Why do you people even get caught up in this "he said" "she said" blame game? That's exactly what these politicians want us to do. It's great that these articles placing blame on who they believe to be responsible after the fact. Where were they 5 or 10 years ago when it could have been prevented?? We live in an oligarchy, they're all pigs, Democrat and Republican. Republicans didn't have the moral authority to say anything, because Frank and the Democrats knew that many Republicans were getting greased with campaign contributions by the same financial institutions. To think otherwise would be naive.
The only solution I can see would be to gut the two major national parties, or the formation a viable third party. And sadly to say, Americans today are more concerned about who's doing better on Dancing With The Stars than the survival of this Country
Bank on this: Failures to rise Many institutions to go under despite bailout, experts say BY MICHAEL LIEDTKE The Associated Press
SAN FRANCISCO — Here’s a safe bet for uncertain times: A lot of banks won’t survive the next year of upheaval despite the U.S. government’s $700 billion plan to restore order to the financial industry. The biggest question is how many will perish and how they will be put out of their misery — in outright closures by regulators scrambling to preserve the dwindling deposit insurance fund or in fire sales made under government pressure. Enfeebled by huge losses on risky home loans, the banking industry is now on the shakiest ground since the early 1990s, when more than 800 federally insured institutions failed in a three-year period. That was during the clean-up phase of a decade-long savings-and-loan meltdown that wound up costing U.S. taxpayers $170 billion to $205 billion, after adjusting for inflation. The government’s commitment to spend up to $700 billion buying bad debts from ailing banks is likely to save some institutions that would have otherwise died, but analysts doubt it will be enough to avert a major shakeout. “It will help, but it’s not going to be the saving grace” because a lot of banks are holding construc- tion loans and other types of deteriorating assets that the government won’t take off their books, predicted Stanford Financial analyst Jaret Seiberg. He expects more than 100 banks nationwide to fail next year. The darkening clouds already have some depositors pondering a question that always seems to crop up in financial panics despite deposit insurance: Could it possibly make more sense to stash cash in a mattress than in a bank account? “It sounds like a joke,” said business owner Mauricoa Quintero as he recently paused outside a Wachovia Bank branch in Miami. “But it sounds safer than the turmoil out there right now.” Not as many banks are likely to fail as in the S&L crisis, largely because there are about 8,000 fewer today than there were in 1988. But that doesn’t necessarily mean the problems won’t be as costly or as unnerving; banks are much larger than they were 20 years ago, thanks to laws passed in the 1990s. “I don’t see why things will be that much different this time,” said Joseph Mason, an economist who worked for the U.S. Treasury Department in the 1990s and is now a finance professor at Louisiana State University. “We just had a big party where people and businesses overborrowed. We had a bubble and now we want to get back to normal. Is it going to be painless? No.” With more super-sized banks in business, fewer failures could still dump a big bill on the Federal Deposit Insurance Corp., the government agency that insures bank and S&L deposits. The FDIC’s potential liability is rising under a provision of the bailout that increases the deposit insurance limit to $250,000 per account, up from $100,000. Using statistics from the S&L crisis as a guide, Mason estimates total deposits in banks that fail during the current crisis at $1.1 trillion. After calculating gains from selling deposits and some of the assets of the failed banks, Mason estimates the clean-up this time will cost the FDIC $140 billion to $200 billion. The FDIC’s fund currently has about $45 billion — a five-year low — but the agency can make up for any shortfalls by borrowing from the U.S. Treasury and eventually repaying the money by raising the premiums that it charges the healthy banks and S&Ls. Through the first nine months of the year, 13 banks and S&Ls have been taken over by the FDIC — more than the previous five years combined.
Does bailout put us on edge of socialist reform? First published: Monday, October 6, 2008
Taxes will inevitably rise to pay for the $700 billion bailout of financial institutions that would ultimately fail in this alleged free-market economy. In this capitalist economy, we were to live by the Darwinian theory of "survival of the fittest." Our actions have hardly adhered to that theory given our governments' current acts of intervention.
