October 3, 2008

$700 Billion Bailout Bill Round Two: One Down, One To Go

The Senate loaded the bailout bill up with all sorts of goodies and gave it a pass. The House will vote again today. And even if the bill now passes (and we’d be surprised if it didn't), there’s one thing to keep in mind: as we wrote before they raised the confirming loan limits (you know, that $168 billion "stimulus" package that turned out to be - gasp! - more of a tease), this will be anything but a silver bullet.

UPDATE: The House has passed the bailout bill 263 to 171.

UPDATE: And the market closes down 157.

$700 Billion Bailout Breaking News: Round One Rejected By The House [SocketSite]
Once Again, We’ll Simply Go With The Worst (In Terms Of The Bailout) [SocketSite]
Conforming Loan Limits: A Placeholder For Discussion And Analysis [SocketSite]
If Lowering Rates Isn’t Working, Perhaps Increasing Limits Will [SocketSite]

First Published: October 3, 2008 7:30 AM

Comments from "Plugged In" Readers

The financiers are desperately trying to snooker us again. We, the taxpayers, will never see that money once Congress caves in to special interests, (as usual). If we try to get it back by taxing these businesses, then they will take the good parts of their portfolios and flee to other countries. Suckers!

If we use that money to enhance social security, then all of the retirees that lost their retirement funds in the stock market will at least be guaranteed a reasonably comfortable retirement. (The only ones who will still be unhappy are the ones trying to retire to their mansions.)

Finally! Congress has found the money to make social security work.

Let Congress know that if they get fooled by this bailout, then the only thing for voters to do is punish congress the way it was punished for the gulf war.

Bryant Arms

Posted by: Bryant Arms at October 3, 2008 7:39 AM

done deal. now the pain begins.

Posted by: tony at October 3, 2008 10:29 AM

The DJIA dropped almost 800 points after the House failed to pass the bill. Up 150 and falling now that they have...

Posted by: Michael at October 3, 2008 10:39 AM

We truly have the worst government that money has bought!
Is there any chance Cindy Sheehan can dethrone Pelosi?

Posted by: jwhite at October 3, 2008 10:51 AM

@ Bryant Arms

You do realize, don't you, that social security is in decent shape. It's medicare that's the big mess.

And OK, I'll bite. How, exactly was congress punished for the Gulf War?

Posted by: anon at October 3, 2008 11:25 AM

DJIA is now DOWN 140. It's a good thing they rushed to pass that crappy bill.

Posted by: Michael at October 3, 2008 1:00 PM

Kudos to Jimmy for getting out of his Wachovia puts in the nick of time. As Yogi Berra said, "It ain't over till it's over." Hometown bank takes a bullet for the people (FDIC).

Posted by: EBGuy at October 3, 2008 1:10 PM

When Michael Moore and house republicans AGREE, you know this is a terrible bill.

Posted by: sf at October 3, 2008 1:16 PM

Wow -- did you folks see CA is going to ask USG for a loan because of seized credit markets?

Posted by: dub dub at October 3, 2008 4:33 PM

If you were to give me a dollar to buy a HAMBURGER today -- I would GLADLY pay you the dollar back next tuesday.

--Wimpy

Posted by: diemos at October 3, 2008 4:49 PM

The bailout stock rally already seems to have fizzled, and the credit markets appear as frozen as they were before. I'm crossing my fingers, but I suspect the bailout will have to be enhanced in the not-too-distant future. Interesting twist that the state government has been so significantly affected so soon.

Well, at least Sarah Palin enlightened us all with her explanation that this is all because of the "greedy lenders."

Posted by: Trip at October 3, 2008 4:53 PM

Trip - How might the bailout be enhanced? It seems that Hank has fired his bazooka. Maybe we should be optimistic now that Goldman Sachs has just stated that they are predicting a more severe recession. Weren't they just calling for $200 oil?

Hey, not that Palin and McCain are going to win, but admit it - she did pretty good last night, didn't she? Gosh darn it!

Posted by: FSBO at October 3, 2008 5:15 PM

Basically this bailout bill and a few interest rate cuts will at best postpone a train wreck in the equity markets. None the less, a train wreck is coming regardless of this infusion of funds in the short term. If panic sets in after the Fed runs out of ammunition and can not cut rates any further then we will see a crash in the stock market. If the stock market breaks down below 9500, we could test 2003 levels all over again. We are talking Dow 7500 folks. The other negative effect of this bill is that it will cause more debt burden on the tax payer and the Fed will print more money. This will in turn cause hyper-inflation and the dollar will crash relative to other major currencies like the euro and the yen. I am seriously worried about an economic melt down and possibly a depression. Comment by Buck McHugh former VP of Investments at A.G.Edwards and graduate of Cambridge University's Judge Institute of Management Studies.

Posted by: Buck McHugh at October 3, 2008 5:48 PM

Ms. Palin exceeded my extremely low expectations for her, I have to admit that. She probably has quite a future ahead of her.

It does not appear that passing the Bailout Bill has restored general confidence in the banking system, on the contrary I was reading a Bloomberg article that said that the LIBOR was at a record high.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a7ukySUQ66dU&refer=home

Monday should be interesting.

Posted by: NoeValleyJim at October 3, 2008 7:09 PM

By "enhancing" the bailout, I'm just guessing we're going to see even more of what we've seen. An increased infusion of cash beyond the $700B in this bill; further IRS revisions to soften the impact of losses; more sweetheart deals to let weak companies acquire even weaker companies with the taxpayer guaranteeing debts; free money to banks.

But I did see that Merrill is now calling for $50/bbl oil, so at least we'll all be able to drive around looking for jobs.

Posted by: Trip at October 4, 2008 9:13 AM

Dow crossed 10K for the first time since October 2008.

It's the economy, stupid.

Posted by: San FronziScheme at October 6, 2008 7:09 AM

If the stock market breaks down below 9500, we could test 2003 levels all over again. We are talking Dow 7500 folks

is this post from a month ago? The Dow is around 8500, so I'm sure that the stock market will break below 9500!

===
As for the TARP, I hope it is clear to everybody that the government has no idea what to do. This is not a knock on the government. It is simply because there is no answer. there is no "easy out" for our current problem. It has been 25 years in the making of major imbalances and ever increasing debt.

Thus, instead of trying to "fix" this (an impossibility), the government is trying to
1) limit the damage as much as possible
2) help their own friends/family.

So some of the presented ideas are an attempt to limit the pain to our economy and country. others are a way to give huge money to insiders. Who are the friends of Paulson and Bernanke? The financial system. Thus, is it any surprise that all the "solutions" revolve around "Saving" the financial system?

that said, there is a recent power shift, so we'll have to see who the new Administration favors.

as I've said countless times, it is IMPOSSIBLE to predict anything in almost any market, because the markets are centrally influenced now by just a few people (maybe 10 people). their whims can change at any point.

Thus the TROUBLED ASSET Relief Program that was hastily passed will no longer focus on TROUBLED ASSETS. who would've thought it?

there will be more "surprises" since again all these decisions are being made on an ad hoc basis and usually each is in response to the latest crisis. there is no long term plan. so we'll just bumble along until the next dislocation then SURPRISE we'll have more govt intervention and crony capitalism.

Don't worry though, our betters will keep their millions and will rake in millions more (financial bonuses will be near record highs this year). that should console you as you eat cat food. but remember, your sacrifice of eating catfood was essential to keeping the financial system functioning, so that it can restart our economy in some ill-defined period hopefully before you die.

Posted by: ex SF-er at November 12, 2008 10:05 AM

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