Officially titled the “Emergency Economic Stabilization Act of 2008,” the plan to rescue the financial system of the US has ballooned from 3 pages to 110 (pdf). Others with more time (and experience) than I have looked at it in more detail (see this NY Times article, for example), concluding that this bill is needed now and in its current form, this is about the best we can get.
My biggest concern is that $700 billion may be the tip of the iceberg and that we may very well find ourselves on the hook for much, much more. Once we go down this path (Iraq, anyone?) there is no turning back.
VIVIAN J. PAIGE | All Politics is Local 
You do like to ignore anyone or anything that does not conform to your Weltanschauung, don’t you, MB?
Don and Lewis, go on over to MB’s blog and start commenting. He’ll ask you nicely please not to comment on his blog (apparently, he cannot stand to be embarrassed on his own blog) and then he will ban you.
rlewis, if stupid was currency, we’d just ask you to lend us some to pay for a bailout. MB and I have consistently said the plan is flawed. A lot of Republicans voted against it; so did a lot of Democrats. It appears the plan has managed to generate bi-paristan contempt.
Back to the discussion about cause: I do think the foundation of the current turmoil does go back to the Clinton Administration, but not for the reason some people think.
Clinton pushed for relaxing the standards for evaluating and approving lenders from which Freddie and Fannie would buy mortgages in the secondary housing market, largely because he was concerned about the growing market of buyers participating in the sub-prime mortgage market. This was a legitimate concern, but I think his administration pushed for the wrong approach; they should have instead moved to regulate the the sub-prime market. Why they didn’t, I can’t say; I suspect it would have been politically difficult with a Republican majority in Congress while relaxing standards was comparatively easy. But I can’t really say.
Fast foward a decade or so, and it’s the sub-prime market that ended up being the fire-starter; that’s where the first round of foreclosures came from. That stalled the housing market, which caused problems: falling sales prices meant that you bring in less money on interest than you would off a higher sale price, and falling volume of sales meant lenders couldn’t recoup the losses in sheer volume. Other things probably happened to influence this, like declining foreign investments due to a weakening dollar and broader problems with US debt–we’ll find out more when Freddie and Fannie have their books cracked open, as I note that the DOJ has issued subpeonas for their paperwork over the last couple of years. The upswing of it all is that the two GSEs were exposed to more financial risk from the borrowers that Clinton tried to lure out of the subprime mortgage market, they didn’t have the capitol on hand to back their loans (Greenspan was the one who noted these two factors, incidentally, if you want to assign credit for foresight), and they couldn’t raise as much capitol from foreign investors on a declining dollar, or from skittish domestic investors worried about the market.
Which isn’t to say it’s Clinton’s fault; many people did foresee problems with the subprime market in the bullish days of the 1990s on Wall Street, and those concerns were born out when the bubble burst. Clinton sought to compete with the institutions marketing those loans so as to limit their impact on the economy. Unfortunately, their marketshare wasn’t reduced enough to the point where their collapse would prevent wider implications for the market.
It’s also not as though either party did anything to correct the issue, either. The 2005 legislation didn’t fail because it couldn’t be reconciled with Democrats–it failed because it couldn’t be reconciled with the version passed by the US House of Representatives with broad, bi-partisan support. The House version included provisions for a regulator who would set size limits for the size of the two GSEs’ portfolios, whereas the Senate version had a strict cap. The House version also included funds dedicated for low-income housing and housing in hurricane-prone areas, whereas the Senate version left no room for any such provision. Democrats in the Senate supported the House’s version; Republicans wanted their own bill. Democrats could have sucked it up, probably, but it’s also true that Senate Banking Committee chairman Shelby could have worked harder to secure bi-partisan support for a bill that could have been easily reconciled in conference before passing both chambers of Congress.
Short version: Democrats didn’t “stymie” the legislation that didn’t get voted on.
Rep. Boehner (sp?) is blaming Rep. Pelosi for the bill’s failure because she said mean things during her floor speech. Her words were exceedingly ill chosen – especially considering her position as Speaker. But come on guys – is the House Republican Caucus made up primarily of petulant twelve year olds? That is a rhetorical question.
Stymie is certainly the wrong word (if for no other reason than it’s not a parliamentary proceedure available in the legislative process–Mr. Speaker, I move to stymie and reserve the balance of my rabble-rabble).
Certainly a lot of parties share responsibility–there were two competing points of view (having little to do with partisanship, as Republicans in the House liked their version, too) that no one ever bothered trying to reconcile. If people had approached the issue with the same sort of seriousness that they approached the bailout, with Republican and Democratic leaders coming together with the President and the relevant cabinet heads to hammer out a deal, we might be in a different place. But no one gets to claim credit for something that never happened, and everyone gets to share the blame.
Vivian,
For what it’s worth, the Bush Admin tried to regulate Fannie and Freddie in 2003/05/07. All three bills died in the Senate. The first two times they failed because the Repubs didn’t have the votes for cloture (and did not care to spend time on the floor for a vote). In ’07, the bill “died” in committee. Here is the NYT story on the first try from “03:
http://tinyurl.com/4qd8j3
Despite their recalcitrance on this, I don’t think that one can reasonably say, “Aha! Senate Dems are primarily to blame!” The current financial crisis is way too big a clusterfark for them to get that much of the credit.
Brian – thanks for that info.
Pelosi made it clear that even if the Republicans swallowed their pride and compromised a lot to accept the bill, she was going to cast it as a Democrat victory and give them no credit, and the press would have backed her version, so they took their ball and went home.
Apparently, reaching across the aisle for Pelosi is only for the purpose of slapping their faces.
Anyway, sometimes partisan gridlock can be a good thing. If they just stay at loggerheads long enough, the marketplace will sort things out before they can make it worse.
Gasp! It would have been cast as a Democratic victory! People would have run through the streets praising the Democratic Party! Barack Obama would have been elected by acclamation instead of election!
It kind of makes you wonder: If partisan politics was the reason it failed, why did 94 Democrats vote against it?
Barney Frank amuses.
(Go ahead and watch, if you can. Until I saw the GOP leadership, one at time, get up and whine about hurt feelings, I thought maybe the claim that they were blaming Pelosi’s speech was a little overblown. Who knew?)
This is Congressman Franks’ showing why Democrats cannot be trusted with the economy.
“Fannie Mae and Freddie Mac are not in crisis.”
So do we wait for a crisis before we do anything, or try to head off the crisis (which he was unable to see coming, but Bush and McCain did)?
“Even if there were a problem, the government doesn’t bail them out.”
Isn’t that what Congressman Franks wants to do now?
The fact is, Pres. Bush, Sen. McCain, and the Republicans saw this coming and tried to stop it. McCain’s bill made it out of committee on a party-line vote, but without the 60 votes required for cloture, there was little point in bringing the bill to the floor.
Where was Obama — on the take from Fannie Mae to the tune of over $125,000.
LOL, we’re back to supporting the socialist President who isn’t a real fiscal conservative, I see.
rlewis – I warned you before about the name-calling. Last warning.
Mouse – I wouldn’t say too much about Obama getting money from Fannie Mae when McCain’s campaign manager was getting $15K a month right up until the gov’t took it over.
And the guy who chose Biden was…?