Tentative Agreement Reached on Treasury’s $700 billion Rescue Plan … Deal or No Deal?


According to the Politico, a tentative agreement has been reached in the $700 billion Treasury bail out plan. Congressional negotiators “made great progress” toward reaching a deal on the bail out plan. Isn’t it unfortunate that it takes the specter of the complete crash of the US financial markets before Congress actually sits down and does the work of the people rather than playing partisan politics?


click on pic to watch and learn

House Financial Services Chairman Barney Frank, D-Mass., center, and House Speaker Nancy Pelosi, D-Calif., left. (Why does the bail out repulse Americans? Because the very people who are praising a deal is made are the very people who sat by and denied their was a crisis.)

From the initial failed deal put forth, it appears that Democrats have made some concessions and House Republicans won a major victory, “persuading negotiators to include a provision that would require the Treasury Department to create a federal insurance program that would guarantee banks and other firms against loss from any troubled asset.”

House and Senate negotiators have reached tentative agreement on Treasury’s $700 billion rescue plan for the financial markets after a marathon Capitol negotiating session that started Saturday afternoon and stretched into early Sunday morning.

House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.) said the deal still had to be “committed to paper,” a process that will continue throughout the night, with an eye toward a formal announcement Sunday.

“We have something verbal,” said Rep. Rahm Emanuel (D-Ill.).

Republican Whip Roy Blunt (R-Mo.), the chief negotiator for the House GOP, said he was “looking forward to what we’re going to see on paper” but said he was optimistic that it would be something House Republicans could support.

From The Weekly Standard, Deal is Reached. Is ACORN Out? It appears that there are some changes

According to the Washington Post, Lawmakers Reach Accord on Huge Financial Rescue and a vote is imminent. Some of the key provisions of the proposal appear as follows:

  • The money would be dispersed in segments, with Paulson receiving $250 billion immediately, $100 billion upon White House certification of its necessity and the final $350 billion only after Congress has been given 15 days to object.
  • Firms participating in the bailout would be required to grant the government warrants to obtain nonvoting shares of stock, so taxpayers can benefit if the companies return to profitability.
  • Firms taking advantage of the bailout would be required to limit compensation for senior executives, with especially severe limits on “golden parachutes” at failing firms. The compensation limits will be enacted primarily, but not solely, through the tax code by reducing tax deductions for firms that pay executives more than $400,000 a year.

Let’s hope this version of the bail out plan has more than 24% approval from “We the People”. In the end, no deal will be looked upon by the voters as good as between both the financial markets and the government oversight … there are no heros.

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  • Comments

    25 Responses to “Tentative Agreement Reached on Treasury’s $700 billion Rescue Plan … Deal or No Deal?”

    1. Richard on September 28th, 2008 7:52 am

      What a sad state of affairs for our nation to be reduced to. Much has been made of the ‘golden parachute’ issue, which isn’t really key in the whole thing … but I think that the management of any company participating in this plan have clearly failed.

      Their resignations, without any bonuses or anything similar, ought to be required.

      Aren’t they responsible for running their companies? Have we abandoned the notion of responsibility?

      Let’s hope for the best in the days ahead.

    2. A New Girl on September 28th, 2008 10:04 am

      Richard, I agree…a sad state of affairs indeed.

      It goes back to what you post about responsibility…Yes, many in our country have abandoned the notion of responsibility. Let’s remember the very reasons that the Gov. created Fannie Mae/Freddie Mac in the first place! Everyone saw this coming, so now there needs to be bipartisanship to get us out of this jam and work together in coming up with an equitable solution.

      BTW, I posted my sentiments on a previous thread about Barney Frank. Ugh! I’m from MA and I can’t STAND that lisping, inarticulate buffoon!! I’m sorry, but Frank truly is the REAL definition of the word BUFFOON.


