Goodlatte votes against bailout… again.
Brent Finnegan -- October 3rd, 2008
Rep. Bob Goodlatte voted against the “Wall Street bailout” Monday, and voted no again today on a so-called “revised” package, which was loaded with porky extras. Goodlatte said:
Inaction has never been an option. However, after much deliberation, I reached the conclusion that this legislation, which I voted against, is not the solution to our long-term financial problems or our short-term credit liquidity crisis. While improvements have been made to the legislation, at its core, it is the same as the revised Paulson plan which the House defeated earlier this week.
Tags: Goodlatte
Good for him. The latest version was full of pork. John McCain keeps saying he’ll veto pork bills, but he voted for this bill. Too bad he squandered a chance to match his words with action. Sigh.
So Bob fritters and dallies… suggesting that the United States taxpayer should insure the riskiest and most default-prone mortgages guaranteeing nearly all mortgages in the country (since it already owns Fannie Mae and Freddie Mac). And since no one seems to know what we are insuring, taxpayers would face big losses if defaults turn out to be higher than expected and exceed insurance assumptions. This is stupid.
Suggestion to Representative Goodlatte (and Goode): Man up and roll onto wall street. Own the place and kick some ass. We don’t need to “insure” anyone, we need to take charge and sit on these greedheads until we know we know their crimes. Better yet, go back home and stay on the porch. Tough times require brave politicians.
While I didn’t see Goodlatte drafting any alternatives, and I believe he voted against it for the wrong reasons, at least he voted against it.
This bailout bill is bullshit. Anyone that knows anything about finances knows that wise financial decisions aren’t made hastily. Bush, Paulson and Bernanke held a gun to everyone’s’ head and made a threat (or a bluff) disguised as a warning.
The bill was rejected by the House because it sucked, then it went to the Senate, where they added pork and voted yes. Where were the expert testimonies? They should have had hundreds of leading economists testifying before Congress day and night for weeks while opponents drafted alternatives. Where were the alternative plans? For that matter, where was Paulson’s plan? The number, $700 billion, was a swing in the dark:
Obama, Biden, McCain, Webb and everyone else that voted yes caved in to pressure from Bush, the will of the moneyed interest, fear of an economic collapse, and/or fear it might hurt their election campaigns.
Goodlatte, Feingold, Kucinich and the rest that voted no (for various reasons) stood up for what they believed in and made the right choice.
This whole thing reeks with the same stench as the invasion of Iraq. Bush sells Congress an emergency bill, Congress obliges post-haste. This is yet another case where the majority of both parties was wrong, and acted in direct opposition to the will of the majority of the people they are supposed to be representing.
The scope of the wall street problem isn’t clear, but never mind that, the banking rules that require banks to hold assets in reserve against their bad debt had exploded in the last few days. When you get a call from your banker and she tells you that your operating line of credit was being redrawn to balance the books…the last thing you want to hear is that Congress is going to hold hearings and fill the room with a bunch of Econ professors.
The draft of the bill removed the Mark to Market bank rules and hoses liquidity into the system. Which is to say, we’re just putting the fire out. The real work begins as we finger the perps, assess the “assets”, and enforce accountability and oversight on the markets. If they do this right the taxpayer could come out even or better, and a whole bunch of market ideology could be killed for good.
The first casualty was Ronald Reagan’s phrase: “Government is not the solution, government is the problem.” Nobody but the federal government has the resources to do what had to be done – snuff the panic. The taxpayers are now owners and I expect to be treated like one.
Bubby, who do you think should or will do the “real work”? These criminal bastards are going to pack up and move on to “greener pastures” while leaving the US a third world nation. What else do you expect these “people” to do after they destroyed the place?
I’ll agree with Bubby that the scope and consequences of the crisis and bailout are unclear. However, Congress, Bush, Greenspan, Bernanke and Paulson have known this was going to happen sooner or later, and the “housing bubble” has been common knowledge for years.
At best, the passage of this bill indicates to me that we have shortsighted leaders who practice bad judgment and make rash decisions in a panic. And that’s only if I give them the benefit of the doubt, which I don’t.
