CTV News | U.S. lawmakers expected to pass $700 B bailout

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U.S. lawmakers expected to pass $700 B bailout

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CTV News: Joy Malbon on the new bailout deal
CTV National News: Peter Drake, Fidelity Investments Canada
CTV Newsnet: Rachel Ziemba, RGE monitor
CTV Newsnet: Peter Brieger, Globeinvestment, on how the markets will react to the bailout
CTV Newsnet: Vincent Reinhart, AEI, with more on the tentative deal

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CTV.ca News Staff

Date: Sun. Sep. 28 2008 8:13 PM ET

The White House and congressional leaders agreed Sunday to a massive US$700-billion bailout for the U.S. financial sector, after a deal was made for legislators to share spending controls with the administration.

The deal won the tentative support of both presidential candidates, Sens. John McCain and Barack Obama, and is set to go to the House of Representatives for a vote Monday.

The plan is intended to keep credit flowing, to rescue bankers from bad loans that could derail the U.S. and global economies.

Congress has insisted on controlling more of the $700 billion than the White House wanted. Legislators had to walk a tricky line between angry voters who care little about Wall Street bankers and the administration who are forecasting financial disaster without action.

The final bill was released Sunday night as lawmakers met privately to figure out how to vote.

"This isn't about a bailout of Wall Street, it's a buy-in, so that we can turn our economy around," Democratic House Speaker Nancy Pelosi said.

The bill would be the largest government intervention in the financial markets since the Great Depression.

U.S. President George Bush has also expressed confidence that the plan could be passed. But he acknowledged that Americans are angry that so much taxpayers' money could be used in the bailout for Wall Street's mistakes.

Bush will address the nation at 7:35 a.m. EDT Monday morning about the bailout plan.

Analysts, however, expressed caution whether the deal would be passed, even though leading lawmakers on Capital Hill says it has the votes to pass.

"It's not over until it's over. They've got to read the fine print," Vincent Reinhart of the American Enterprise Institute told CTV Newsnet on Sunday.

A group of House Republicans had objected to aspects of the initial bailout package. Some GOP leaders said they didn't like the idea of government intervention to prop up failing private enterprises.

"They'll be justifiably appalled. It does really raise the issue of fairness -- the idea that you would provide funding to the former masters of the universe during bad times when you don't take back the money they earn in the good times," said Reinhart.

But he noted that the bailout is necessary to prevent an economic freefall.

Negotiations to finalize details of the bailout are being watched closely by international investors and governments. Stock markets around the world have seen significant fluctuations and declines over the past two weeks.

Industry Minister Jim Prentice told CTV's Question Period that Canada has a strong banking sector. But he added that Canadians will be impacted by what happens in the U.S.

"Our officials are monitoring this very closely. No country is an island, and certainly there will be consequences for Canada with what happens in the American economy. But we've had very sound fiscal finances in the government of Canada," Prentice said.

With files from The Associated Press

Comments are now closed for this story

Lowell
said

well something had to be done. The new president will have his work cut out for him cleaning up the mess. I hope that more regulations are put into place to keep the financial industry under control. Greed seems to be the prevailing motivator there.


Kirk
said

One possibility out of all of this is that the American governmnet will have title to a lot of real estate. If their economy is able to rebound then this might ( a very big might ) actually be benificial to the government and the taxpayer. However, I hope they put a permanent stop to the ridiculous lending policies that led to this fiasco.

However, why do I have this feeling we'll be back at this in another ten years?


BB in B.C.
said

Top executive pay on Wall Street went from 35 times to 300 times salaried employee rates in a few years. Normally the government would have taxed most of this bonus money but I'll bet it is mostly buried off shore. The rewards for their wreckless actions must be clawed back and the formula for compensation changed if the taxpayer is footing the bill to rescue these thieves. Washington Mutual paying 20 million for 17 days of employment is ridiculous.


jeff
said

There's salary caps in pro sports for a reason. Cap the CEO's and total transparency of the books. Funny how McCain said he was suspending his campaign to help with the bailout. Many involved in the proposed bailout deal said McCain deserves zero credit. In fact the straight talk express is in the process of derailing. It's about time I've heard enough from this maverick.


Lyn
said

I still don't hear a mention on regulating that industry. It just keeps on happening. Remember the S & L debacle? When are the U.S. citizens going to demand regulations?


patrick
said

The CEO's and upper echlon of these financial houses' should have their salaries capped at the wage of the "average" American earner.
No bonuses,stock options, until this "loan" is repaid and they turn a profit.


DCR-Toronto
said

This is only a temporary fix. The markets will float on this for a month or so, and then crash.


James
said

in my opinion, big industry can and will fix itself if given the oppertunity, by bailing them out it give them no incentive to change the practises that led to this huge downturn. 700 billion is an obscene number to give to companies. with 700 billion they could put an end to world hunger or cure aids or cancer. or any number of other things. instead it's being given to huge banks for no return.
good investment america!!


Prof. Pye Chartt
said

It's certainly a bitter pill to swallow...especially for free-marketeers (like myself) who generally believe greed should be punished by allowing companies to fail and executives to find a job at Burger King if necessary.

