Category: Legislation

I Love Barney Frank

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In the “Heterosexually yours in a chaste and biblically appropriate kind of way,” that the Jesus’ General does. Or at least I love the distinguished gentleman from Massachusetts when he says stuff like this:

Frank: “We don’t believe they had the votes and I think they are covering up the embarrassment of not having the votes. But think about this: somebody hurt my feelings so I will punish the country. I mean that’s hardly plausible. And there were twelve Republicans who were ready to stand up for the economic interest of America but not if anybody insulted them. I’ll make an offer: Give me those twelve people’s names and I will go talk uncharacteristically nicely to them and tell them what wonderful people they are, and maybe they’ll now think about the country.”

There is some serious ownage going on here.

House of Representatives Passed New Credit Card Regulations

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It’s some fairly minor stuff, but it’s a start, though I doubt that it will make it past the Senate, though considering that the distinguished gentleman from MBNA Delaware is otherwise occupied, it’s possible.

Basic provisions:

  • requires a notice period for interest rate increases
  • prohibits interest charges on balances paid during grace periods
  • bars issuers from applying payments first to lower-interest debt while debt carrying a higher interest rate remains unpaid.

Update: Dodd Bill Does Have Bankruptcy Changes

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According to Politico.com:

Among the major provisions Dodd is adding:

  • Authority for bankruptcy judges to restructure mortgages for homeowners facing foreclosure. This was considered a poison pill in a housing bill that passed Congress earlier this summer, but it has gained much more currency now that Washington wants to bail out Wall Street.

Two snaps up to the distinguished gentleman from Connecticut.

Lawmaker Pushback on Paulson’s Plan

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I think that it’s clear that Paulson’s plan will be subject to sagnificant modifications in the legislative process with the Democrats seeing a need for new and stronger regulations, an equity stake in exchange for the bailout, and seeing serious questions raised by the portions of the proposed law that prohibit judicial review.

Of course, if I were them, I’d also be flipping out over the idea of Treasury hiring the Wall Street firms who f%$#ed up in the first place to manage the assets once they are purchased.

I would also note that some Congressmen want some sort of mortgage aid to distressed homeowners to be a part of the plan. (IMNSHO, allowing bankruptcy judges to handle this is the best, cheapest, and most efficient way to handle this).

I should note that the the Wall Street boys hate the idea of restrictions or equity stakes, but they have always wanted, to quote Dire Straits, their , “Money for Nothing”.

It does appear, however that the White House and the Congress are narrowing their differences.

Bailout Plan Appears Even More Sweeping than Proposed

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First, let’s note that under his proposed plan, Paulson can buy non-American, non-mortgage assets, which sounds an awful lot like some of this money will go to benefit UBS, where Phil “Mr. Congeniality” Gramm, sits on the board of directors……Funny that, huh?

Furthermore, the $700 billion quoted is low. The real reckoning of the cost of the plan is $1.8 Trillion:

  • The $700 billion of this plan
  • $50 billion from the Exchange Stabilization Fund
  • The Fed discount window loans.
  • $10+ billion of Treasury purchases of mortgage backed securities (MBS)
  • $144 billion in MBS purchases by Fannie and Freddie.
  • $85 billion loaned to AIG
  • $87 billion in repayments to JPMorgan Chase for loans to Lehman Brothers
  • $200 billion for Fannie and Freddie from the Treasury
  • $300 billion from the FHA to refinance bad mortgages
  • $4 billion to communities to buy and resell abandoned homes.
  • $29 billion to JPMorgan Chase’s to pay them off for taking over Bear Stearns
  • $200 billion made available through the Fed’s Term Auction Facility

Someone is getting a haircut, and it ain’t Wall Street executives.

Bailout Plan Opinions

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Atrios

Deep Thought

Any member of Congress who looks at the plan to give Hank unchecked power to transfer $700 billion from the Treasury to his friends’ companies and has any reaction other than ‘You’ve got to be f%#@ing kidding me’ does not deserve to hold office.

Krugman opposes the plan, at least in the form presented by Henry Paulson, though he is more receptive to Chris Dodd’s version, which requires equity from the firms rescued for buying their part of the big sh$#pile.

Sebastian Mallaby, who normally favors economics for the benefit of rich folk, hates the Paulson plan too.

Brad DeLong is of a similar mind to Krugman.

In The Nation, William Greider calls the Paulson plan a, “historic swindle.”

Dean Baker, as is his wont, gets into some fairly specific proposals in some depth, which which I agree.

Robert Reich is less specific, but he does add one specific proposal: allowing primary mortgages to be modified by a bankruptcy judge, with which I also agree.

As for me, I will merely note that Henry Paulson holds hundreds of millions of dollars worth of shares on Goldman Sachs, and the idea that he get a blank check to work this is therefore nuts.

I Wish This Were My Congresscritter

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Matt Stoller, of Open Left, got the following missive from an unnamed Congressman:

Paulsen and congressional Republicans, or the few that will actually vote for this (most will be unwilling to take responsibility for the consequences of their policies), have said that there can’t be any “add ons,” or addition provisions. F$#@ that. I don’t really want to trigger a world wide depression (that’s not hyperbole, that’s a distinct possibility), but I’m not voting for a blank check for $700 billion for those mother f$#@ers.

Nancy said she wanted to include the second “stimulus” package that the Bush Administration and congressional Republicans have blocked. I don’t want to trade a $700 billion dollar giveaway to the most unsympathetic human beings on the planet for a few f$#@ing bridges. I want reforms of the industry, and I want it to be as punitive as possible.

Henry Waxman has suggested corporate government reforms, including CEO compensation, as the price for this. Some members have publicly suggested allowing modification of mortgages in bankruptcy, and the House Judiciary Committee staff is also very interested in that. That’s a real possibility.