Keep an eye on the comment that Ronald Reagan’s phrase that Government is the problem is a casualty. That Government is the only one with the resourses to do what has to be done is like pouring gasoline on a fire. Panic is not the end of the world. This so called bail out will have a negative effect on the stock market. What foreign or domestic investors will put confidence in a government who puts such a debt on its taxpayers in a pipedream hope of “fixing something” they were intristically involved in causing to happen. Try this…No matter who is no in office…Vote them out. Democrat or Republican…Vote them out!! You or I could do much, much better. The Declaration of Independence tells us how we are to deal with a Government like we have. Our Founding Fathers were men of Courage. Few such men exist today. We are a nation of Cowards and everyone knows it.
In less than 30 days guys like Henry Paulson, Alan Greenspan, Ben Bernanke, former Congressman Phil Gramm (and currently McCain’s economic brain), Mike Oxley (R-OH) former House Finance committee chair, or McCain’s Campaign Manager Rick Davis (Fannie/Freddie Lobbyist) will either be looking at subpoenas to testify…or be picking out their office furniture in the McCain Administration. Choose wisely.
I wouldn’t be so sure about Gramm. Although he’s been vilified by Obama supporters, pay very special attention to the 41:10 – 47:00 section of the most recent episode of This American Life.
That episode, as well as the episode from two weeks ago stand out as the best reporting on the financial crisis that I’ve heard/read anywhere. And I’ve read quite a bit.
Former Senator Phil Gramm (Chairman of the Banking Committee) was author of the 1999 Gramm-Leach-Bliley Act. The Act passed out of the Senate on a party line vote with 100% Republican support, including that of John McCain. This legislation deregulated banking and allowed banks to become directly involved in the stock market, selling bonds, and insurance.
Senator Gramm was a co-sponsor of the 2000 -Commodity Futures Modernization Act (CFMA) which he slipped into a “must pass” spending bill on the last day of the 106th Congress. CFMA sheltered from regulatory scrutiny something called the “credit default swap”, a kind of insurance one bank could exchange with another, credit default swaps supposedly made it safe for banks to take on ever riskier forms of debt.
These deregulated “insurance policies” were issued by the newly deregulated banks and traded without oversight They are now being cashed in by investors who lost on mortgage backed securities (bonds). No one knows for certain how much of this “insurance” is out there but I’ve seen estimates of $60 – $70 trillion. In the insurance business, a company has to keep reserves to cover their losses. Not in Phil Gramm’s world – the taxpayer is the insurer. I suspect that this is where Paulson came up with a $700 billion bailout number – it is about 1% of the exposure.
These unquantified liabilities are now constricting liquidity and credit in the world economy as banks scramble to cover their losses in both mortgages, and credit swap insurance.
Which is where we are. Republicans wanted deregulation, and campaigned for bank deregulation. A Republican majority gave America deregulation, and former Economics professor, Phil Gramm lead the effort as the Dean of Deregulation. He should be stripped of his citizenship.
and his testicles
But then again maybe John McCain should join him for still relying on his “superior knowledge of the markets”.
http://www.keatingeconomics.com/
Bubby, I understand and appreciate what you’re saying, but you’re not telling the whole story. That CFMA passed 95 – 0. That means all Democrats present voted for it. Additionally, the Clinton administration wasn’t exactly pro-regulation, either.
– Michael Greenberger, former Director of the Division of Trading and Markets at the Commodity Futures Trading Commission (on the most recent edition of This American Life)
All this partisan finger pointing is giving me a headache, because every president since Reagan has been deregulating and privatizing. That includes Clinton. The fact of the matter is that most of the elected Republicans and Democrats in Washington have been complicit in this crisis, either by their actions or inaction.
No car tax.
No bank regulation.
No stock regulation.
Money for nothing.
Government for nothing.
How complicated is it?
Finnegan is right. For example, if you get down to it, the Gramm-Leach-Bliley Act and the Commodity Futures Modernization Act were both signed by Clinton. Here’s a Democrat I wish I could vote for:
http://www.youtube.com/watch?v=v8Qn4-1q80A
Keep hammering away at this dead horse. I love this great country of ours. There is a beginning and there is an end; an Alpha and an Omega. The train is speeding down the track. Look to see how much track is left. Does anyone really, I mean, does anyone really expect McCain or Obama, or any of our politicians to bring this train under control before the track runs out? These are pitiful people, downright pitiful. And America watches their every move day in an day out. We have become a nation to be pitied. Yet the beat goes on…Obama…McCain…for god sake will someone please save us!!!