When the same crisis hit South Korea in the late 1990s, the United States and International Monetary Fund denied aid to bail out their companies. The financial institutions of South Korea became bankrupt; thousands lost jobs and became homeless.
Now, we find ourselves in a similar dilemma. Only this time we hypocritically decide to provide aid to ourselves when we were supposed to let the institutions fail like in South Korea. Even though we plan on funding this bailout ourselves, it still goes against what America has represented for decades. Can we even classify the United States as a free-market economy anymore, or are we on the verge of socialist reform? We have no idea how long the government will operate these firms for, or even if the proposed bailout plan will work.
The proposed $700 billion plan will accumulate some revenue in the long run, provided the firms keep their heads above water and the money is paid back. All we can do is wait and see.
Anxiety spurs sell-off Rescue plan no help as markets dive worldwide BY TOM RAUM AND JEANNINE AVERSA The Associated Press
WASHINGTON — The government’s $700 billion rescue, aimed at rebuilding economic confidence, appeared to sound a global alarm instead on Monday, triggering a fearful international sell-off as the U.S. began work on a plan that investors feared would be too little and too late to stave off a worldwide recession. As markets around the world tumbled amid fastspreading anxiety, officials in Washington worked quickly to put the new financial plan into effect and to shovel more money into the banking system. The Treasury Department named a former Goldman Sachs executive, Neel Kashkari, now Treasury’s assistant secretary for international affairs, to oversee the new program and said it would increase its bond sales to help pay for the huge package that was approved with fanfare and signed Friday by President Bush. Trying to do its part, the Federal Reserve increased a short-term loan program to as much as $900 billion and announced it would begin paying interest on reserves that banks keep with it. Bush sought to reassure panicking markets. “It’s going to take awhile to restore confidence in the fi nancial system. But one thing people can be certain of is that the bill I signed is a big step toward solving this problem,” he said in San Antonio, Texas. Nobody seemed reassured. Chaos in the financial system seemed to be growing by the minute. The Dow industrials plunged below the 10,000 level for the first time in four years, and at one point were down as much as 800 points before recovering to close with a loss of 370. All sectors — not just financial com- panies — were being sold off. “People are panicked that their bank is going to go out of business. People have just lost a lot of trust in the financial system and in these large institutions,” said Anil Kashyap, professor of economics and finance at the University of Chicago’s Graduate School of Business. He suggested the crisis has morphed from a near shutdown in lending to a new, more dangerous phase in which financial and other companies face greater chances of insolvency. The fear was reinforced by new problems among European banks and fresh worries in Asia of a spreading global recession that would harm the continent’s prized ability to export. It all started with a U.S. housing boom, helped along by low interest rates and government encouragement for more home ownership. Too many home mortgages were written for too many people who really couldn’t afford them. Banks and other financial companies that made the home loans then resold them. Many were packaged into Wall Street securities and sold to investors. There was lax federal regulation over the process. It worked as long as home prices were going up. But when they started to fall several years ago, the process began to collapse. Many people suddenly owed more on their homes than they were worth. Rising interest rates made it harder to meet monthly mortgage payments that were resetting to higher levels. Foreclosures increased. The infection spread as markets dried up for mortgages and mortgagebacked securities. Now, many banks and financial institutions don’t have enough money to cover their obligations as a result of the plunge in the value of these securities on their balance sheets. Many are hoarding what cash they have. That’s what the bailout is supposed to help fi x, with the government buying these hard-to-value assets and reselling them later in hopes of allowing banks to start lending again. But trust among banks is in short supply on a battlefield littered with a growing number of dead, wounded and transformed financial institutions.
Our current economic crisis was caused by politicians, both Democrats and Republicans, who perverted the American Dream by treating home ownership as an undeniable right rather than what it really is, a privilege. President Bush aggressively promoted the benefits of home ownership through various policy positions, including a reckless zero down-payment initiative for some homebuyers and praised Fannie Mae and Freddie Mac even after concerns about their accounting standards began to surface.
