Congressional Charade: Changes in Bailout Bill Cosmetic, and Everyone Knows That

For a quick, one-stop synopsis of the Mother of All Bailouts (as of this month), see this readable version at Clusterstock (we’ve become a recent convert to this site).

Reader and sometimes contributor Lune, who was once a Congressional staffer and still subscribes to the the inside-the-Beltway press, provided a wrap of their coverage of the bailout bill. It makes clear that everyone understands that turning Hank Paulson’s three pager into a 110 page draft made for a nice fig leaf but made virtually no substantive difference.

From Lune:

Well folks, we’re almost to a done deal (certainly closer than Thursday). The Hill papers are reporting that they’re getting closer in both the Senate and the House to the needed votes to pass the new bailout bill. Roll Call gives the most frank assessment of what happened over the weekend in an article entitled “Same Bailout, New Dynamic” (subtitle: Outrage Prompts Sales Effort).

All the late-night talks, last-minute demands and dramatic pronouncements aside, the fundamental structure of a $700 billion Wall Street rescue plan that Congress spent the weekend wrangling over has not changed significantly from the outline proposed by a bipartisan group of Senators and House Members last Thursday.

“This is in essence the same,” said Sen. Bob Corker (R-Tenn.), who attended those talks.
. . .
Assuming enough House Republicans agree to vote for the package, it appeared that the House could vote as early as today, while the Senate might have to wait to take it up Wednesday after Rosh Hashana on Tuesday.

“If it doesn’t pass, we shouldn’t be in Congress,” a confident Sen. Judd Gregg (R-N.H.) said on Sunday, adding that he thought the measure would pass with broad bipartisan support in both chambers.

Members and staff disagreed about why the bones of the package stayed the same but took so long to hash out.

Negotiators on Saturday added a mortgage insurance program to the proposal at the request of rebellious House Republicans, though that plan is unlikely to be used by failing companies given the Treasury’s ability to take bad debt off the books of troubled financial firms. That means the high-stakes negotiating sessions over the weekend served mainly to generate buy-in and political cover for Republicans and Democrats.

Some Democrats said the time between Thursday and Sunday was largely wasted on back-and-forth talks that yielded few changes. In addition, there was the distraction of presidential nominee Sen. John McCain (R-Ariz.) inserting himself into the mix, they said.

“They were very close to an agreement on Thursday,” one senior Senate Democratic aide said. “Then John McCain blew into town and blew things up for three days. Now, they have virtually the same agreement now that they had before, with a couple of options in it that [Treasury Secretary Henry] Paulson will never use.”

One Senate Democratic leadership aide echoed that notion, saying, “This is largely based on the draft we had Thursday morning. … Once we got past the McCain shenanigans, the legislative process took over and people worked very hard to work out an acceptable agreement.”

. . .
House Republicans proposed a mortgage insurance idea so Wall Street could fund its own bailout. House Democrats proposed a pay-as-you-go trigger requiring a fee on financial firms if the bailout results in losses for the Treasury.

The political goal was the same — both sides wanted to be able to tell constituents that Wall Street, not average citizens, would pay for the bailout.

But neither proposal won out — the mortgage insurance idea will largely be a side option for the Treasury secretary, and Paulson reportedly already rejected the proposal in internal Treasury talks this summer.

. . .
A senior House Democratic aide at press time estimated that Democrats could wrangle about 125 votes for the plan, meaning GOPers would need to find nearly 100 supporters in their ranks if the numbers remained unchanged.

All eyes are on the House. From another article in Roll Call entitled “House Moves Shakily Forward on Bailout“:

Both the House Republican Conference and House Democratic Caucus spent hours cloistered in closed-door sessions Sunday night as Congressional leaders tried to gather support for the package within their own ranks by putting outstanding questions about it to rest.

All eyes are on the House Republicans, who threw talks on a deal into disarray Thursday when they abandoned bipartisan, bicameral negotiations with the White House.

. . .

The bill filed tonight is “a giant improvement” over previous proposals, namely because it considerably reduces taxpayer risk, House Minority Leader John Boehner (R-Ohio) told reporters after the meeting.

“At the end of the day, there really is no taxpayer risk in this bill,” Boehner said, referring to mandated insurance provisions in the package.

