Senate leaders scheduled a Wednesday vote on a $700 billion financial bailout package after agreeing to add tax breaks and a higher limit for insured bank deposits in a bid to attract enough votes to reverse a shocking defeat in the House and send legislation to President Bush by the end of the week…. The Senate tax bill would cost more than $100 billion and extend and expand many individual and business tax breaks, including tax credits for the production and use of renewable energy sources, like solar energy and wind power. The bill would also extend the business tax credit for research and development, expand the child tax credit, protect millions of families from the alternative minimum tax and provide tax relief to victims of recent floods, tornadoes and severe storms.
That seems to be all the detail that’s available. And here’s an interesting nugget:
After the plunge in stock market that followed the rejection of the package on Monday, lawmakers described the experience as sobering and said it could enhance prospects for a revised plan…. On the morning after the sell-off on Wall Street, Congressional offices reported a shift in angry calls from constituents, with some now demanding that lawmakers take some corrective action – a distinct change from the outpouring of public opposition that contributed to the defeat of the plan. “I started hearing from a lot of people who lost money on their investments thanks to the big drop on Wall Street yesterday,” said Representative Steven C. LaTourette, Republican of Ohio, who voted against the plan.
My guess: the revised bill passes the Senate overwhelmingly, and passes the House comfortably, with both liberal Democrats and conservative Republicans able to find enough in the bill to justify switching their “no” votes. When the stock market inevitably soars following the bill’s passage, everyone can claim victory by restoring gajillions of dollars to Americans’ retirement accounts, and the whole thing starts to seem like a bad dream.
At least for now.
Note that these stock market rallies that follow big drops keep coming up short: the moving averages are all down.
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p>Same with this legislation. Larding this bill with buy-outs for special interest groups is, to coin a phrase, like putting lipstick on a pig. This remains a bad bill, because just buying debt is not going to solve the fundamental problems here.
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p>A bad bill is better than no bill, but this remains a failure first by the Bush administration, and second by the Democratic leadership in the Congress.
AND these guys have the most to lose!
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p>The US Government should offer financial aid to banks and lenders—-BUT—-the banks/lenders should absorb the losses and fix this mess themselves.
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p>The US Government in incapable of sifting through hundreds of thousands/millions of non performing mortgages. This entire “bailout”, so called, is shaping up to be a catastrophe in and of itself.
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p>Meanwhile half of America is worried about Sarah Palin.
Isn’t that just swell.
Check the charts for yourself.
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p>http://finance.yahoo.com/q/bc?…
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p>On Monday at 4:00, the official stock market closing time, the DOW JONES AVERAGE was down 550 points.
The market was then “OFFICIALY” walked down to close down 777 points, or enough to show a record down close.
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p>At around the same time this was happening, Bob Pisani, a commentator on CNBC was quoted on television as saying that traders WANTED to see a realy bad close in the market to spook the public into supporting the bailout bill and …
they mysteriously got their wish when the dow dropped AFTER THE MARKET WAS CLOSED.
The headline that ran across the country was “record drop in markets”.
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p>This morning the market opened up 250 points, or exactly at the same point it was at 4:00PM the previous day when the market was supposed to be closed.
It was then reported by MSM that the market was up on RELIEF THAT THE BAILOUT WAS BEING RECONSIDERED.
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p>In actualy both the close monday and the open tuesday were entirely staged for headline impact.
If they can fake the market with such little effort what else is being faked? Does this restore your confidence?
The financial press is desperate to get the people behind a big payoff or buyout or bailout.
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p>And the Democrats are loving the panic atmosphere because they can perform a power grab on Wall Street. The real effect of this will be massive lobbying of Democrats by Wall Street to write the rules to favor established institutions.
Did anyone else read/note that the G-8 is bringing a lot of pressure on the US SENATE as well? Putin and Merkel are running around their offices with their hair on fire!
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p>You wonder—how much are we being manipulated by _____?
What did I say. I just put up the graph of the tape man, read it yourself. Everyone knows about painting the tape. it has gone on forever; but 270 points? I dont ever recall seeing anything like it.
Check the yahoo business message boards for any sp500 stock between 4:00 and 5:00 monday afternoon. Everyone was howling about the same thing, what was up with that close?