Home ownership has always been part of the American Dream. It allows individuals and families to build wealth by having them pay themselves instead of a landlord or rental company and vests people in their communities by grounding them in local schools, stores and government.
The concept that owning a home was a privilege and not a right began to change in 1992 following a flawed Boston Federal Reserve Board study which allegedly found subtle discrimination in loan and mortgage lending by banks and mortgage lenders.
Politicians didn't care that the study was full of errors. The study found discrimination took place when five minority applicants were rejected for special low-income loans even though the applicants were rejected because they made too much money to qualify for a low-income loan, not because of their race. The report also classified as 'rejected' the applications of eight minority borrowers even though these borrowers voluntarily withdrew their mortgage applications. The study's sloppiness also went the other way.
The study reported that a white applicant was approved for a $3,115,000 loan in order to purchase a home valued at $445,000. It was later demonstrated that the actual loan was approved for $311,500, far less than $3 million reported and more importantly, less than the home's purchase price. When these and other errors were corrected no evidence of discrimination existed.
But politicians didn't care. They used this report as the basis to fix a problem which didn't exist. Leading the charge for change was President Clinton who immediately set-out to rework the Community Reinvestment Act to give federal officials the power to pressure banks to make loans they otherwise considered too risky or uneconomical.
Traditional lending requirements were labeled 'outdated' and discriminatory. What 'traditional lending requirements' were viewed as 'outdated' and 'discriminatory'? (1) banks were told that a "lack of credit history should not be seen as a negative factor" and that "past credit problems" should be viewed and considered in light of any "extenuating circumstances" so loans could be extended when they otherwise would have been denied; (2) banks were encouraged to let borrowers without enough money for a down-payment make-up any deficiency with "gifts, grants, or loans from relatives, nonprofit organizations, or municipal agencies" even though banks considered this risky as the home buyer would have little or no equity in the house; (3) banks were also instructed that borrowers who received child support, welfare payments or unemployment benefits could count that as 'income' for borrowing purposes.
Call me crazy but if you need to count child support money that's intended for your child, or are in such bad economic shape that you're relying on welfare payments to make ends meet or are unemployed, maybe, just maybe, you shouldn't be buying a house. Too bad our politicians and the 'best and brightest' on Wall Street couldn't figure that out!
Community groups like ACORN, threatened to cry racism if banks didn't increase their loans to subprime borrowers. Banks typically avoided subprime loans as they carried a greater risk of default, but with law on its side, ACORN and other groups intimidated lending institutions into making such loans.
Banks soon learned, however, that making subprime loans actually could increase their profits without increasing their risk. Once the banks extended a loan to a subprime borrower that loan could then be sold by the bank to Fannie Mae or Freddie Mac, two government sponsored entities charged with making home ownership affordable to all Americans.
Banks, Wall Street, and mortgage lenders were soon eager to extend mortgages to subprime borrowers because they could make lots of money without carrying any risk. Fannie and Freddie carried all the risk once the original lending agency sold the loan to them. And once Fannie and Freddie bought the loan this freed up the banks to make even more subprime loans.
So everyone was a winner. The subprime borrower got the money to buy a house. The banks generated mortgages and made a nice profit and Fannie and Freddie executives made tens-of-millions of dollars in salaries and bonuses by hitting their annual goals.
The problem was that in order to keep all of this going lending standards were continually lowered to help the next level of subprime borrowers qualify for mortgages and no one had an incentive to make sure that the new subprime borrowers would actually be capable of making regular mortgage payments. The banks which extended the loans really didn't care because they were just going to sell the loan off to Fannie or Freddie. Fannie and Freddie weren't too concerned because it wasn't their money-they knew that they were insured by the 'full faith and credit' of the federal government (that's government lingo for "you and me").
