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Democrats say bailout could be law by Sunday

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CTV.ca News Staff

Date: Fri. Sep. 26 2008 8:26 PM ET

Key Democrats say they believe an agreement will be reached by Sunday on a massive bailout package the White House has put forward after the largest banking collapse in U.S. history.

The Bush administration had been hoping the deal would be done by Friday, but House Republicans - many of whom are up for re-election this fall - have been stalling on a compromise plan and ended those negotiations on Thursday.

House Republican plans want serious consideration of a plan of their own, with a lower price tag than the $700 billion originally proposed.

Democratic House Speaker Nancy Pelosi said late Friday that progress was being made, though neither she nor Massachusetts Representative Barney Frank would reveal details of their discussions with Republicans.

"The legislative process is sometimes not very pretty," U.S. President George Bush said earlier Friday, as he called on Congress to end the squabbling.

"But we are going to get a package passed. We will rise to the occasion. Republicans and Democrats will come together and pass a substantial rescue plan."

Speaking outside the Oval Office, Bush acknowledged there are challenges that come with such a major proposal, and said the issue is further complicated by the speed at which the US$700 bailout has been pushed forward.

"The legislative process is sometimes not very pretty but we are going to get a package fast. We are going to get a package passed," Bush said.

Democrats were quick to blame Republican presidential candidate John McCain on derailing the bailout plan, which looked like a done deal Thursday afternoon.

"We don't need presidential politics in this. All he has done is stand in front of the cameras," Senate Majority Leader Harry Reid said of McCain.

McCain suspended his campaign on Wednesday to focus on the bailout and said he would not attend Friday's debate unless a deal was reached.

However, he did not arrive in Washington until Thursday and the deal broke down shortly after he attended a summit meeting at the White House.

On Friday, McCain decided he would attend the debate and left Capital Hill without a deal.

Republican lawmakers have so far rejected the massive proposal. House Minority leader John Boehner suggested that instead of the government buying the distressed securities, it would insure them.

Congressmen are listening to their constituents and the polls. In an Associated Press-Knowledge Networks poll released Friday, only 30 per cent of Americans surveyed expressed support for Bush's package.

But some veteran stock market watchers say otherwise.

"Congress has to pass a bailout bill, if they don't come Monday, the markets could go to hell in a handbasket," Harvey Pitt, former security exchange commission chairman, said.

And as negotiations dragged on this week, another bank failed. Washington Mutual was seized by the Federal Deposit Insurance Corp. on Thursday and its assets were sold to JPMorgan Chase & Co. for $1.9 billion -- making it the largest bank in U.S. history to fail.

Bush hopes his bailout plan will stem the bleeding in the financial sector, and is hoping for a deal before markets open on Monday.

Comments are now closed for this story

Mark E
said

I feel bad for the average American. Seeing a choice between going another $700 billion in debt on an investment that most likely will take many years to see a return on, if ever, or going into a depression. What a mess!

I cannot see how a disaster like this would not deeply affect Canada. Canadians are sitting on an enormous pile of debt fom years of cheap interest rates, easy credit and 0 down/0% financing. The system in the US was more fraudulent and irresponsible but it would no take much of an economic spillover to start the avalanche here.




Wes
said

In November 2004, A video of Osama Bin Laden surfaced on the news and he stated "We are continuing this policy in bleeding America to the point of bankruptcy. Allah willing, and nothing is too great for Allah. We, alongside the mujahedeen, bled Russia for 10 years until it went bankrupt and was forced to withdraw in defeat. All that we have to do is to send two mujahedeen to the furthest point east to raise a piece of cloth on which is written al Qaeda, in order to make generals race there to cause America to suffer human, economic and political losses without their achieving anything of note other than some benefits for their private corporations." I guess he's not to far off of achieving is goal...


Nick in Gatineau
said

Years ago, OSFI (Office of the Superintendent for Financial Insitutions) appeared before the Parliamentary and Senate committees and said that in order for Canadian Financial institutions to be healthy, and survive, they needed to be competitive in a world market and thus be allowed to emulate their international counterparts - for the most part, American.

Our government agreed and gave Carte Blanche to go shopping for these types of products and to sell these products here in Canada.

In order to sell such products an institution has to have something called Account Dilution; it reduces the risk factor of an account within its Assets to below the 5% mark. Usually lies between 1 to 4% depending on the risk of the product. That means that any given product cannot result in a loss greater than 1 to 4% of its value at any given time and that the asset can cover such a loss at any given time.

A prime example of this is when you here government say that it has put 300 Million $ towards a program, and then another 300 towards other programs and another 300, you know there is dilution.