The orchestration and administration of this bailout will require some transparency; in order for the public to be remotely satisfied that the same bozos who sunk their own ship don't get rewarded for their stupidity.

It will be interesting and rather fascinating to observe. It's all so unprecedented.

Ultimately, Bush has indicated that when the bailout is in gear, thereafter the government will put under the microscope the banking system itself, and those insufficient regulations that presently exist.

Until the U.S. government properly reconciles private-sector mortgage banking and public-sector controls (including the insuring or backing-up of funds), the fundamental problem will remain unsolved and may rear its ugly head again when the next real estate boom comes.


dennis
said

The american people should 'loan' them 700b and get paid back over 25 years like a mortgage.


scott
said

Wall Street has caused this problem therefore freeze the interset rates on all of these bad mortgages at the unrealistic low rates they used to enticed people to borrow. The result is that people can still pay their mortgage and wall street pays the price with lower profits.

It's too bad it can't be that simple. Main Street survives and Wall Street feels the consequences of thier actions.

High paid CEOs need to feel some of the pain they have caused the average citizen trying to make a living.


Jason from Saskatoon
said

A system based on greed and ever expanding growth cannot work forever and this proves it. Time to limit profits and force companies to provided steady realistic growth that benefits the economy not just the individual investor. David Suzuki once said that in nature nothing can grow and expand forever and survive, and that was a special on our global economy. Maybe the money lenders and world leaders should take his advice.


Paul C
said

glub,glub,glub-throw em an anchor.This is just too funny the amer. public should be SCREAMING and out raged at this .Another Bush debacle for the next guy to clean up just like his DADDY left for Clinton!!!There peso should be worth about 75 cents be the end of the week..


Billy
said

I say let the house of cards fall...maybe we will get back to the reality of the value of gas, real estate and food...the government is afraid, very afraid right now!


J H ansen
said

If the USA government can spend/waste trillions of tax payers's $$$ in iraq-destroying the country-then why not waste a few hundred billions in the USA to destroy the taxpayers--they will pay for both mistakes--always the taxpayers will pay--the rich banks just keep raping the system-need new goverment--old party corrupt. Canadians see the USA in a different light--lobyists always get their way. thanks J in Canada


Mike Kaye
said

Yep.. this "bailout plan" really isn't fixing anything. It's just a temporary band-aid on the wound. Why does the rest of the country have to pay for the sins of the greedy? The next president is going to have to build things again from the ground up. No more quick patchy fixes to this system, that obviously doesn't work.


TSX & Venure to start their fall rise
said

This should bring stability to the markets and signal a bottom to what has been a rocky ride.

Gold and silver however will continue to rise because of the inflationary pressures this bailout will cause.




TSX & Venure to start their fall rise
said

This should bring stability to the marklets and signal a bottom to what has been a rocky ride.

Gold and silver however will continue to rise because of the inflationary pressures this bailout will cause.




Jay in Saskatoon
said

I'm not sure why anyone is surprised about any of this. This has happened over and over throughout the history of the United States - the 20s were a booming time, party time for everyone, the corporations got out of control and eventually collapsed under their own greed. Then the Depression occurred, eventually leading to World War II. In the words of Battlestar Gallactica - "This has all happened before and it will all happen again."


Dean
said

So now that the big bankers can be bailed out, what about all of the small companies that need help? What about all of the people who have abused their credit cards? These bankers don't deserve anything but a jail term for all of the fraud and abuse of the system.


Nicole
said

What I haven't heard is if ACORN is going to get a piece of the potential profits. This organization promotes 0 down mortgages and encourages the giving of credit to people with very little income. Essentially implementation of this (originating in 1999 - that would be under Clinton's watch) led Fannie and Freddie to disaster. This organization is under investigation for voter fraud and embezzlement in various states. Did I mention it is Democratic must have proposal and one of the primary reasons the House Republicans were not too keen on signing on. Did I mention ACORN publicly endorses Obama (course he used to work for them too). Talk about a direct vote buying scheme by the Democrats. I agree the Bush administration carries some blame, but players like Dodd and Barney Frank are up to their eyeballs in this mess and nary a word.


George
said

How interesting..
Bush wanted money for a stupid war that had very little legitimacy. He got billions, which will soon turn into trillions.
Bush wants money for a bailout of people and companies who followed ridiculous policies that put them into debt. He is getting billions, soon to be trillions, more.
Bush doesn't want money to tackle pollution and environmental issues. It would be impossible to find the tens, some to be hundreds of millions they would need to make a sizeable impact in this area.
So far the issues are a bit different, but Harper is heading in the same direction.


Fraser
said

Has anyone thought that this might have been the plan all along........? Why is it that J.P. Morgan et. al. is not in the financial woes of the rest of them and able to buy up banks for 10 and 20 cents on the dollar. Whose idea was it to bunch all of these bad debts in with financial instruments in with 401K's, mutual’s etc. so that they could not be separated out and therefore "everything" was a failure? Too many are in panic mode and not asking the pertinent questions. Just some interesting questions and thoughts.