So when federal regulators began to warn the executives at Fannie and Freddie about the increasing risks of non-payment by subprime borrowers the companies did nothing and when the regulators took their concerns to congress their warnings were met with scorn and contempt. The politicians who received the most political contributions from Fannie and Freddie, by pure coincidence, just happened to be their biggest defenders: Chris Dodd (D-$133,900), John Kerry (D-$111,000) and Barack Obama (D-$105,189).
Representative Barney Frank, who has been a fierce defender of Fannie and Freddie, actually said, while arguing against more regulation, "I want to roll the dice a little bit more in this situation towards subsidized housing.... " It's nice to know that he doesn't mind gambling with our money. Senator Chris Dodd, in praising Fannie and Freddie said, "I, just briefly will say, Mr. Chairman, obviously, like most of us here, this is one of the great success stories of all time. "While Senator Charles Schumer said, "And my worry is that we're using the recent safety and soundness concerns, particularly with Freddie, and with a poor regulator, as a straw man to curtail Fannie and Freddie's mission."
Barack Obama has received more money from Fannie and Freddie than any other senator, with the exception of Senator Dodd, in the last four years. Before entering the senate, Obama filed a class-action lawsuit against Citibank, alleging that the bank was red-lining, or not doing enough lending in certain areas. That lawsuit was eventually settled. Arguably, Barack Obama helped cause the problem he now wants to fix.
The Federal Reserve Board was doing its part by throwing huge piles of cash at would-be home buyers by keeping interest rates too low. With low interest rates speculators began to look at houses as business opportunities, while others began to look at their homes as a giant piggy bank rather than a place where you actually lived and raised a family. Alan Greenspan encouraged this type of behavior and proudly said, "American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgages..." President Bush, responding to September 11th unwisely encouraged us to "go shopping" rather than hunker down financially and contribute to the War on Terror in other ways (can you say home equity loans?).
The SEC also shares in the blame. It failed to do its job (failed to adequately regulate mortgage brokers, the credit rating companies, and naked short-sellers), acted only after the markets froze-up (finally addressed mark-to-market rules) and refused to examine how the credit-default-swap market could grow from $919 billion in 2001 to over $54 trillion by 2008 (which allowed companies to make wild financial bets with the false confidence that 'insurance' would be there if the deal went south).
So what happened? Home-ownership rates which had been relatively constant for 25 years began a 10 year upward climb beginning in 1995, around the same time that government began its push and pressure for banks to make more subprime loans. The politicians, banks, lenders and Wall Streeters were thrilled because they were all making gobs of money.
Today we are all paying the price for the decisions made long ago. I have spoken to people involved at the highest levels and they now are all saying the same thing, "it is worse than anyone knows" and "worse than I even thought." Political and business leaders who I respect have told me that the economy is on the edge of an abyss.
The bailout is an outrage and is designed only to buy time for the politicians. It will delay the real hard times from hitting until after the November elections. Not one politician has said that this bailout legislation will put us on a better financial footing or that our economic problems will be put behind us. In fact, we'll be worse off because our politicians, even in this crisis, can't stop themselves from spending. This bill includes an extension of the rum tax benefits for Puerto Rico and the US Virgin Islands ($192 million), tax benefits for companies which manufacture wooden arrows for kids ($6 million), car racing tracks ($128 million), a provision which forces insurance companies to treat mental health problems like physical problems ($3.8 billion) and many, many more.
International markets don't offer any better alternative. Germany, England, the Netherlands, and Russia have all come out with their own government backed bailout plans. There are now calls for more international regulation (presumably led by the United Nations) and China has taken this opportunity to call for "a diversified currency and financial system and fair and just financial order that is not dependent on the United States." Meanwhile, there is increasing international indications that the dollar will lose its place as the reserve currency of the world.
The politicians from both political parties continue to lie to us. They promise us better healthcare and more government programs. The only thing either party will be able to deliver is higher, much higher, taxes as the debt swells and government revenues fall. The above is an exerp from a Glenn Beck news letter on why we're in this mess and it's not over yet.
Excellent article. There are two things I'd like to elaborate on.