Merkel WOULD be panicking, German banks are really tied up in this mortgage-backed securities mess. Of course she’s running around with her hair on fire, it’s affecting them greatly.
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p>Putin has another reason…the falling market has seen a seriously falling oil market as well. He needs that to reverse, and a stronger US market probably would do it.
The law of the stock market is the law of the mob. Once a few people go down one path, the rest follow for fear of being left as the last one left behind. This makes nosedives self-replicating so to speak.
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p>However, mobs are also highly susceptible to suggestion and perception. But in this case, it was less manipulation than the desire to not be the trader left holding the bag at the bottom.
The markets were CLOSED when the price move occured… dont you get it?
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p>The market doesn’t ‘close ‘ in the way in which you think it ‘closes’. There is significant trading done ‘after hours‘ and ‘extended trades’. Most often, this is done by large institutional investors moving big chunks of investments hither and yon… Few participants with bigger antes means larger swings of the ticker.
After hours trading is “off exchange”.
Just like pre market or any other off exchange trades are not reflected in the opening prices, after hours trades have zippo to do with the published closing prices.
It is an entirely seperate and unrelated trade mechanism just as if you and I were to work out a deal in some barroom late at night.
At the NYSE, each security specialist is assigned the task of “publishing” a closing print.
Typicaly this is done within minutes (by 4:05 or 4:10) of the closing bell.
This closing “print” showed a dow drop of 565 on monday afternoon.
By 4:45 the OFFICAL number being reported was down 777.
I was afraid of something like this. Why tack on infinite numbers of unrelated things to this bill? Just keep it to something focused on the economic problems at stake – the credit markets and the risk of foreclosures. There’s plenty in there to appeal to either progressives or conservatives, or both, without having to resort to tax cut gimmicks and further giveaways that have little to do with the bill. I hope this bill fails too. (And the more times they keep pushing awful bills, the more they risk the economic solvency of this country.)
I not only was afraid of something like this, it seemed almost inevitable after the first vote split of 40% of House Democrats (and a large majority of House Republicans.
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p>The signal was clearly sent by the House from both sides – we want more! They seemingly feel the need to go back to their re-election campaigns with business and upper class tax relief they can tout to their “constituents” (contributors).
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p>Most depressing, to me, is the plan to “protect millions of families from the alternative minimum tax.” Despite the NYT adoption of this positive spin, the reality is much different and so typical of the spin surrounding so much of our tax policy.
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p>The fact is that repealing or even making significant new changes (it’s not clear what the bill would actually do) to the alternative minimum tax is essentially a tax cut for the wealthy. The vast majority of people subject to the alternative minimum tax have annual incomes exceeding $200,000. Simple fixes, far short of repeal and implemented in the last several budgets, have dealt with and would continue to deal with almost every individual or family making less than $200,000 (the true middle class).
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p>For an in-depth discussion of the AMT myths see: http://www.cbpp.org/2-14-07tax…
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p>How sad that this bailout bill has become the vehicle for such regressive tax policy.
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p>You can attach “protecting millions of families” and “tax relief to victims of recent floods, tornadoes and severe storms” to a pig. But it’s still a pig that’s printing money to make itself look better.
Despite the protest of reasoned people the evil bill passes? As the economy sours more and more of the taxpayer dollar is squandered into the money pit, let us remember who did this to us. Remember, the next administration will feel the brunt of the debacle.
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p>If appropriations have to come from Congress, why is it that the Senate is making this vote? I haven’t yet found the explanation of the Internet. Anyone know offhand?
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p>Appropriations and Budget bills start in the House, which this did but was defeated They are trying, what is an unusual enough process that Senators are speaking of it, to give the bill momentum by passing a Senate version overwhelmingly. (We’ll see tonight if they do).
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p>What they should consider are the wasted opportunities to correct things when much earlier it was clear there were impending problems. Though the Republicans are now trying to claim the Democrats fought deregulation, this is not going to fly – they were proudly the party of deregulation and complained ad nauseum about Democratic regulation in nearly every election for at least 50 years. The 2004 Democratic platform included a plank that called for more regulation in the mortgage and credit card industries. People know that from 2000 to January 2007, when the housing boom occurred and most of these bad loans were written, that there was a Republican President and a Republican controlled House and Senate.
