Questions About the Bailout, and How We Got Here

Now that Congress has voted down the one solid plan we had to address the credit crisis here in the U.S., lot of folks are wondering where we go from here. And many of those same folks are worried about what this means to them and their money.

First, the crisis itself. Hindsight is 20/20, of course, but signs that we were heading for something bad have been there for a while. Two local investment advisors warned about Fannie Mae and Freddie Mac in the pages of Arkansas Business four years ago:

We believe the time has come to bust up Fannie Mae and Freddie Mac, which have become the final guarantors of the bulk of the residential mortgage debt in this country.

These huge entities perhaps have the strongest lobbying groups in Washington, so the job will require much fortitude and tenacity.

Not long ago, our country went through a financial crisis in home mortgage finance with the savings and loan business.

The federal government was called in to pay off the guaranteed liabilities (the insured deposits) and to make an orderly liquidation of the assets.

Fast forward to today. We have Fannie Mae and Freddie Mac, which have taken the place of the savings and loan industry from a financing perspective.

Thus, the potential hazard of guaranteed deposits that existed in the S&L business has been transferred to these two behemoths. Fannie and Freddie have taken the risk and run with it, leveraging their balance sheets to a point where any sober observer would consider both undercapitalized.

A multitude of mortgage originators has taken the place of S&Ls on the asset side. Many are barely capitalized operations that simply collect an origination fee and transfer the risk to Fannie and Freddie.

Sounds familiar, eh?

Fast forward to 2007-2008. MSNBC shows us how this year unfolded, tracking statements by Congressional members and financial leaders alongside unemployment rates and Dow Jones levels, via this neat interactive chart. Early last year was when we began to see bankruptcies from some of the largest mortgage lenders in the country, whose sub-prime mortgages began to go bad as people couldn’t make their payments.

That’s led to the wave upon wave of bad economic news, and brings us where we are this week. Yesterday’s (in)action by Congress was dramatic, but on the whole not surprising, considering the outcry from “Main Street” that taxpayer dollars shouldn’t go to a multi-bllion dollar bailout plan for Wall Street.

On KTHV at 6 p.m. Monday, Craig O’Neill and I talked about what that bailout plan might have done, had it been approved. Click here to see the video.

So now what? Because of a Jewish holiday, Congress doesn’t meet again until Thursday. Will Monday’s bailout plan come up for another vote, or will an alternate plan emerge? That remains to be seen.

Meanwhile, what do you do with your money? More on that after the jump.

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House Defeats Government Bailout Program

Stunning.

From the AP via ArkansasBusiness.com:

The House on Monday defeated a $700 billion emergency rescue package, ignoring urgent pleas from President Bush and bipartisan congressional leaders to quickly bail out the staggering financial industry.

More developing here. Vote was 228 to 205.

More

The roll call [House.gov]

Dems to try again [Reuters]

Arkansas delegation reacts [ArkansasBusiness.com]

Let the finger pointing begin [Politico]

On CNBC: Boehner blames Pelosi’s “partisan” speech before vote

McCain blames Obama, Dem leadership [Politico]

Bush disappointed [AP]

Google tracks the plunge

Google tracks the plunge

Video: Pelosi’s speech [Breitbart.tv]

Stocks plunge [AP via ArkansasBusiness.com]

Obama: ‘Sit tight,’ ‘Don’t panic’ [Doug Krile via Twitter]

… forced to alter speech after vote fails [Politico]

Time has run out [Steve Harrelson, Under the Dome]

All four Arkansas members of the House vote ‘yea’ [Arkansas Times]

Paulson to use all power to protect markets after vote [AP]

House.gov overwhelmed as people seek info on bailout vote [AP]

Republican: The people rejected this bailout, and now so has Congress [Providence Business News]

Pelosi’s NSFW floor speech! [Ana Marie Cox via Twitter]

Joe Klein: Time for a cool head [Time]

The bailout nobody likes [Time]

What now? [The Big Money via Slate]

Don’t blame Pelosi [Slate]

Related

MSNBC interactive chart: How the crisis unfolded

Is my money safe? Questions to ask [New York Times]

After the jump, Drudge’s and Huffington Post’s calm, measured coverage. Also: video of that Pelosi speech.