Asked how many Members will vote for the bill, Boehner said he didn’t know but that GOP leaders “are working on it. … I made it pretty clear to our Members that we are supporting this.”

. . .

At one point, Rep. Mike Pence (R-Ind.) [Ed: chair of the Republican Study Committee, a conservative Republican caucus in the House which has been the primary roadblock to the bailout plan] received “a tepid response” when he proposed starting from scratch and coming up with a new bill, according to one aide.

. . .

Rep. Scott Garrett (N.J.), a member of the influential Republican Study Committee, told reporters outside the Conference meeting that at least some of the conservative group will back the plan, although he said he would be voting against it.

And finally, the wizard behind the curtain is revealed (“It’s Frank’s World, We Just Live In It“):

In case there was any doubt who was running the show over the past week, or how confused even most Members were about what was happening with the Wall Street bailout, a few lawmakers confirmed it for us.

A handful of Members — guys who are ostensibly getting briefings and actually sit in on meetings — were apparently so confused about the status of the bailout, they sunk so low as to actually join press scrums (those knots of lowly reporters crowding a particularly in-the-know Member) around House Financial Services Chairman Barney Frank to try to get a clue.

Is it any surprise that Congresspeople elected for their ability to clear brush or deliver sound bites with a photogenic smile are about to cast one of the most important votes of their careers without a clue about what they’re voting for? Winston Churchill once said “The best argument against democracy is a five minute conversation with the average voter”. The American corollary to that adds a 5 minute conversation with the average elected representative…

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27 comments

  1. Anonymous

    Weekends are notorious for knee-capping and other sorts of general intimidation.

    Nothing changed, only the seeming urgency expressed last week. They are going to “wait a few weeks to get everything going”?

    Call you reps, demand that they vote no, and start over, completely over and get to the real root of the problem.

    The last step is looting the treasury….

  2. Anonymous

    Is it any wonder that Congress has a lower approval rating than the President has? When this whole scheme fails, is it legal to tar and feather everyone representing us in government?

    This stuff is just making me sick… They think taxpayers are stupid and they can pull whatever tricks they want and everyone will just go along with it.

  3. Cash Mundy

    Great info, Lune. Thanks.

    Winston Churchill once said “The best argument against democracy is a five minute conversation with the average voter” Brilliant. I always suspected Winnie would make me a Monarchist or a Maoist eventually.

  4. Anonymous

    No need to tar and feather. Just make a simple pledge … to vote AGAINST anyone who votes FOR this measure … and talk to a many people as you can about it over the next 6 weeks.

    Opponents to incumbents of both parties who vote for this measure have been handed the election on a platter, IMHO. As this begins to sink in, I suspect we will be looking at a 1-issue election. The election is the real place to file a protest over all this.

    Maybe I’m giving the average American voter too much credit, but maybe Congress is giving them too little.

  5. spare some change?

    Taxpayers are protected, because the banks are paying for insurance for the fraudulently created mortgages they’re responsible for!

    And if you believe that, I have some volcano insurance I’d like you to buy.

  6. Cash Mundy

    One of the effects of Federal interventions to date, which also appears engineered into the bailout, is to encourage massive consolidation in the finance industry. Perhaps this is not accidental?

    In any case, it is worth considering that soon Greater Goldman, Greater Citi, greater BAC and perhaps Greater Morgan will dwarf all other banks. It brings to mind Toynbee’s comments about standardisation and uniformity as indications of a civilisation in decline.

  7. Anonymous

    These are direct quotes from the Treasury conference call. They are not consistent with “banking system is about to fail if we don’t spend $700B yesterday”.

    “…targeted at our financial system…of which some may be failing institutions but the vast majority are healthy institutions…”

    “…if you look at the definition of financial institutions, it’s a very broad definition…”

    “…it’s not just a liquidity problem, it’s a capital problem…”

    “…will this attract companies to participate in the program…”

    “…we want healthy institutions to participate…”

    Somewhere in this mess is a very important nugget of truth that we are not being told.