      **McCain/Palin ’08**

    3. allank on September 28th, 2008 10:15 am

      I might as well send congress my paycheck it no longer belongs to me. This is sick. Can anybody prove it was sub prime mortgage that caused this?

    4. allank on September 28th, 2008 10:17 am

      PS Did not mortgage insurance premiums work? People still pay it.

    5. Silky on September 28th, 2008 10:52 am

      Thanks to Sen McCain, and his influence urging Republicans to stand strong, other Dem greedy additions have been removed:

      Democrats also made a number of concessions, abandoning demands that bankruptcy judges be empowered to modify home mortgages on primary residences for people in foreclosure. They also agreed not to dedicate a portion of any profits from the bailout program to an affordable housing fund that Republicans claimed would primarily assist social service organizations that support the Democratic Party, the official said.

    6. Silky on September 28th, 2008 10:55 am

      Nothing more than political blackmail.

      I hope it didn’t fly over anyone’s radar screen that before the crisis is overted, another HUGE $634 Billion bill was pushed through ripe with earmarks courtesy of the Dem majority.

      The 78-12 vote sent the $634 billion measure to President Bush, who was expected to sign it even though it spends more money and contains more pet projects than he would have liked.

      Bush had threatened to veto bills that did not cut the number and cost of pet projects in half or cause agency operating budgets to exceed his request. Democrats ignored the edict as they drafted the plan and the White House has apparently backed down.

      Taxpayers for Common Sense, a watchdog group, discovered 2,322 pet projects totaling $6.6 billion. That included 2,025 in the defense portion alone that cost a total of $4.9 billion. Critics of such “earmarks” promise to scrutinize them in coming weeks and months for links to lobbyists and campaign contributions.

      The Democratic majority in the Senate and House has again held our country hostage to their excessive spending. Fire them next term!

    7. Scared Monkeys on September 28th, 2008 11:58 am

      Just want I always wanted … the Federal Govt to have more control over people’s lives.

      The fact that our Fed Gov’t is going to have oversight over $750 billion when the fact of the matter is that they cared less about the oversight in the first place as to the reason why we are in this mess.

      It was socialism, greed and conflicts of interest
      that created the financial crisis. So the answer is more socialism. Great!

    8. Just Bearly on September 28th, 2008 12:04 pm

      Whoever said the dollar is going the way of the Mexican Pesos i think is right. Wall Street is on Welfare. I say let them dumpster dive. Enough of corporate greed and big government spending on wasteful projects. Just my anarchist point of view on it all. Vote for Dave Barr!!!

    9. Just Bearly on September 28th, 2008 12:06 pm

      oops… bob barr

    10. caesu on September 28th, 2008 12:30 pm

      who would have thought?
      just over 15 years after the collapse of the Soviet Union.
      the USA is opting for financial socialism.

      i bet Reagan and the Soviet leaders are turning in their graves.

      and Republican comrade G. W. Bush is going to sign this into law…

    11. Susan on September 28th, 2008 1:38 pm

      Right on, Richard! These companies should be held responsible for their actions. The American taxpayers should not be left “holding the bag” for irresponsible, greedy, selfish CEOs mismanagement of their corporations finances!!

      If anything, Congress should come up with ways to penalize these corporations, instead of bailing ‘em out. Let them pay for their own mistakes! Don’t force it on the American taxpayer…

    12. Susan on September 28th, 2008 1:40 pm

      Oh yeah, off topic:


    13. A New Girl on September 28th, 2008 1:46 pm

      Silky says:

      The Democratic majority in the Senate and House has again held our country hostage to their excessive spending. Fire them next term!

      Bingo! For that matter, they ALL are not doing their jobs so how about a thorough house cleaning and removing them all? Yeah, that’s the ticket right there, Silky.


    14. Patti on September 28th, 2008 2:05 pm

      All these banks have sky boxes. One single box with ten box seat used to cost 1 million per year. This isn’t socialism, it’s capitalizm at it’s best… with a golden parachute to catch them when they fall. And, who pays for those tickets? US, the good ol’ U.S.A. on the back of every single working class slave that is forced to pay his taxes or ‘serve’ the consequences.