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p>The Republicans are speaking of a 2005 bill that McCain co-sponsored, but they are not saying that S 190 was introduced in early 2005 and went to the Banking Committee and was passed out of committee in July 2005 and then it never made it to the entire Senate. McCain signed onto the bill in May 2006, 10 months after it was dead – and nothing else happened and no other Senators signed on. In addition, the BIPARTISAN bill that passed the House was sent to the Senate and referred to the Banking Committee, where it was defeated by the Republicans in a party line bill.
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p>It was also the Republicans who killed the Senate version of the Stimulation package in January of this year by one of there unprecedented number of filibusters. That bill contained money to let states renegotiate mortgages to keep people in their homes. This could have lessened the crisis and saved many communities a lot of pain. That provision, which passed the Senate Finance committee with 20 votes was sponsored by Kerry and Smith.
I was confused.
What’s with Pelosi and Reid— DEMANDING—- that a specific number of Republicans sign onto to this? The democrats can pass this all by themselves, but they refuse to. I’m puzzled. Life is about risk. The winner takes all the marbles. If the bailout saves America—the democrats have the presidency for sixteen years and the congress forever.
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p>Are Pelosi and Reid that fearfull that this entire “bailout” is going to blow up and they refuse to take responsibility. To me that shows zero backbone and zero leadership.
The backlash is severe, and of course you want BOTH SIDES to bear that weight. It only makes political sense.
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p>Also, see BMG’s post about how on BOTH sides, the embattled pols were the ones to vote against it. The Repubs just happen to have more embattled incumbents…
In addition, this needed to be doen in a bipartisan spirit with the interests and concerns of both sides considered. That is why they tried to create a bill that was neither Democratic or Republican.
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p>Another reason is that a BIG component of the problem now is that lack of confidence that itself becomes a factor. Let’s say the Democrats wrote what they would consider the best bill and ASSUME for sake of argument that it was the best alternative available.
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p>This is a political season. As the bill is labeled “Democratic”, there would be millions of dollars of ads that the Democrats were increasing the debt or were going to raise taxes to pay for this. It would also be derided as wrongheaded and unlikely to work. This would make restoring confidence near impossible. This was a time where we needed unity, not politics.
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p>In addition, reality is not as simple as “working” or “not working”. No matter what is passed, we will not know what not passing it would have resulted in or what any magical Republican bill would do.
There will be no way to determine what effect this bill has. If this bill doesn’t pass and we enter a recession, there will be no way to be certain that passing it would have prevented that. If it does pass and we don’t enter a recession, there will be no way to be certain that we would have entered a recession without it. If this plan were to actually work, nobody would be able to reliably prove that it worked. There is no political upside to this.
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p>The absolute worst case scenario is passing this bill and then having a recession happen anyway. I don’t think this bill will help the economy in any significant way. I think we are headed for a depression no matter what we do at this point. But passing this bill leaves us with $700B more debt at the beginning, which will make it that much harder to get anything done later.
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p>Politically, this bill is unpopular. Everyone is already running against it, and it hasn’t even passed yet. I haven’t seen any reason to believe that it will work. If this bill passes and we get a recession, everyone who voted for it will be voted out. Even if we don’t get a recession, this bill will still be used against everyone that votes for it for a few years. No politician is willing to take that risk. By insisting that it pass with bipartisan support, it prevents either party from using it for political purposes. It can still be used against incumbents, but not in as partisan of a manner.
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p>I think that someone needs to do a better job of selling it to the American people. Which would be easier if the plan was actually a good idea. Voting for an enormous Wall Street bailout that almost every economist is opposed to and is unpopular with the people without trying to explain why you think it will work is political suicide. As it should be.
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p>It is possible that the House vote Monday was supposed to fail. Once people saw the stock market fall in response to the bill not passing, I think that people began to believe that passing it might be a good idea. There’s nothing like threatening to destroy everyone’s 401(k) to build public support for a plan.
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p>Of course, now that Wall Street knows they can demand money from the government just by screwing with the credit and stock markets, who knows what will happen. It is clearly more profitable for Wall Street to shut down as much lending as possible until this is passed. What a great way to legalize extortion.