The problem is that a diluted account is based on the following: Self-sufficiency, self-preservation, and self-quaratine. The moment 1 of these is no longer applicable, the dilution ceases to exist. When 2 of these cease to function and thus the very nature of that account has been overlooked for a long period of time, it becomes internal fraud.

Now they say that everything in Canada is fine. I don't call 30 Billion $ influx of cash over the past year fine. I also don't admire this growing sentiment that all financial institutions are not responsible and that it is somehow strictly the consumers' fault.


Michelle
said

Finally someone is talking about holding execs accountable for creating this mess.
Even my kids know that they can't borrow more money than they can afford to pay back or lend money they can't afford to lose. No way this should be happenning in the adult world.



Frank Miller
said

This is unfortunate, but it should serve as a wake up call to all American investors. If you want to protect your money, you need to diversify and invest at least some of it overseas. These are hard times for American investing firms. I personally use offshore bank accounts and they have helped me with diversification and asset protection....

La Tuna
said

I agree with the article when they said we are not in the same shoes as the States. Our bank are run much differently, but I do think we will feel the crunch just as every other country in the world will. We have come along way from the 90's so stop comparing this time to that. If most people did their homework, they would realize that we do most of our Trading with Europe (EUFTA). We're not as reliant on the states as you might think. Still we are not that safe, I agree with Nick about the $30 billion influx suggestion, not good at all to see that. As horrible as this may sound, I want this slowdown to happen, because we need it to happen. People are looking for a short cut around this, and there isn't. The good times have stopped and now we have to go through a correction period. What's that line from Batman again, oh ya, "The night is darkest before the Dawn". We will go through this correctional phase, and there will be good times again, but first we have to muddle through this period to get there.

By the way Wes, I like the comment, it made me think. Reminds me of when Napoleon and the French were trying to take over Russia, he strayed to far from home, lost many men on the way and was defeated horribly by the Russians, upon his return Napoleon was exiled after the French revolted. You would think the Americans would learn from past mistakes like that, but they also went through the great depression, and now look at them!


Don H. K.L.
said

Well it sucks for the world economy but I'm glad someone in Washington is not brain dead. This situation was created by alot of very stupid people and greedy politicians have allowed it to happen. Now that things are falling apart, everyone wants a way out. When i choose to make a bad decision, no one is there to help me fix it. We all know it's gonna hurt and this Bailout is only buying time for some people to run and hide with atleast some of their money. People got over black tuesday, they will get over this. Tax payer's money could be put to much better use in so many different places. Too many people could not afford to invest and so they don't need to be involved. With or without the bailout, we're in big trouble so let's not make matters worst by creating unnecessary debt for countries on top of the inevitable economic ruin.


Let's clean house now..
said

As I see this the US regulators DID NOTHING to stop the unbridled greed of investment bankers and mortgage brokers which led to the sub-crime fiasco.

We have very greedy investment bankers here as well who have caused havoc on our TSX without impunity naked shorting stocks etc because our regulators are lax and don't do their job.

As long as our regulators stand idly by and allow these people to do what they continue to do our markets are in jeopardy.

Personally I fail to see how principle of shorting stocks contributes to a healthy market system. I would ban shorting completely and have it vigorously monitored and enforced.

Regulators should NOT be taken from the industry so you don't keep getting the old fox looking after the chicken coop.

Unless and until we all participate and demand a clean up it wont happen. Everyone who has mutual finds, stocks are being affected to varying degrees no exceptions.





Dr. MW
said

The company I helped found has been working in the US building industry for 18 years.

I wish more people would actually inform themselves, rather than just saying the banks and executives caused this mess.

Yes, banks lent money much too freely and government had no oversight or formulas in place for how much a person should be allowed to borrow. But it is the American homeowner's absolute greed which really brought on this meltdown.

People knowingly borrowed much more than they could afford. They knowingly took out interest only mortgages, expecting to be able to flip a house for a huge profit every two years.

I only feel sorry for homeowners who did not max out their credit and were prudent fiscal managers. Any homeowner who lost or is at risk of losing their home because they overextended themselves need only look in the mirror to see who's to blame for their predicament. Of course, no politician will ever say this because it won't get a lot of votes.

Whatever happened to personal responsibility?


Jon in Petawawa
said

Wow, It's incredible how people can bad mouth americans so much, and deny the fact that the American economy has a direct effect on the economies of the entire world(Canada included, like it or not). The Democrats have made out like bandits through this whole ordeal in the states.... well at least someone is profitting from it I guess, meanwhile the rest of the country is nearing a depression.