      Freedom, they call it.

      And, sadly, enough; there are those that STILL live in ‘temporary’ housing. All one has to do is look behind them, to see the poverty they leave in their path.


      Socialism, My Dear, would have those children looking tidy, ready for school, in their uniforms… saying, “Ta-Ta”, to their mommies and daddies in a non-violent society.


      Red would rather have ‘Cowboys and Indians’ :)


      I know there has to be more democrats
      out there that can put this place to shame!

    15. Patti on September 28th, 2008 2:48 pm

      Socialism and Military Stockpiling…

      Don’t mix.


      You’re either for the People…

      Or ?


      The U.S. doesn’t send their kids off to school; they send them into the military….

      GREAT future!


      Say, “Ta-Ta”


      Lesson One:

      See that guy over there?

      He’s the enemy!


    16. Maggie on September 28th, 2008 4:07 pm

      New Girl I agree about Barney Frank. Been seeing him and Chris Dodd on tv talking about them being our “saviour” sure,, sure..

      per wikipedia

      In 2003, Frank opposed Bush administration and Congressional Republican efforts for the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis. [28] Under the plan a new agency would have been created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry. “These two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis,” Frank said. He added, “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

      Amidst the 2008 financial market turmoil, billionaire Rupert R. Murdoch has repeatedly pointed blame at Frank and a few others as the root cause of the recent housing crisis. In a recent interview, Murdoch claimed that Frank’s plan in the early nineties pushed Fannie Mae and Freddie Mac to make “bad” loans to “underprivileged” families. An anonymous opinion piece published in The Wall Street Journal (owned by Murdoch’s News Corp) on September 9th 2008 further describes Barney Frank as the Patron Saint of Fannie Mae and Freddie Mac.

    17. Maggie on September 28th, 2008 4:11 pm

      Was watching a show last night with a guy from AFL-CIO on capitol hill last week, trying to get in what they wanted.. Above his desk was a poster for the group ACORN.. I understand today, Acorn has been removed from the package.

      One of the guys on the news shows this morning said, People have been living way beyond their means for over 10 years in the USA.. and it’s coming home now..

    18. Richard on September 28th, 2008 8:52 pm

      In re the comment about Chris Dodd above … let us keep in mind that Dodd is, and for some years has been, chairman of the Senate Finance and Banking Committee. Aren’t they supposed to be regulating these companies?

      And he points the finger at Bush? I hope to God that Connecticut voters have the good sense to send him to the recycle bin in November.

      Apparently the money for this rescue package is going to be released in tranches. What I don’t know is, who decides which mortgages, which institutions, or whatever will be supported and/or bought up?

      Who sets the criteria for “trouble”?

      And who makes the decisions?

      Basically, I’m afraid that the government will be stuck with the lowest of the low, and will pay through the nose for the junk.

      Another thing that I don’t understand … I support the idea that CEOs and people of that ilk should prosper WHEN THE COMPANY DOES WELL.

      A company in theory is owned by its stockholders. So if they benefit, I don’t mind if the CEO does as well.

      But some of these guys presided over the bankruptcy of their companies … meaning the stockholders will probably get nothing …

      And yet, the CEOs STILL have their golden parachutes. How in hell is this right?

      That’s why I say that if the government is forced into supporting any company … that’s a bona fide signal that management has FAILED.

      And let them pay the price. Kick them out. And make it clear that no support will be given to any company that doesn’t drop any plans for making a failed CEO rich.

      Isn’t that supposed to be the American system?

      Frankly, I think the boards of directors of such companies should be ousted as well. But that might mean that board members would have to live up to a code of ethics and a sense of decency … and how often do we see that in America today?