First, since when is it shameful to rent? I rented when I couldn't afford to purchase a home. And my rental WAS A HOME to me. Perhaps it wasn't a HOUSE I owned, but it was certainly a HOME! There is nothing shameful in renting!
Second, the reps have always had the platform of FREE MARKET and CAPITALISM and promoting PRIVATE BUSINESS. Well now the dems are saying that it clearly is NOT working. That there should be more government oversight regarding private business.
With the dems in power will only place more restrictions on the private sector businesses. But with this all said, it was, in fact, THE GOVERNMENT, both parties, that allowed and was a part of this crisis.
Let it all crash!! AS AMERICA GOES, SO DOES THE WORLD!!
When the INSANE are running the ASYLUM In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. -- Friedrich Nietzsche
“How fortunate for those in power that people never think.” Adolph Hitler
Retirement plans take $2 trillion hit BY JULIE HIRSCHFELD DAVIS The Associated Press
WASHINGTON — Americans’ retirement plans have lost as much as $2 trillion in the past 15 months, Congress’ top budget analyst estimated Tuesday. The upheaval that has engulfed the financial industry and sent the stock market plummeting is devastating workers’ savings, forcing people to hold off on major purchases and consider delaying their retirement, said Peter Orszag, the head of the Congressional Budget Office. As Congress investigates the causes and effects of the financial meltdown, the House Education and Labor Committee was hearing from retirement savings and budget analysts on how the housing, credit and other financial troubles have battered pensions and other retirement funds, which are among the most common forms of savings in the United States. “Unlike Wall Street executives, America’s families don’t have a golden parachute to fall back on,” said Rep. George Miller, D-Calif., the panel chairman. “It’s clear that their retirement security may be one of the greatest casualties of this financial crisis.” More than half the people surveyed in an Associated Press-GfK poll taken Sept. 27-30 said they worry they will have to work longer because the value of their retirement savings has declined. Orszag indicated the fear is wellfounded. Public and private pension funds and employees’ private retirement savings accounts — like 401(k)’s — have lost some 20 percent overall since mid-2007, he estimated. Private retirement plans may have suffered slightly more because those holdings are more heavily skewed toward stocks, Orszag added. “Some people will delay their retirement. In particular, those on the verge of retirement may decide they can no longer afford to retire and will continue working,” Orszag said. A new AARP study found that because of the economic downturn, one in five workers 45 and older has stopped putting money into a 401(k), IRA or other retirement savings account during the past year, and nearly one in four has increased the number of hours he works.
AIG execs' retreat after bailout angers lawmakers By ANDREW TAYLOR, Associated Press Writer Tue Oct 7, 11:15 PM ET
Days after it got a federal bailout, American International Group Inc. spent $440,000 on a posh California retreat for its executives, complete with spa treatments, banquets and golf outings, according to lawmakers investigating the company's meltdown.
AIG sent its executives to the coastal St. Regis resort south of Los Angeles even as the company tapped into an $85 billion loan from the government it needed to stave off bankruptcy. The resort tab included $23,380 worth of spa treatments for AIG employees, according to invoices the resort turned over to the House Oversight and Government Reform Committee.
The retreat didn't include anyone from the financial products division that nearly drove AIG under, but lawmakers still were enraged over thousands of dollars spent on outing for executives of AIG's main U.S. life insurance subsidiary.
"Average Americans are suffering economically. They're losing their jobs, their homes and their health insurance," the committee's chairman, Rep. Henry Waxman, D-Calif., scolded the company during a lengthy opening statement at a hearing Tuesday. "Yet less than one week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation."
Former AIG CEO Robert Willumstad, who lost his job a day after the Federal Reserve put up the $85 billion on Sept. 16, said he was not familiar with the conference and would not have gone along with it.
"It seems very inappropriate," Willumstad said in response to questioning from Rep. Elijah Cummings, D-Md.