Robin the Hood
said

Appears the right wing ideology of unregulated, in your face capitalism is again showing its cracks as it did with the Reaganomics caused S&L crisis of the 1980s. Found it ironic that G Dubya actually called it "democratic capitalism" in his recent speech when the fact is the average citizen has no say in the decisions made by top corporate executives and investors... regulation is the one and only input the average person has in a capitalistic system and where they can hold their politicians accountable for economic decisions. However, its become obvious that the right wing / Republicans fanatics are going to demonstrate further stupidity by holding up a bail out that is the last option to avoid a massive market meltdown. Fact is that the Americans voted these clowns in for the last 8 years and need to bail themselves - and us - out, deficit or not.



Just wait....
said

Credit default swaps. With more and more defaults on mortgages, just wait until CDS holders come calling on this this unregulated $45 trillion market. The current issues will be a walk in the park. This $700 billion is nothing more than a cash grab by the White House. Shocked by that?


Martin5519
said

Hmm...

Something I don't get.. the per capita debt in the States is around $31 to $32,000 per person. With that Bailout, it would go to $34,000.. doesn't seem like it's anything super crazy. Their dept is already very high...

What am I missing?

Don't get me wrong, I think it's crazy that these firms are getting bailed out... so unfair to everyone else.


Let the correction begin.
said

People are always being corrected with varying degrees of pain stimuli which ranges from tickets for parking infractions to rotting teeth for poor dental hygiene to economic depression for failure to let the truth be told.
I am very disappointed to see that many people who comment on this site still refuse to admit the utter failure of socialism. A lot of things in garbage bins in the U.S. and Canada are still better than the best things the Russians and Chinese were making under their communists systems!
It is more clear to me why capitalists go to war against the left. My father operated a 50 calibre machine gun in Korea against some of them. The far left are just a bunch of liars and sadly some of them will have to be shot down!


Reece
said

The real "fun" happens when the United States eventually pulls out of Iraq. The billions spent per day there acrtificially stimulates the US economy. Without this war, the true shape of the economy is actually much worse than it appears - and it don't appear too good right now.



Steph
said

There is absolutely no reason that the American people should have to pay 10 000 to bail out Corporations. Maybe if their "leader" would have focused on the American people and the country rather than spending billions on a war in a country they have no business being in, things would be different. This is why it's so important to vote!


Donald
said

As bizarre as this sounds to the regular joe, 700 billion is not enough. Not near enough. Some estimates of bad debt and leveraged debt are in excess of 1,000 billion!

The USA and its people need to take their medicine and the longer it is put off, the harder it is going to be.

The system was allowed to run amok for years, now it is time to pay the piper.

I believe, when you step back objectively and not view with panic in your eyes, there is no good way out,but there is a way to make it worse, saddle more debt on the working man and his kids.

Mark my words, if this goes through, it is only to buy time until after the US election.

Also, ask yourself, how does this help the average family out who is about to loose thier home. There are still 100's of thousands of surplus homes on the market, and many more who have mortgages that are much larger than their home's value.

This bailout is not for them...IT IS FOR THE SAME PEOPLE WHO CREATED THE MESS!

Wake up, these people are only looking after each other!


Kevin in Fredericton
said

Quite the legacy you're building for yourself George. Let's pretend to be in George's head. He's thinking (LOL, had to laugh) 'Hurry up, you're all making me look bad. I've got to put this band-aid in place until someone else gets elected an then they can fix it.'


Nick in Gatineau
said

I hope that the market does crash. And place the blame solely on the people responsible: Bankers who applied 'projected' values instead of 'actual' values - without risk assessment - and drove their customers into bankruptcy.

If you know your customer will be eating Kraft diner, you don't give him a mortgage, a credit line and a credit card offer to boot. All the while telling him that a beamer would look great in that new driveway.


FCS
said

Nick in gatineau wrote:

"If you know your customer will be eating Kraft diner, you don't give him a mortgage, a credit line and a credit card offer to boot."

While I agree with your point I refuse to sit here and let you bad mouth Kraft Dinner. I made over 65 k last year and I still find myself occassionaly craving the cheap orange filler we all grew up on.There's just something about KD, especially when the pasta is just right, mmmmm. Is it lunch yet?