    19. Richard on September 28th, 2008 9:01 pm

      Another thing to consider … I have read that our government is borrowing money from abroad to the tune of $2 billion a day to keep afloat.

      That’s a lot of money to most of us. And with the weakening of the dollar (and this massive injection of money should make the dollar fall even more), nations such as China, Japan, and the oil exporters that have recycled their petro-dollars in our Treasury bills have gotten a royal raking over the coals.

      What will they do now? Pull out that money? Park it in gold?

      Imagine if foreign investors sell off their holdings of our Treasury bonds … sending those prices plunging and the interest rate that the government pays soaring (in bonds, prices move inversely to rates: if there are no buyers, or if would-be buyers fear inflation, they will demand higher interest rates, pushing prices down).

      Head for the hills if that happens.

      But if they take the longer view, they might snap up some of our best assets for a song. A Japanese company has just snapped up certain overseas operations of Goldman Sachs, and is boasting that it was a once-in-a-century deal.

    20. Maggie on September 28th, 2008 9:19 pm

      Richard, they have a bill, but not sure it will pass tomorrow.. many Republicans constituents don’t want them to vote yes..still on the bill as is.. I saw one of them from my state and he said he would not sign it.. as is.. Some are up for re-election signing yes would be a death warrant..

      Tonight Mark Cuban(the billionaire who owns the Mavericks) said he was reading through it and he couldn’t believe the group they put in place to oversee this money.. He said they already have jobs and this would be a full time job, not a once a month thing.. and 2 will be out of office soon.. The CNBC guy don’t think much of the bill as is. He said why not insure them instead of handing them tax payers money.. Nancy Pelosi parsing words said it’s not a bail out, but the panel all said it is still a bail out. They eliminated golden parachutes for future workers, but the ones already there get to keep theirs.. Sounds like a joke..and I am sure they tacked on 6 billion worth of more pork.. The bill started out 3 pages and is up to 106 pages.

      As for Chris Dodd…

      Go here and read up on him ,, and his sweetheart real estate deal he got..

      2008 poll of Connecticut voters suggested Dodd would have difficulty winning re-election in 2010, with 46% viewing his job performance as fair or poor


    21. Richard on September 28th, 2008 9:20 pm

      Here’s an AP article saying that initial market reaction to this news is rather tepid.

      It makes three very interesting points:

      1. There is basically no return on short-term Treasuries. People are so panicked that they have bought them and bid up prices to the point that they get no economic reward, other than putting their money in the U.S. government.

      In that situation, what incentive can there be for more purchases of Treasuries? And absent drastic measures, how can our government meet its obligations if nobody will give it more money?

      2. The point is made that if the market perceives this massive infusion of money into the economy as inflationary, then it will be bad for the market. And the package does nothing to stem the decline in home sales and prices … it just helps the banks work off the sludge now in the system. That doesn’t mean people will go out and buy homes now … we’re all scared as it is.

      Maybe a simpler answer is just to burn down houses and buildings until the supply is so low that prices on what is left will go up? Do we like the idea of a National Arsonist Corps?

      3. We don’t know the details of how this plan will work in practice. Who will decide what to buy, from whom, and at how much?

      Don’t abandon the lifeboats yet … not to mention that we have an election coming up.

      NEW YORK – Financial markets were subdued in early trading Sunday night after congressional leaders said they are poised to pass a $700 billion rescue plan for banks, brokerages, credit unions, thrifts and insurance companies.

      Failure to reach an agreement would have led to severe market disruptions, analysts said. But even if investors did dodge a bullet and credit markets start to stabilize, the realities of a weak economy are likely to weigh on markets, they said.

      “When you start thinking of the broader issues, a lot of this is very troubling,” said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. “We have in front of us a recession in the general economy, the consumer is dramatically retrenching their habits by cutting spending, and our financial system has sputtered. This isn’t necessarily a confidence builder because now everybody knows how precarious the financial system really is.”

