Bush, candidates, lawmakers to meet on rescue plan

NF Reporter · 09-25-2008, 02:20 AM

AP - President Bush summoned Barack Obama, John McCain and legislative leaders to an extraordinary White House summit, warning Americans and Congress on Wednesday night that failing to act on a $700 billion financial industry bailout could lead to "a long and painful recession."

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waltky · 09-25-2008, 08:59 PM

Think I stumbled across the real reason for the bailout...

... friend of mine has a friend who has an ARM...

... due to the decline in the economy and interest rates, their house payment has dropped $300/mo.

This would mean the banks are losing quite a bit on ARM's, not only due to the ones who earlier in the subprime problem abandoned their homes to get out of upside down mortgages...

... but also due to mortgages that have reset with lower payments in the most recent timeframe.

Could this loss to the banks be the real reason for the bailout? And would it mean that there will be a resulting decline in foreclosures due to resets which result in lower house payments?

Also:

Tentative bailout deal unravels
25 Sept. `08 WASHINGTON - Paulson, Bernanke to meet with Congressional leaders to revive agreement

Quote:

Urgent efforts to lash together a $700 billion rescue plan for the national economy appeared to be stalling Thursday night, hours after key lawmakers had declared they had reached a deal. Weary congressional negotiators hurried back to work, joined by Treasury Secretary Henry Paulson in an effort to revive or rework the proposal that President Bush said must be quickly approved by Congress to stave off economic disaster. Congressional leaders said Federal Reserve Chairman Ben Bernanke might come to Capitol Hill, too, if enough progress was made. The meetings were to continue into the night.

After six days of intensive talks on the unprecedented package proposed by the Bush administration, with Wall Street tottering and presidential politics intruding six weeks before the election, there was more confusion than clarity. The day’s earlier apparent breakthrough, announced with fanfare at midday, was followed by a White House summit bringing together President Bush, presidential contenders John McCain and Barack Obama, and top congressional leaders. But that meeting, aimed at showing unity in resolving a national financial crisis, broke up with conflicts in plain view.

Inside the session, House Republican leader John Boehner expressed misgivings about the emerging plan and McCain would not commit to supporting it, said people from both parties who were briefed on the exchange. They spoke on condition of anonymity because the session was private. The earlier agreement by key members of Congress from both parties — but not top leaders — would have given the Bush administration just a fraction of the money it wanted up front, subjecting half the $700 billion total to a congressional veto.

More Tentative agreement on bailout falls apart - Stocks & economy - MSNBC.com

waltky · 10-02-2008, 01:58 PM

Depends on how they go about it, whether its a good bill or not...

The accounting rule you should care about
October 1, 2008: The battle over how banks and Wall Street value their assets is at the center of credit crisis and the debate over the $700 billion bailout plan.

Quote:

It's easy to understand why the proposal to spend $700 billion in taxpayer money to rescue banks would inspire impassioned debate in Washington. But in a sign of just how complex and controversial the current credit crisis has become, a move to potentially change accounting rules on how banks and Wall Street firms value the securities they own is almost as heated. Some argue that tight accounting rules are a major reason for the credit crisis in the first place. Others contend that changing the rules will just bury problems lurking beneath the surface and could further shake investor confidence in the already battered financial sector.

Roots of the problem

First a bit of background. The one fact everyone agrees on is that the current financial crisis centers on trillions of dollars worth of mortgage loans that were packaged together into financial instruments known as mortgage-backed securities, or MBS. Those securities were purchased by banks and Wall Street firms. But as home prices started to fall and foreclosures rose, the value of these securities plunged. Today, there is almost no market for the securities.

This is why Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke proposed that the government buy the securities. The hope is that doing so could restart the MBS market at something well above the current fire sale valuations and that the government could hold the securities until the market improves. Some advocates of the plan argue that taxpayers will be able to eventually make money if the government sells the securities at a higher price down the road. But the more immediate hope is that banks and Wall Street firms, freed from the toxic loans on their balance sheet, will start lending again.

What is fair value?