POLITICS - Bailout Plan agreed to - should now pass

[O.S.O.K.]

http://news.yahoo.com/s/ap/20080925/ap_ ... l_meltdown

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By JENNIFER LOVEN, Associated Press Writer
4 minutes ago



WASHINGTON - Confident but not yet celebrating, key lawmakers agreed Thursday on a multibillion-dollar bailout plan for Wall Street aimed at staving off a national economic catastrophe. President Bush brought the two men fighting to succeed him to a historic White House huddle on how to sell a deal to lawmakers who were still resisting.

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Welcoming Republican John McCain and Democrat Barack Obama — as well as congressional leaders — Bush said, "My hope is that we can reach an agreement very shortly."

The tentative accord would give the Bush administration just a fraction of the $700 billion it had requested up front, with half the money subject to a congressional veto, congressional aides said. Under the plan, the Treasury secretary would get $250 billion immediately and could have an additional $100 billion if he certified it was needed. The last $350 billion could be blocked by a vote of Congress under the arrangement, designed to give lawmakers a stronger hand in controlling the unprecedented rescue.

The aides described the details on condition of anonymity because they were not authorized to speak publicly.

Private talks on Capitol Hill ended at midday with the announcement that an agreement in principle had been reached on a $700 billion financial rescue package that the Bush administration wants. Few details were immediately available.

There were signs that the conservative-leaning House Republican Caucus was not on board. Both of Congress' Republican leaders, Rep. John Boehner and Sen. Mitch McConnell, issued statements saying there was not yet an agreement.

But Banking Chairman Chris Dodd, D-Conn., and Republican Sen. Bob Bennett, among others, said negotiators from Congress and the administration had arrived at a deal that could win approval. Other key lawmakers said that after days of bare-knuckles negotiations there was little of note left to resolve.

The early reaction from the White House was positive but cautious. "It's a good sign that progress is being made," White House deputy press secretary Tony Fratto said.

Wall Street showed its pleasure. The Dow Jones industrials closed some 196 points higher, though that was down from larger gains earlier in the day.

Under the tentative plan, the government would buy the toxic, mortgage-based assets of shaky financial institutions in a bid to keep them from going under and setting off a cascade of ruinous events, including wiped-out retirement savings, rising home foreclosures, closed businesses, and lost jobs. Bush warned darkly in a prime-time address Wednesday night, "Our entire economy is in danger."

Debate has been fierce on such questions as whether to phase in the cost and whether to give taxpayers an equity stake in rescued companies. Housing Financial Services Chairman Barney Frank, D-Mass., told The Associated Press both would be included in the legislation.

The Bush administration has made concessions almost daily to demands from the right and the left from its original three-page proposal, including agreeing to limit pay for executives of bailed-out financial institutions.

While lawmakers engaged in nitty-gritty dealmaking, Democrat Barack Obama and Republican John McCain, who have each sought in their own ways to distance themselves from the unpopular Bush, prepared to sit down together with the sitting president at the White House for an hourlong afternoon session apparently without precedent. By also including Congress' Democratic and Republican leaders in the meeting, much of Washington's political power structure was to be gathered at one long table in a small West Wing room.

The White House timed the session to fit the candidates' schedules — and after the stock markets closed for the day.

It was somewhat upstaged nearly three hours before various motorcades deposited the meeting participants and their entourages inside the White House gates, when Capitol Hill leaders reported their deal. Despite the national prominence of Bush, McCain and Obama, none has been deeply involved in this week's scramble to hammer out a package.

The developments on the Hill lent fresh and urgent purpose to the session: providing encouragement — and political cover — for lawmakers of both parties to accept the plan in this highly charged election season.

The bailout plan is expected to come up for votes in the House and Senate quickly, perhaps within days, so that lawmakers can adjourn to campaign for their own re-elections.

"The meeting's purpose is to provide for a discussion among the country's top political leadership where everyone can agree on the urgency of getting something done and on a path to bringing it to conclusion," said White House press secretary Dana Perino.

The pitch by Bush, Obama and McCain was no easy sell.

All lawmakers are returning to home districts packed with constituents angry that they are being asked to foot the bill to bail out Wall Street's rich guys when they and their neighbors are suffering the effects of ballooning mortgages and tightening credit. This means Obama and even the increasingly marginalized Bush could have sway with their joint resolve.

McCain, in particular, was being leaned on by Democrats and fellow Republicans alike to deliver GOP votes, as some conservatives are in open revolt over the astonishing price tag of the proposal and the heavy hand of government that it would place on private markets. Placating them enough to bring them in line could be a tall order for the Republican presidential nominee who has a checkered relationship with the right wing of his party.

A group of GOP lawmakers circulated a less government-focused alternative. Their proposal would have the government provide insurance to companies that agree to hold frozen assets, rather than have the government purchase the assets. Rep Eric Cantor, R-Va., said the idea would be to remove the burden of the bailout from taxpayers and place it, over time, on Wall Street instead.

Layered over the White House meeting was a complicated web of potential political benefits and consequences for both Obama and McCain.

McCain hoped voters would believe that he rose above politics to wade into successful, nitty-gritty dealmaking at a time of urgent crisis, but he risked being seen instead as either overly impulsive or politically craven, or both. Obama saw a chance to appear presidential and fit for duty, but was also caught off guard strategically by McCain's surprising gamble in saying he was suspending his campaigning and asking to delay Friday night's debate to focus on the crisis.

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Associated Press writer Julie Hirschfeld Davis contributed to this story.

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[Old Ironsights]

BOHICA.

[45Jack]

From the NY Times Sept. 1999. Yet this still caught everyone by surprise?!
Also check out the testimony given by Fred L. Smith Jr. of the Competitive Enterprise Institute to the U.S. House of Representatives on June 15, 2000.




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September 30, 1999
Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.




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[Ysabel Kid]

Do nothing, and good chance of a major financial meltdown. Housing values plummet; 401K values plummet. Job losses skyrocket. But... the government keeps it nose out of the market, and market corrects as it always does, and it is that much stronger in the future.

Bail it out - to the BEGINNING tune of $700 Billion (you know it will end up costing more), and saddle our kids and grandkids not only with the debt, but with government controlling more and more of the private sector and the market.

I'd rather take the lumps now and spare my kids. The best thing I can hand down to them is freedom - free as a society, and free from debt.

[Hobie]

While I've expressed my opinion I have accepted that I have little say in what will be done.

[Old Ironsights]

...I'd rather take the lumps now and spare my kids. The best thing I can hand down to them is freedom - free as a society, and free from debt.

"If there must be trouble, let it be now, that my children may live in peace." - Thomas Paine.