  8. a

    Can’t see a recent posting of links on the front page, but here’s an interesting one on Libor:

    http://www.ft.com/cms/s/0/cdae9da2-8c00-11dd-8a4c-0000779fd18c.html?nclick_check=1

    “Banks are looking at passing on higher funding costs to corporate borrowers by invoking an extraordinary clause in loan agreements triggered by market turmoil.
    A growing number of banks are concerned that Libor – a benchmark for interbank borrowing costs and the base for calculating the interest rate for many corporate loans – is no longer accurate in reflecting their actual funding costs.
    Some are now considering whether they can invoke a “Market Disruption Clause” in loan agreements on certain undrawn credit facilities, allowing to charge higher interest rates to borrowers.”

    I.e. the “real Libor” (the cost of bank borrowing from their peers) is much higher than reported Libor.

  9. doc holiday

    Re: "Is it any surprise that Congresspeople elected for their ability to clear brush or deliver sound bites with a photogenic smile are about to cast one of the most important votes of their careers without a clue about what they're voting for? "

    >> As I yelled at my reps Friday, I told them they had no understanding of what they were doing, and of course, the silence on the other side of the phone was filled with disdain for me.

    See Also: CONGRESS Job Rating in national polls
    http://www.pollingreport.com/CongJob.htm

    Furthermore: George Bush has an approval rating that's hovered around a horrible 30 percent for months. His economic policies — especially his support for lax regulating of the financial sector — led to the current problems.

    Meanwhile, Congress has an even lower approval rating, at 18 percent in a recent Gallup Poll. That's abysmal.

    And, yes, these were the same congressional members who have sat idly by while this economic crisis unfolded.

    Why in the world should Americans trust these supposed titans of the political world to know what they are doing with the $700 billion bailout?
    http://voices.kansascity.com/node/2123

  10. Anonymous

    Yah baby!

    “These capitalists generally act harmoniously and in concert to fleece the people, and now that they have got into a quarrel with themselves, we are called upon to appropriate the people’s money to settle the quarrel.” – Abraham Lincoln, speech to Illinois legislature, January 1837

  11. Anonymous

    Certainly, you are being lied to.

    It’s nice that folks are attempting to make their voices heard in Congress. It’s nice that a few Democrat and Republican reps were honest enough to balk. But it’s over, folks. Anyone who votes “no” or resists the Reich will be punished. Mainstream press know it. Yves and Mish are tolerated because it *validates* the Bad Guys. See? Democracy. Free speech. Majority rule.

    It’s over.

  12. Richard Kline

    Trust these dupes, mooks, and bagmen? Where has the Congress been on the issue for fifteen months, other than running for office and from the truth? A horrible bill, and a worse process, demonstrating, as Anon said above, that the sump pump level of voter approval for Congress is well and truly _earned_, point by point. The only good news in Lune’s compile summary is that as of today the Demoblican ‘sellership’ only has ~125 votes for this abomination. That’s waaaayyyy too many, but enough to suggest that this steal is quite yet a deal.

  13. eh

    “If it doesn’t pass, we shouldn’t be in Congress,” a confident Sen. Judd Gregg (R-N.H.) said on Sunday,…

    What the hell is that supposed to mean. I buy the latter clause as it is when the inverse of the former is or becomes true.

  14. djap113

    please note that BOTH presidential candidates are SUPPORTING this bill. Congress and our representatives have completely ignored the public’s wishes. Third party is the only way to vote this election.
    Last chance, America.

    literally.

  15. eh

    And why all the anonymous comments? Just choose “Name/URL” and put in some kind of moniker — some character string that will identify you consistently. This is pretty much the same as being anonymous, but makes the contributions of the various people who comment here easier to follow. And believe me many of them are worth following. Don’t get me wrong: I think this blog and the comments are great, but IMO having fewer anonymous comments would improve the comment threads.

    But thanks to all who put in the effort; the comments make the site even better.

  16. Anonymous

    Voting third party for a President won’t do any good. Those people never win.

    I’m starting to think the solution is rebellion. We need another Tea Party!

  17. Jojo

    Is it any surprise that Congresspeople elected for their ability to clear brush or deliver sound bites with a photogenic smile are about to cast one of the most important votes of their careers without a clue about what they’re voting for?

    Yves, you don't think that Congresspeople actually read or understand the bills they vote on?