David A.H. Brown
said

Not One Dime!
$700 billion in taxpayer money would be wasted in a federal bailout – it would be the wrong people paying the bill, the wrong people making the decision, and the wrong reforms to fix the underlying causes.
The industry (not government) should set up a distressed debt fund to provide liquidity to mortgage-backed paper until maturity. A new Financial Services Authority should be established, replacing the SEC and other federal regulators. Other key reforms are needed and outlined here: to election financing, bankruptcy courts, mortgage lending, executive compensation, director certification, accounting practices, and risk-weighted capital.
Commentary on “financial bailout” by governance expert David Brown



Doug BC
said

Estimates are that this will cost every person in America $2300 in taxes.I expect that means a very slow economy for a very long time.The S&L debacle in the early 1990's took almost a decade to overcome.
While I agree that they are going to have to do much more on the regulation side of financial markets,it is far to simplistic to thik it ca be done easily,or that letting these institutions fail would only hurt the wealthy.
And yes,Mr.Bush and his administration should have seen this coming,and acted much sooner.But,the fact is,that the mortage problem got exponentially larger in the Clinton years.It was the Liberal ideology that moved to make homes available to ALL Americans,whether they could afford them or not.It is simply inappropriate to give morgages to people who have no chance to every re-pay them.No matter how noble the concept of a house for every citizen.That idea is what really put this train on the wrong track.
Of course,you won't hear Clinton,or Pelosi,or Obama talk about that.
As harsh as it may be,it MUST be necessary to actually "qualify" fo a loan to make the system work.


MuskyBuck
said

I'm awaiting the details of this package.

I want to see if politicians in the US have any insight at all on the disparity between rich and poor.

Here's an idea, the 700 billion is given to the ones that took the mortgages out, not to the issuer's.

It's a simple solution. Buy the interest. Let those that took those mortgages out at the freezed interest level, continue to pay down their mortgages over 25 years at that level.

Then the government gets a majority of the 700 billion back.

The citizens of the US keep their homes.

The economy will right itself within a year.

And the banks that go broke, do so because of their decisions.

Enough of the rich getting richer, if this plan calls for anything else, then the US is truly a corrupt, bloated nepatistic organization.


Plabo
said

Micheal Moore's Fahrenheit 911, if I recall, mentioned that all companies held by Bush Jr went belly up. Well! Looks like he's done the same to the United States. He's bankrupted a whole country for what?
1-Help his friends
2-Get a pat on the shoulder from his dad because

I wouldn't be surprise if Bush senior was actually running the whole show through his puppet son.

Would also be nice to know how much Bush junior was worth before being elected as president and how much he's worth today.




eddytoronto
said

Bank Borrowing From Fed Already Exceeded Bailout Total in Last Week!

U.S. banks borrowed $188 billion per day on average in the latest week from the Federal Reserve, meaning that the Fed loaned out more money than the Treasury’s proposed bailout in just one week, still barely managing to keep the economy afloat.

Federal Reserve data showed on Thursday the total amount banks borrowed nearly quadrupled the previous record of $47.97 billion per day notched just the week before, Reuters reports.

$188 billion per day on average over the course of five days means that the total amount borrowed from the Fed in the week ending the 24th September stood at $940 billion - a figure that easily eclipses the proposed $700 billion bailout.

As we have already reported, the $700 billion number was simply pulled out of thin air by the Treasury.

The Treasury’s fact sheet about the bailout states, “The Secretary will have the discretion, in consultation with the Chairman of the Federal Reserve, to purchase other assets, as deemed necessary to effectively stabilize financial markets.”



eddytoronto
said

This gives the government and the Federal Reserve carte blanche to do whatever they want to long as it is done in the name of stabilizing financial markets, they can nationalize any company or industry and use taxpayer money, above and beyond the initial $700 billion, for whatever purpose is deemed necessary, without any oversight. Paulson’s bailout plan is also unreviewable by any court, it will remain in perpetuity.

Paulson’s draft bailout plans says: “The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time.”

As Chris Martenson writes, “This means that $700 billion is NOT the cost of this dangerous legislation, it is only the amount that can be outstanding at any one time. After, say, $100 billion of bad mortgages are disposed of, another $100 billion can be bought. In short, these four little words assure that there is NO LIMIT to the potential size of this bailout. This means that $700 billion is a rolling amount, not a ceiling.”

If the bailout bill passes it is just the beginning of something much larger. $700 billion is a meaningless figure that will do nothing to shore up the economy. It is not a bailout, it is a giveaway that will allow insiders to purge themselves of bad bets and free to continue where they left off. The real reason for the bill is the unprecedented transfer of power to the Executive Branch and into the hands of the global corporate elite.




Leave the trash in the corporate vaults.
said

Wall Street bigshots bought the toxic debt . . . and they can eat it.

The government can help ordinary citizens who may be adversely affected by the economic repercussions of financial system turmoil . . . but the bigshots can fend for themselves.




THe corporate boys always have their hands out.
said

Live by the "free market," die by the "free market."




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