The Senate approved a $700 billion rescue package for the financial industry Wednesday night, giving new life to the bailout by loading it with tax breaks and other provisions tailored to help ease its passage in the House, where an earlier version fell a dozen votes short Monday.
The 74-25 Senate vote — well over the 60 votes needed for passage — comes as the House gears up to consider the massive plan on Friday.
President Bush issued a statement lauding the action in the Senate. "With the improvements the Senate has made, I believe members of both parties in the House can support this legislation," Bush said. "The American people expect — and our economy demands — that the House pass this good bill this week and send it to my desk."
No, what the American people demanded was truth and honesty from it's investors and lenders, you know them better as lobbyists Mr. President.
Even though it looks more likely that a rescue package for the financial industry will be sent to the president this week, investors are still wary. They are concerned that the $700 billion plan won't be enough to stave off more bank failures or end up doing enough to ease the current credit squeeze. The Dow Jones industrial index ended down almost 20 points, at 10,831.07.
Investors are now looking beyond the bailout package to how this crisis is likely to affect the economy. They are bracing for nothing less than a recession.
Nothing LESS than a recession means a possible depression, why can't journalists ever say the D-word?
Since the House rejected the rescue plan Monday, sending financial markets plummeting, the tenor of the conversation has clearly changed.
Lawmakers and the White House are focusing on the economy and what small-business people and ordinary Americans have at stake.
That's a new approach. What a novel idea!
Senate Majority Leader Harry Reid (D-NV) provided a roster of examples for reporters in which he said the financial crisis was starting to bite ordinary Americans. He said one auto dealer in his district — who has been in business for more than 50 years — called him to say he couldn't get credit. Reid said people waiting to take out mortgages were losing escrow money.
dot da dot dot dot da dot dot News Flash, this has been going on for 8 years and WWII is finally over dot da dot dot dot da dot dot
This started years ago, only it started with the poorest and worked it's way up, now that it is effecting those with bank accounts large enough to be heard by the Feds it's suddenly news....Pulleeze.
The Senate measure is very different from the one Treasury Secretary Henry Paulson presented to Congress last week.
Lawmakers in the House added provisions that would dole out the $700 billion the government wants to buy bad loans in three tranches. It also gives taxpayers some assurance that they would be paid back if and when the financial institutions they rescue get back on their feet later.
HAW HAW, no what will happen is it gives financial institutions (lenders) time to figure out ways to keep the money and not repay it, that's what they do, it's their mission statement. Take in more money than they give out.
The bill also includes beefed-up oversight of the program and a cap on compensation for executives who have the Treasury buy up their bad mortgages.
Boosting Deposit Insurance
The Senate, for its part, added "sweeteners" that would increase bank deposit insurance and extend tax breaks. Republicans have agitated for both provisions. As it stands now, the bill would temporarily raise the limit on federal deposit insurance to $250,000 from $100,000 per account and provide more than $100 billion in tax breaks, including extending alternative minimum tax relief for middle-class taxpayers and property tax relief.
The FDIC insurance measure is meant to help restore confidence in the nation's lenders. Federal Deposit Insurance Corp. Chairman Sheila Bair sought the increase Tuesday. The Senate's tax breaks would include some $78 billion in renewable energy incentives and extensions of expiring tax breaks. Those breaks would cost about $112 billion over the next five years.
Both Republican presidential nominee John McCain and Democratic nominee Barack Obama had expressed support for the Senate proposal. Both senators returned to Washington to vote on the measure Wednesday evening. Earlier, McCain told NPR's Steve Inskeep that he was "guardedly optimistic" the bill would pass.
That means I don't know to people like you and I.
Credit Trouble
Bush had been contacting senators to lean on them to pass the bill.
Oh God I wish I could have got that call, I really do. Just think of it, a telemarketing call from the President, he must have had to pick up a part time job to make ends meet.
White House spokesman Tony Fratto said in an e-mail that the president is increasingly concerned about a seizing up in the credit markets. "This morning we're seeing increased evidence of the credit squeeze on small businesses and municipalities all across the country," Fratto said. "So it's critically important that we approve legislation this week and limit further damage to our economy."
A Change In Accounting
They have also asked for the Securities and Exchange Commission to suspend mark-to-market accounting rules and instead require bank regulators to assess the real value of troubled assets.
Mark-to-market accounting essentially allows Wall Street firms to value (or "mark") the assets in their portfolio based on current market prices.
WHAT? So they could lie about the market value before? So I wonder how we got into this mess in the first place?
The problem, critics say, is that under that accounting rule, sliding home prices affect not just the value of mortgages that are defaulting but of all mortgages — and therefore, of all mortgage-backed securities.
That, in turn, affects how much capital firms are required to have on hand to cover their debt exposure. And to raise that capital, firms end up having to sell other assets — which drives the price of those assets down, too. In other words, they say, mark-to-market accounting can lead to a downward spiral.
In other words if the general public finds out how MUCH they lied about market value we will invest accordingly?
House Democrats have been opposed to both a change in mark-to-market accounting rules and to the insurance provision. It is unclear how they will work out those differences or how much the House will tinker with the bill when they get it. That said, the sense on the Hill is that everyone wants to get the vote behind them, key lawmakers say.
The Council of Institutional Investors and the CFA Institute oppose a suspension of mark-to-market — also known as "fair value" — accounting because, in their opinion, the rule offers investors transparency. "In the interest of investor confidence and the health of our capital markets and overall economy, we urge the SEC to resist calls from those with a questionable commitment to transparency and to reject any proposal that would suspend fair value accounting.
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Good luck folks we are going to need it, Washington doesn't know it's ass from a hole in the ground.
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