      In electronic trading Sunday night, futures on the Dow Jones industrial average, Standard & Poor’s 500 index and the Nasdaq 100 all rose about 0.1 percent. The dollar recovered moderately against currencies such as the pound, euro and yen. The yield on three-month Treasuries fell slightly to 0.81 percent in Sunday night trading, an indication that flight-to-quality fears remain high.

      The plan would allow the government to buy toxic mortgage-backed assets from embattled financial institutions, giving them fresh cash to bolster lending. It would permit the Treasury to immediately spend $250 billion to buy banks’ risky assets, provide another $100 billion at the discretion of the president, and a final $350 billion unless Congress has a change of heart and the president decides not to veto the decision.

      Even if the bailout is passed — the House votes on Monday, and the Senate later this week — the economy remains balanced on the edge of a recession. Unemployment has been rising; it’s now at a five-year high of 6.1 percent and is expected to rise as high as 7.5 percent by late 2009.

      With worries running high about recessions around the world, global stock market volatility should remain elevated. And while anxiety about the financial institutions could keep boosting demand for Treasury bills, pushing short-term rates down for U.S. government debt, a glut of new issues with longer maturities that must be sold to finance the rescue plan could weaken the dollar over time.

      In early trading Sunday night, the euro fell to $1.4545, the pound fell to $1.8336, while the dollar rose to 106.28 yen.

      There are also plenty of banks still in trouble, and it may take time before the plan helps them.

      Banks and brokerages wrote down about $400 billion worth of toxic mortgage investments since last year. Analysts believe write-downs could reach $1 trillion as rising home foreclosures further erode the values of mortgage-backed securities.

      In the second quarter, the Federal Deposit Insurance Corp. estimated there were 117 banks and thrifts in trouble, the highest level since 2003. This past week Washington Mutual Inc. became the largest bank to fail in U.S. history, and investors are concerned there might be more failures to come.

      In Europe, the beleaguered Dutch-Belgian banking and insurance giant Fortis NV is being partially nationalized due to the market dislocation. Troubled British mortgage lender Bradford & Bingley will also be nationalized and sold off in parts, British media reported Sunday.

      The threat of more banks failing in the U.S. and abroad forced the government to act swiftly.

      “Without this rescue plan, the costs to the American economy could be disastrous,” President Bush said in a statement late Sunday after the legislation was finalized.

      Stocks have been volatile and the credit markets have been tight for over a year. The turbulence escalated to unprecedented levels a few weeks ago.

      T-bill yields fell to zero for the first time since 1940 as investors pulled their money out of money-market funds and turned to the safest assets out there even if they offered no returns. The difference between those T-bill yields and bank-to-bank lending rates — a key measure of banks’ willingness to lend — rose to the highest levels since 1982. And the Dow Jones industrial average swung violently, dropping to its lowest point since November 2005.

      The proposed $700 billion bailout is aimed at reviving a market for mortgage-backed securities that has all but disappeared as credit has tightened.

      “This gives us a much stronger background to work in compared to the past three weeks,” said Ned Riley, chief investment officer of Boston-based Riley Asset Management. He added, however, that “we’re still not out of the woods relative to all the other problems facing the economy, and there will be doomsayers who predict this package won’t work.”

      The plan gave no details about how the government will buy banks’ troubled assets, leaving it up to the U.S. Treasury Department to come up with the fine points. The government could price the assets very conservatively, which will mean further losses for institutions with souring debt on their books. Pricing the assets too high might leave taxpayers on the hook.

      While those details have yet to be worked out, the market’s biggest worry is that the rescue package may trigger inflation, said Quincy Krosby, chief investment strategist for The Hartford. She said “the government might have to print money to pay for the bailout” by issuing large amounts of Treasury debt.

      “If the market believes this is going to be inflationary, you’ll see mortgage rates go up and money go into commodities,” Krosby said.