"Those executives should be fired," Democratic presidential candidate Sen. Barack Obama said at a debate with Sen. John McCain on Tuesday, referring to the retreat participants. Obama also said AIG should give the Treasury $440,000 to cover the costs of the retreat.
But Eric Dinallo, superintendent of the New York State Insurance Department, said he could see the value of such a retreat under the circumstances.
"Having been at large global companies and knowing what condition AIG was in ... the absolute worst thing that could have happened" would have been for employees and underwriters in its life insurance subsidiary to flee the company.
"I do agree there is some profligate spending there, but the concept of bringing all the major employees together ... to ensure that the $85 billion could be as greatly as possible paid back would have been not a crazy corporate decision," Dinallo told the House committee.
The hearing disclosed that AIG executives hid the full range of its risky financial products from auditors as losses mounted, according to documents released by the committee, which is examining the chain of events that forced the government to bail out the conglomerate.
The panel sharply criticized AIG's former top executives, who cast blame on each other for the company's financial woes.
"You have cost my constituents and the taxpayers of this country $85 billion and run into the ground one of the most respected insurance companies in the history of our country," said Rep. Carolyn Maloney, D-N.Y. "You were just gambling billions, possibly trillions of dollars."
AIG, crippled by huge losses linked to mortgage defaults, was forced last month to accept the $85 billion government loan that gives the U.S. the right to an 80 percent stake in the company.
Waxman unveiled documents showing AIG executives hid the full extent of the firm's risky financial products from auditors, both outside and inside the firm, as losses mounted.
For instance, federal regulators at the Office of Thrift Supervision warned in March that "corporate oversight of AIG Financial Products ... lack critical elements of independence." At the same time, PricewaterhouseCoopers confidentially warned the company that the "root cause" of its mounting problems was denying internal overseers in charge of limiting AIG's exposure access to what was going on in its highly leveraged financial products branch.
Waxman also released testimony from former AIG auditor Joseph St. Denis, who resigned after being blocked from giving his input on how the firm estimated its liabilities.
Three former AIG executives were summoned to appear before the hearing. One of them, Maurice "Hank" Greenberg — who ran AIG for 38 years until 2005 — canceled his appearance citing illness but submitted prepared testimony. In it, he blamed the company's financial woes on his successors, former CEOs Martin Sullivan and Willumstad.
"When I left AIG, the company operated in 130 countries and employed approximately 92,000 people," Greenberg said. "Today, the company we built up over almost four decades has been virtually destroyed."
Sullivan and Willumstad, in turn, cast much of the blame on accounting rules that forced AIG to take tens of billions of dollars in losses stemming from exposure to toxic mortgage-related securities.
Lawmakers also upbraided Sullivan, who ran the firm from 2005 until June of this year, for urging AIG's board of directors to waive pay guidelines to win a $5 million bonus for 2007 — even as the company lost $5 billion in the 4th quarter of that year. Sullivan countered that he was mainly concerned with helping other senior executives.
The U.S. Treasury Department is considering taking ownership stakes in many U.S. banks in a bid to restore confidence in the badly shaken financial system. An administration official, who spoke on condition of anonymity because no decision has been made, said the $700 billion rescue package passed by Congress last week allows the Treasury Department to inject fresh capital into financial institutions and get ownership shares in return.
This official said all the new powers granted in the legislation were being considered as the administration seeks to deal with a serious credit crisis that has caused the biggest upheavals on Wall Street in seven decades and continues to roil global markets.
Supporters of this approach, such as Sen. Charles Schumer, D-N.Y., argue that injecting fresh capital into U.S. banks who want to participate in the program would be an effective way to bolster banks' balance sheets and get them to resume lending. Taxpayers would benefit because the government would receive an equity stake in the bank in return for providing the capital.
"This idea would, at a minimum, complement the administration's planned approach of buying up troubled assets and may prove to be the most promising tool of all in Secretary Paulson's kit," Schumer said in a statement.
A decision to inject capital directly into financial institutions in return for ownership stakes would be similar to a plan announced Wednesday by Britain.
