night abandoned their status as investment banks in a move marking the end of an era on Wall Street.