    I read an insider story once that said all the heavy lifting is done by the staffers. They produce a sort of Cliffnotes summary and recommend the action the Congressperson take. What with lunching and traveling with lobbyists and drumming up campaign contributions, Congresspeople don't have time to read and study bills that are hundreds or thousands of pages long. It's all very disgusting.

    While voting against those who vote for the bailout is a good idea, the problem is that not all of Congress is up for reelection this go around. In California, Feinstein & Boxer are not, so they are safe and can vote for the bill knowing that the average voter's memory is about 5 days prior.

  18. Anonymous

    I have been watching this Financial coup d’etat slackjawed.

    I heard Sen Judd Gregg (NH) describe the bailout as an investment by the taxpayer.

    Barring the insane and money launderers why would any rational person person purchase anything sight unseen,price unknown ,quantity unknown and market value unknown.

    Whats remarkable is the fact that this is precisely the selling strategy that lead to this debacle (from sub prime on..)….and now its being repeated at the back end of the problem.

  19. Anonymous

    Nobody asked Ms. Market how SHE felt about all this. Yesterday most bloggers were assuming a big pop today, on the prospect of all that stolen Treasury loot being handed over to Da Boyz.

    Wrong-o! I see Dow futs down 129, and spoos off 20. Que locura! Kongress is like a kid, naively trying to buy a bicycle with his lunch money. The store owner, in his best Barney Frank rasp, tells him, “Ya ain’t even got a DOWN PAYMENT, kiddo. Come back when ya grow up and have some money.”

    Well, KongressKlowns will never grow up, and their “money” will never be anything but worthless fiat paper. So to the esteemed Ms. Market, I say:

    “DUMP THOSE PENNILESS CLOWNS AND BANG THE CIRCUIT BREAKERS!”

    — Juan Falcone

  20. Jojo

    Just watching the political reporter on CNBC say that the bailout bill is going to pass. Says there are enough votes.

    Interestingly, he addressed voter potential backlash against incumbents by saying that the leaders will let those in difficult races vote no to protect them. The yes votes will only come from those not up for reelection this cycle or those who don’t have to worry because they get elected no matter what they do.

    They know how to work the system.

    I’ll second the vote for a new tea party and revolution. This seems the only way that that the system will get changed, sigh. Do they still make guillotines?

  21. Avl Guy

    Given the tweaking, how long will it take for blogdom to confirm that first $350 Billion tranche of “No Bank Left Behind” v1.4 is failing to achieve its goals?
    Will there be enough transparency to track who refuses a bailout, when executive compensation limits are put into effect?
    The impact on liquidity of inter-bank lending will be easier to track by blogdom.
    The price paid/sold for distressed assets are supposed to be released 48-hours after each transaction right?

  22. tk6910

    “If it doesn’t pass we shouldn’t be in Congress”, said Senator Judd.

    I say we should vote against all those who voted for this bill this November. Let us act on our outrage with our votes. This is more important than who we vote for the Presidency of the US, since both candidates are supporting this bill.

  23. Poor-is-the-new-black

    I contacted my Senator and Congressman last night to vote no on this bill. If the public can be informed via Internet, there may be enough pressure to screw the vote. Keep trying people, Think of -your- children!

  24. Peggy McGilligan

    Just Say No: imagine, a $1-trillion dollar bailout without even a hint at wrongdoing or malfeasance. Many of the fat cats who circulate from board to board and from job to job, are also members of the Trilateral Commission and or the Bilderberg Group. When someone takes your money and steals your car, it makes an impression. When they’re committed globalists, it leaves a lasting impression. Many elected officials even belong to the cabals. When Bill Clinton eased banking restrictions, he dished out $8-billion dollars for community reinvestment loans. When the financing schemes fell through, as is their wont whenever 30-million Mexican nationals buy inflated properties and default, it left banks in the lurch. Hillary Clinton counted on the loan giveaways to buy votes. Interestingly enough, had Hillary secured the nomination; she, instead of Barack Obama would preside over the bailout. So, where is that $8-bilion plus dollars? The Global Initiative people (code speak for car thieves) took my money; they stole my car. If you or I did half the things these people have done, we’d be serving consecutive life sentences. Let the bubble burst. Gentlemen, I want my money back: http://theseedsof9-11.com

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