Ed in Alberta
said

Well its just too bad that this mess will pass its pains on to the rest of the world . The Big Kid on the block with all the money needs help so the people (us government)have to come to the rescue or watch 50 years of being a Superpower evaporate.And these people at some point were preaching responsibility


Gail (Hamilton)
said

I wish some who comment would check some of the US web sites as well. Lou Dobbs on CNN said that President Jimmy Carter was the one who started this deregulation. The regulatory agencies should have stopped Fannie and Freddie. Pres. Bush asked Congress 17 times to check into Fannie and Freddie, but he was ignored by the Congress who are now blaming him for this problem. The truth like water always looks for the easiest route of resistance, while coverups tend to work twice as hard.


Eric
said

This situation is not a failure of capitalism. It is not. Place the responsibility where it belongs.

This was caused by banks that lent money to people who could not afford to pay it back. They should not have lent the money out. This was also caused by the home buyers themselves. They borrowed money they should have known they could not pay back. If you can't afford something you should not buy it. I want it is not good enough. People have free will. They can say no. Some of the responsibility has to fall on the regulators for allowing this to go on.

This really is a failure of common sense. Blaming this mess on the government alone or on capitalism is a way of not taking person responsibility.


Murray
said

With a 700 billion dollar debt you can bet that Canadians will be paying for the debt also..Watch the price of gas go up and anything else that we get from the U.S.It will be obvious that any country that deals with the U.S is going to pay...Maybe they should bring the troops home imagine the money that is spent there????


Prof. Pye Chartt
said

... Putting the "Republican" label on the American financial crisis not only demonstrates a complete lack of historical understanding ...(the Democrats had an equal hand in making legislative and statutory adjustments to the bank system years ago to encourage mortgage lending to as many people as possible) but also a failure to grasp the nature of the problem as it relates to capitalism.

By sticking its hand into the mortgage banking industry to create a secure market for mortgages (in practicum, backing them up), while maintaining no control of those institutions and investment firms who played in the real estate game, the government (Democrats & Republicans) upset the natural checks and balances that inherently exist within free-market capitalism.

If you think you're witnessing the result of unbridled capitalism, you're misinformed and sadly mistaken. You're just delivering empty partisan rhetoric in absence of the facts.

Markets work best when they're free. Capitalism with a fork stuck in its side doesn't work. The S & L crisis of 1991 was rooted in the same interference (the government insured institutional deposits while allowing those banks to play in the real estate game without restriction. Again, this isn't free-market capitalism. Without the "insurance," countless depositors wouldn't have lent their money to banks to gamble with... I hope this clears things up.


Paul out West
said

The conservative Republicans under George W. Bush have bankrupted the US, debt in the trillions, deficit in the trillions, a war in Iraq costing over $20 billion a month. If this is an example of how conservatives run a nation and an economy then give us the alternative.

George W. threw his country into so many messes. It'll take Barack Obama years to clean up the economic and social mess caused by the American conservatives (assuming Obama wins of course).


Ed
said

Well the USA finally found the WMD. Read Weapons of Money Destruction. It has been proven millions of times that one can not live beyond their means but the Financial Institutions, being void of proper regulation, will create so called Derivatives, Bundles etc. that even they can not understand and sell it to the ordinary citizen. Let's be thankful that Canada has a better regulatory system.


Another hurricane's a comin'!
said

Aaahhh, and the world will turn tomorrow and I'll still eat KD!! Best go get some 'cus us plastic wealthy, greedy westerners are burning too many gas guzzling vehicles thus creating a warmer climate = I'll need some KD for the next few days 'cus we've got ANOTHER HURRICANE COMING HERE in NOVA SCOTIA, TOMORROW AND SUNDAY. Thanks from N.S. for an entertaining read. Hope the republicans get to do their new 2nd choice.


George
said

How interesting. The US spent many years telling the world that Communism was bad, for a variety of reasons. One of which was that the state owns everything.

The US government will now be the 'owner' of more homes than any lending institution. Old Nikita K. must be having a good laugh.


Darren in fredericton
said

When the USSR collapsed people were quick to tout the superiority of the capitalist system. Yet here we are with the USA on the brink of collapse. Corruption and greed has led the US down this path and I think that they shouldn’t jump in with a bail out for these huge corporations while leaving the American people on the hook and left in the street. The banks show no mercy to the people they evict and the credit card companies lobby hard to prevent the average person from going bankrupt on bad dept that is impossible to repay because of outlandish interest rates. The dept system that capitalism holds up as being so virtuous is flawed from the ground up. Every dollar that is put into circulation is created with a loan. Yet no one creates the interest so the only way that the system can keep going is to create more dept. This bail out will only prop up a flawed system. We need to break free from this dept model and start valuing the real wealth of a country, its resources and the sweat and ingenuity of its people. The usury that banks practice is a sin. I don’t share many beliefs with the Muslim religion but I have to agree that lending money with interest is a great disservice to all of mankind. Are we going to go into another depression? Will people go hungry while crops rot in the fields, will people be living in the street while houses stand empty, will children die because their parents can’t afford a doctor, and will we do nothing about the environment because it will harm corporate profits? All because we are in slavery to a flawed financial system. We need a real change, not of government, but of financial ideology. Don’t bail out corporate America bail out the world with a new financial model that puts humanity first and greed last.