      That would deliver another blow to already struggling consumers. Banks have tightened up their lending practices, making it more difficult to get everything from home loans to credit cards. And surging energy prices and an uncertain job market have caused Americans to pare spending.

      After the events of the past few weeks, analysts believe Americans are even angrier and more distrustful of the U.S. financial system. Many have watched their stock portfolios and nest eggs plummet in the past few weeks, and are going to be more unwilling to take risks.

      “Who is going to want to borrow to buy a new home in this environment?” Battipaglia said.

    22. Maggie on September 28th, 2008 9:24 pm

      Now I know how Elvis Presley felt when he shot his television! Watching Barney Frank (D-MA) and Chris Dodd (D-CT) pontificate about how they are going to save the country in it’s time of financial crisis made me nauseous. How is it that these two charlatans can fain concern when they are among the principles responsible for getting the taxpayers into this mess?

      By now even the most intellectually stunted among us understands that the first casualty of politics is honesty. No matter how superficial or how serious the matter, inside the beltway spin doctors take the facts, carve out anything that points to their client’s guilt or responsibility in any given matter and then figure out how to package it so they can level a charge of irresponsibility and ineptness at their opponents or opposing colleagues. Kool-Aid drinking political sycophants glom on to these talking points and suddenly the innocent are the guilty and the inept and responsible are pointing fingers of blame.

      There are several facts that we must not allow the spin doctors, the mainstream media and the guilty to rearrange:

      1) Ever since George W. Bush came to power in 2000 he, along with Sen. John McCain, have been spotlighting the need for a reform of the laws that govern SEC and Wall Street oversight. Their insistence on oversight reform of our financial institutions and markets has been consistent, loud and ignored.

      2) The current financial quagmire in which our nation is firmly planted started, arguably, when Bill Clinton, came up with his “National Homeownership Strategy.” This financial scheme, most likely geared toward bolstering Clintons legacy as a man who “cared about the little people,” promoted insanely low down payments and coerced lenders into giving mortgage loans to first-time buyers with unstable financing and incomes.

      3) Barney Frank (D-MA), as Chairman of the House Financial Services Committee and Chris Dodd (D-CT), Chairman of the Senate Banking, Housing & Urban Affairs Committee had ample knowledge of President Bush’s and Senator McCain’s concerns about the need for oversight reform for the financial markets, yet they chose to play the roles of obstructers instead of reformers. They had the power all along to effect reforms for the financial oversight process and they did nothing.


    23. A New Girl on September 28th, 2008 9:59 pm

      #22- @ Maggie:

      Watching Barney Frank (D-MA) and Chris Dodd (D-CT) pontificate about how they are going to save the country in it’s time of financial crisis made me nauseous. How is it that these two charlatans can fain concern when they are among the principles responsible for getting the taxpayers into this mess? = BRILLIANT !!!

      By now even the most intellectually stunted among us understands that the first casualty of politics is honesty. = Brilliant again, Maggie.

      Excellent post, I really enjoyed reading it. If we were in a room instead of a blog board, I would be on my feet now giving you a standing “O”.

      Encore! =)

    24. Ray on September 28th, 2008 11:07 pm

      Government interference with the Banks is what caused the Bad Loans in the first place,now the govt is going to fix the problem??? When you force the Banks to make BAD loans,what do you think is going to happen. The banks did not want to make some of these loans in the first place. Everyone in Washington is to blame either by their actions or by their Silence.

    25. Richard on September 29th, 2008 7:56 am

      Ultimately, we have to reject the philosophy of government as an always-open checkbook.

      Let’s begin by figuring out what the national government has to do … things that involve the whole nation, such as defense … and the other things, that should be the province of the states.

      Housing, for example … if there is a housing shortage in Michigan, let Michigan handle it. The people of other states are not affected, and should not be asked to pay.

      So, in such a case … hands off!

      Perhaps in this way, states could decide whether it is better to be high-tax, high service, or low-tax, low service. Then let people vote with their feet.

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