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Google’s ‘In Quotes’ Tracks McCain’s, Obama’s Words

Just in time for the elections, Google Labs rolls out a neat little tool called In Quotes, which allows readers to search for the U.S. presidential candidates quotes, as compiled by news sources, by various topics.

So, you wanna know what John McCain and Barack Obama have to say about health care? Just plug that term into the search window here, and Google does the rest, fetching a variety of one-liners from the candidates on that topic. The “spin” button will refresh that search, showing you even more quotations. And, you can do the same trick with Joe Biden/Sarah Palin or any other number of combinations between various U.S. political figures.

Google explains:

These quotations are a valuable resource for understanding where people in the news stand on various issues. Much of the published reporting about people is based on the interpretation of a journalist. Direct quotes, on the other hand, are concrete units of information that describe how newsmakers represent themselves. Google News compiles these quotations from online news stories and sorts them into browsable groups based on who is being quoted.

Similar to article selection and placement on Google News, quotes and their speakers are determined automatically by a computer program and we don’t guarantee the completeness or accuracy of the information you may see. The dates you see represent when the article in which the quote appears was added to Google News.

I like to see Google experimenting with stuff like this. As Nov. 4 draws nearer, more people will be looking for information on where the candidates stand on scores of issues, and this tool might not be a bad starting place.

(A version of this post appears today on The Ladder.)

Congress’ Mortgage Bailout Plan

A tentative deal has been reached. We’ll see if it holds.

A draft of the bill (PDF) via WSJ

Summary via WSJ

The deal [Associated Press]

Who wins, who loses in the bailout plan [Associated Press]

Synopsis [Steve Harrelson, Under the Dome]

Paul Greenberg on Writing Editorials

I will sell the reader the case for X in words he can understand. I think the writer should always try to lift his own self – stretch his own horizons – and to do that he has to have faith that he’ll reach the reader. If he doesn’t have faith, that’s not writing; that’s advertising.

As quoted by Mark Hengel in Outtakes this week. More from the Pulitzer Prize-winning Greenberg on writing here.

McCain-Obama in Oxford: What They’re Saying

The one thing you can say about the debate: it happened. No real fireworks, no clear winner. In a draw, who gets the bump?

In Arkansas

Blake Rutherford’s Twitter, on the debate – “I think Obama discussion of strategy is a smart one. I just wonder it anyone is still watching.” (Debate wrap here: No one wins.)

Max Brantley – “My view: A functional tie …” Obama “too deferential,” McCain “grumpy.”

Arkansas Journal: Obama’s inexperience “front and center.”

Tim Griffin’s roundup

Elsewhere

Washington Post: Video, analysis, transcript, more

Real Clear Politics: Video ClipsTranscriptPollsEditorials

Roger Simon, Politico: The Mac is back: “One of his strongest debate performances ever.”

George Will (video): Not a game-changer

Joe Klein, Time: Nothing here “that should change the current trajectory of the campaign.”

Byron York, The National Review: “Senator McCain is absolutely right …”

Wall Street Journal: “The difference are real …”

Slate: Tie goes to Obama

CNN: Both men beat expectation, but tie goes to Obama

David Gergen: No clear winner

Twitter: Everyone on the debate

Alassandra Stanley: A generational divide

Salon: No decisive slowdown

John J. Pitney, Jr., National Review: On appearances, McCain wins

Andrew Sullivan: Fox focus group gives it to Obama

Mark Halperin: Obama wins

Fact-checking the Debate

Factcheck.org: Debate 1

This Wild Week, Tonight on ‘Arkansas Week’

UPDATED: Listen to the show via podcast.

After the debates (game on!), tune in to your local AETN station for a special 10 p.m. “Arkansas Week,” where host Steve Barnes, Hendrix College political science professor Jay Barth, Arkansas News Bureau columnist David Sanders and I sit down to talk about the latest in state and national business and political news.

Our topics: The Paulson/Bush/McCain(?)/Obama(?) Wall Street bailout; tonight’s presidential debates; Lt. Gov. Bill Halter’s lottery plan; the bingo tax; Arkansas’ natural gas play and more.