Sylvain
said

Western society has been living far above it's means for far to long. The US being one of the worst offenders. Almost every one of us is in some small way responsible for the crisis we are in.

Holidays on credit. Houses way bigger than we need. A car for everyone. TV in every room. I-Pods and I-Phones in every pocket. And most on credit.

We carry way more debt than we ever did in previous generations.

We borrow and borrow and save next to nothing. Sure the banks made it easy and advertising media made us think we needed these but it was we that bought in.

Now we need to adjust our expectations because the economy is already in recession. Even if our "honest" politicians tell us otherwise. At this point I'll be happy if we avoid a full on depression!

The markets and indeed our attitudes towards money is due for a correction. A BIG one.

Look back two generations at how our grandfathers lived. They did not have most of the made in china junk we have today and they were no less happy.

The banks and financial institutions have sucked all the interest out of us the credit customer. Now many of us can't keep up and the debts go bad. Too many bad debts and pop the bubble bursts.

Let the banks burn. The government would do better rounding up all the fat cats that allowed this ugly mess to happen.

Problem is the politicians would probably be a large part of that group.

What a mess...




Charley Rose
said

The American politicians and leaders are fully responsible for what happens to their nations' economy. Fully! nuff said


Dave in Waterloo
said

Either way this goes, the average wage earning, tax paying American is screwed again...big time. If justice was really to be served, Wall Street CEO's and President - George W. Bush, would be lead away in handcuffs in front of all of America to witness! That would be worth the $700 billion alone!


Peter Hunziker
said

Bush is talking about something that is way over his head. ( but then that's nothing new). He ignored warnings for 5 years but refused (or didn't know how)to act.
Whether or not that 700B will save the market still remains the million $ question. The damage has been done with or without the big infusion. Not only Americans are paying for it but many innocent countries are bearing the consequences of the criminal negligence displayed by some of the biggest corporations in the world..... lead by some badly overpaid CEOs. I erroneously believed that the 1929 experience served as a lecture to some lawmakers; I should have known better.
Now we shouldn't be surprised to see the Dollar go..... in the wheelbarrow...uh I hope not.


PVT
said

It would only cost $100 billion to pay off all the mortgages in the US - why not do that instead and save half a trillion?




J. McDonald - North Bay
said

Perhaps the other truth of this overwhelming financial downfall is that all the CEO's have already protected themselves extremely well. They should go to jail! They should suffer too!

In my opinion, they each are no less than traiters/terrorists from within. They have basically killed millions of ordinary people with their own greed.

It's exactly like the biblical phrase I learned as a child: "Love of money is the root of all evil."

The more highlights of ruin... gas, oil, food, pet food, produce etc and now milk - I hear on the news, I shake my head and comment, "NOBODY is watching the store!" RIDICULOUSLY WELL PAID "NOBODYs".


GHW
said

I hope the darn thing goes through. It won’t stop the fall of the American empire but it will slow it down which is much better for Canadians. I see little if any discussion in U.S. politics about getting control of their spiraling debt. At some point the American government will go bankrupt. Canadians should work at paying all our debt off and diversifying our business activities away from the U.S.

U.S. big money business has the general population so brainwashed with fear of socialism that they can’t see the benefit of a measured small amount. Did you hear McCain describe our Medicare system? Like going to see your doctor had to be screened and approved by some KGB agent. Get a grip! In general Canadians love our Medicare system even with the long wait times to see specialists. Anytime I need to see my doctor I call his office and within a week I see him and receive excellent help. No hassle, no worries and no bill to pay.



Rosie
said

Why are the Democrats so eager to bail-out Wall street?Why is that some Republicans don't want to bail them out? Could it be that the Republicans brought this issue before congress four years ago, tried to pass a bill to rein in these lenders speculators only to have that bill defeated by the democrats who control congress?

Alan Greenspan warned this would happen and yet the Democrats killed the bill. Go blame Bush all you want because it happened during his presidency but they keep records of how congressman vote. McCain voted for new regulations, Obama voted against. Hope McCain brings this up tonite, I'd like to hear Obama's explanation for voting to kill that bill.


Chris
said

Let the chips fall where they may!!
Don't trust GW


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