Oversimplifying I’m sure, but as I see it the problem is related to a gigantic, frenzied, speculative asset bubble, including but not limited to real estate, that is deflating. So there’s only so much that can be done at this point. The only question is how bad things will get. This is has happened many times before throughout the history of capitalism so we can only hope that those in charge have the knowledge to avoid the more severe catastrophes of the past.
Capitalism can sometimes tend to be self-destructive (especially when unregulated), but it’s also a pretty resilient system. If things get as bad as many analysts are saying it will get, I think we’ll have to “tighten our belts” for a few years and get through it.
But the “global pool of investors” won’t keep their money under the mattress forever. Eventually they’ll want to invest in something again and start earning interest on loans. Entrepreneurs will innovate, and investors will loan money and invest.
Several months ago, Prof. Rosser turned me onto Dean Baker’s blog. IMO, Baker’s one of the smartest economists in Washington. I highly recommend it to those looking for a reliable expert on the economy.
CFMA was stuffed into an omnibus spending bill by the Republican majority leadership and never debated on the floor. Wadding commodities deregulation into funding for education, health care, community development, etc. in the final days of the 106th assured that no one would vote against it. In a perfect world Clinton would not have signed it.
Bank and commodity deregulation was predicated on an effective SEC, knowledgeable investors, and sophisticated rating agencies. Where was the SEC in their supervisory role of investment banks when they larded up the system with all this worthless opaque credit debt? Who, in the last 8 years has understood the value of mortgage-backed securities? And the current crisis is based on the lack of proper ratings on those investment securities. Its like the entire financial system became a faith-based operation with one guiding principal – we BELIEVE real estate always goes up in value. We BELIEVE in the universal wisdom of free markets. No checks, no balances, just blind faith.
Lobbyists wrote the deregulation laws, and they continue to fund John McCain’s campaign, even paying his campaign manager $2 million for access to McCain, because the last thing they want is meaningful change.
Dean Baker has had some of the more intelligent critiques of the bailout bill, notably that the Fed is able to buy commercial paper, which it is now doing. Clearly the bill was badly flawed, and the Senate’s additions only made it worse.
OTOH, the worst panic was on Sept. 17, when the full effect of the failure to bail out Lehman Brothers hit the credit markets, threatening to do in AIG, with total panic ensuing and interest rates on US Treasuries going to an unheard of 0.06%. The announcement of the bailout was to undo that, and also to allow the bailout of AIG. This latter had been insuring much of the global derivatives market, and letting it go would have put us into 1931 territory. The markets plunged yesterday, but it could have been much worse.
This is a period of time in which all should be cautious. I have for a long time (along with Dean Baker) been warning that the collapse of the housing bubble would lead to some very nasty outcomes. However, I do not have an easy answer as to how we should deal with it. I am a bit appalled at all the people who have come out of the woodwork with their sudden answers who have no idea what they are talking about.
Barkley Rosser wrote, “I am a bit appalled at all the people who have come out of the woodwork with their sudden answers who have no idea what they are talking about.”
I’m certainly no expert on much of anything, but I’ve read every relevant analysis and news report I’ve come across, and it seems to me that George Bush (and to a lesser extent Paulson and Bernanke) fits the description of a man who has no idea what he’s talking about on matters of the economy. Last year, Bernanke said that the fallout from the sub-prime housing crisis would be $50 billion. Now it’s becoming clear that $700 billion or $850 billion is just a drop in the bucket of losses.
And that’s what scares me. Everyone is blind and panicking, including our so-called leaders.
Questions professor, true or false:
1) The value of the entire mortgage market is $7 trillion?
2) The size of the credit default swap market last year was $45 trillion?
Essay:
Why are we still talking about the “housing bubble” in regard to the ruin of the American and possibly the World economy?
To paraphrase a line from This American Life, “If the sub-prime housing bubble is what got the economy sick, credit default swaps is what turned the cold into a plague.”
There is a connection between the two (primarily deregulation) and it’s laid out in those two episodes of T.A.L. I mentioned above.