We may strip out all the gives to industry in the predatory mortgage lending bill that the House passed last November, which hasn’t budged in the Senate, and include that in the bill. There are other ideas on the table but they are going to be tough to work out before next week.

I also find myself drawn to provisions that would serve no useful purpose except to insult the industry, like requiring the CEOs, CFOs and the chair of the board of any entity that sells mortgage related securities to the Treasury Department to certify that they have completed an approved course in credit counseling. That is now required of consumers filing bankruptcy to make sure they feel properly humiliated for being head over heels in debt, although most lost control of their finances because of a serious illness in the family. That would just be petty and childish, and completely in character for me.

I’m open to other ideas, and I am looking for volunteers who want to hold the sons of bitches so I can beat the crap out of them.

Making a Bad Situation Worse

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Well, it appears that the American House fetish and the lobbying of predatory realtors is getting results, as the House Financial Services Committee has approved the markup of H.R. 6694, which re-institutes the insane downpayment assistance program, in which sellers make a payment to non-profits, plus a “service charge”, and the non profits “gift” this to a potential home buyer, so that they can qualify for a FHA loan.

Typical scenario: a home owner has a buyer who has no downpayment for a $100K house, so the home seller “donates” $6000 to to a “non-profit” group, which takes a $500 fee, and “gifts” the remainder to the home buyer, so the home buyer now buys the house at $106,000, which the FHA recognizes as 5% down, and so qualifies for a loan.

Of course, the buyer has still put no money down, and they owe more on the mortgate, and the statistics show a much higher default rate.

It does not put people in houses. It creates a default/foreclosure timebomb.

Foreign Relations Committee Tells Condi to Go Cheney Herself

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Condoleeza Rice has negotiated agreements with the UK and Australia to allow for smoother transfers of defense technologies between the nations, as ITAR (International Traffic in Arms Regulations) can be a rather ponderous apparatus.

After repeated delays in the State Department supplying information regarding the impact of these treaties on existing statute, U.S. Senate Foreign Relations Committee has decided to defer consideration of the compacts until after Bush and His Evil Minions&trade are out of office.

Payback is a bitch, bitch.

How it Should Be Done

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The Democrats are worried about the offshore drilling issue being used against them. They know that it’s bogus, but it’s also VERY easy to demagogue.

What do do?

Pass a bill that allows it, but contains provisions that will make the Republicans vote against it.

Include things like:

  • Reducing the distance to shore from 100 to 50 miles when the Republicans want it much closer.
  • Having the states receive no royalties from new drilling, which makes legislative approval next to impossible.
  • Eliminates $18 billion in tax breaks for big oil.
  • The bill would also force the release of 70 million barrels of oil from the nation’s emergency reserves
  • Provide tax breaks for efficient building construction and companies that promote bicycle commutes
  • Require all utility companies to generate at least 15 percent of their power by alternative fuels by 2020.

The senate will never pass this, it will never get pasty filibuster.

All of which have Bush threatening a veto, so you have a trifecta: The Dems vote for it, the Repugs vote against it, and then they have to vote to support Bush’s veto.

Job well done.

Oh My God, They are Nationalizing Fannie and Freddie

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It appears that regulators have sent a letter notifying the GSEs of this, here and here, and the details will be announced tomorrow.

It won’t be called a nationalization, my money would be on “conservatorship”, but the share holders are rumored to get little to nothing, and management will be replaced by people who answer to the government

One of the interesting dynamics here, and one that is barely covered in the financial press is the fact that Fannie and Freddie have been aggressive lobbyists and soft money contributors (their employees are big hard money contributors) for years, and with a nationalization, that will stop.

This means that Congress will stop writing laws, and pressuring regulators, for the benefit of Fannie and Freddie, which is apt to lead to major changes in said laws, regulation, and oversight.

And Now Phil “You’re All Whiners” Gramm Will Bankrupt the FDIC

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It appears that Gramm-Leach-Bliley created an instrument called a Certificate of Deposit Account Registry Service (CDARS) that allows you to deposit money in a one bank, and the CD is divided across a network, allowing for, “FDIC insurance on deposits of up to $50 million.”

Yet another way that Phill Gramm is a cancer on the body politic and the economic fabric of America.

Big Three Welfare Queens

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They are looking for $25 billion in federal loans…..at 4.25%……about 1/3 of what they are paying now….with the government having an option to defer any payments 5 years.

In 1980, Ronald Wilson Reagan rode into the white house on the story of a welfare mother who drove a Cadillac.

Now it appears that the welfare recipient is Cadillac, with John Dingell and the rest of the whores in Michigan backing it.

If they want a bailout, then shareholders and senior management need to lose, and lose big.

Banks Object to Credit Card Regulation

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There’s a big surprise, they want to continue to treat their customers like garbage.

This bill is pretty mild:

  • Requires 45 days’ notice of interest rate increases
  • prohibits companies from changing the terms of the contract at any time for any reason, so called “Universal Default”.
  • Makes issuers mail billing statements 25 days before the due date, instead of the current 14-day minimum.
  • Require that payments be applied to all balances proportionally, as opposed to the lowest (often introductory) rate first.

But even this very weak tea is too much for the banks.

Ratings Agencies Begin to Upgrade Government Bonds

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At least Moody’s is.

For years, corporate debt has been rated higher than equivalent government debt, and once the monoliner insurers started to implode, municipalities realized how much of a racket it was, with the ratings agencies using a stricter standard, so that the government debt had to use insurers where the rater’s brother-in-law worked.

Took long enough, and I’m sure that the fact that various Attorneys General were looking into this, and that there was a bill in congress, had nothing to do with the change.