Treasury Secretary Henry Paulson told reporters that Treasury was moving quickly to implement the $700 billion rescue effort and he specifically mentioned reviewing ways to bolster the capital of banks.
"We will use all the tools we've been given to maximum effectiveness, including strengthening the capitalization of financial institutions of every size," Paulson said at a Wednesday news conference.
Asked whether he would try something like the British plan, Paulson said: "We have a broad range of authorities and tools. ... We've emphasized the purchase of liquid assets, but we have a broad range of authorities. And I'm confident we have the authorities we need to work with going forward."
The administration so far has stressed its major goal is to purchase bad loans from financial institutions.
Paulson said that while the financial market turmoil has hurt the economy, the administration is moving quickly to begin the largest financial system rescue effort in history.
Even with the program to buy bad assets from financial institutions, he said, some banks will fail. He also called for patience, saying "the turmoil will not end quickly and significant challenges remain ahead."
In an attempt to help stop the financial crisis from causing a global economic recession, the Federal Reserve and other central banks cut interest rates in a rare coordinated move Wednesday.
Paulson called the coordinated rate cuts "a welcome sign that central banks around the world are prepared to take the necessary steps to support the global economy during this difficult time."
Paulson on Monday selected Neel Kashkari, 35, an assistant Treasury secretary, to be the interim head of the new program. In his remarks Wednesday, Paulson said the administration would move quickly to nominate someone to fill the job permanently.
Paulson said he was consulting with President Bush, congressional leaders and presidential candidates Barack Obama and John McCain before choosing someone to fill the job permanently. The post requires Senate confirmation, something Paulson predicted could occur in November.
The administration has been rushing to implement the program, which cleared Congress last Friday. Paulson said it would be several weeks before the program makes its first purchases of troubled assets.
"U.S. and global financial markets continue to be severely strained," Paulson said at the briefing called to preview the upcoming weekend meetings of finance officials of the Group of Seven major industrial countries, the 185-nation International Monetary Fund and the World Bank. The global credit crisis was expected to be the major agenda item at those talks.
Obama, the socialist New Party, and the socialist Bush Treasury Department By Michelle Malkin • October 9, 2008 05:59 AM
There’s a lot of blog buzz over Barack Obama’s membership in the socialist New Party. You can read about it here, here, and here. A year ago, I might have gotten as worked up about this as everyone else seems to be. But after watching a GOP White House and Republican collaborationists fork over billions upon billions in socialist aid to private businesses, presiding over the most massive nationalization efforts I’ve seen in my lifetime over the past year — and then watching John McCain pitch his Treasury Department-as-national loan servicer plan during the debate — it’s hard for me to muster up much more angst than I already have.
Read today’s headline, people: U.S. May Take Ownership Stake in Banks: Having tried without success to unlock frozen credit markets, the Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system, according to government officials. Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it. Such a move would quickly strengthen banks’ balance sheets and, officials hope, persuade them to resume lending. In return, the law gives the Treasury the right to take ownership positions in banks, including healthy ones. The Treasury plan was still preliminary and it was unclear how the process would work, but it appeared that it would be voluntary for banks. The proposal resembles one announced on Wednesday in Britain. Under that plan, the British government would offer banks like the Royal Bank of Scotland, Barclays and HSBC Holdings up to $87 billion to shore up their capital in exchange for preference shares. It also would provide a guarantee of about $430 billion to help banks refinance debt. The American recapitalization plan, officials say, has emerged as one of the most favored new options being discussed in Washington and on Wall Street. The appeal is that it would directly address the worries that banks have about lending to one another and to other customers. This new interest in direct investment in banks comes after yet another tumultuous day in which the Federal Reserve and five other central banks marshaled their combined firepower to cut interest rates but failed to stanch the global financial panic. In a coordinated action, the central banks reduced their benchmark interest rates by one-half percentage point. On top of that, the Bank of England announced its plan to nationalize part of the British banking system and devote almost $500 billion to guarantee financial transactions between banks.
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