The Blue Dogs, the Bailout, and Bankruptcy Protection
BySince it became clear that Congress was on the brink of handing over nearly a trillion dollars to Wall Street, I’ve been trying to keep tabs on the back and forth over the bill within the Democratic caucus.
Here’s what I’ve got right now:
Matt Stoller at Open Left says he has a copy of a letter from 12 members of the Congressional Progressive Caucus demanding a financial transactions tax, bankruptcy relief, and some other things. All it’s going to take is a few more progressive Democrats to take up these demands before no bill can pass without some sort of help for Main Street—unless, of course, some sort of center-right coalition forms to pass a bill that only bails out Wall Street.
And that brings us to the other side of the caucus, where conservative Democrats seem reluctant to stand with the majority of their fellow Democrats and include a provision allowing bankruptcy judges to renegotiate mortgage terms so people may avoid foreclosure. According to Stoller:
Nancy Pelosi apparently met with 40-50 moderate to conservative Democrats today or last night, and one bone of contention is the bankruptcy provision. Melissa Bean, John Tanner, and the usual Blue Dog suspects are carrying water for the industry, so it should be obvious at this point that a reform of the industry isn’t going to happen if it doesn’t happen now. Pelosi is willing to strip bankruptcy provisions, while Obama is backing off his earlier statements that he’s willing to do that.
The financial sector is fighting bankruptcy protections hard. That’s because renegotiating these loans will make them less valuable then they currently are on paper. You start letting judges charge people actual market rates for their homes, and suddenly all those mortgages and potential foreclosures that were based on last year’s home values will deflate like party balloons and start dragging down balance sheets everywhere. Ultimately, this one provision could actually establish which firms were solvent – and worth the taxpayers’ money – and which deserved to simply fail. Nobody on Wall Street wants to face that test.
So – on the one hand, we have progressives asking for bankruptcy relief. We have the Democratic presidential candidate doing the same. We have the chairman of the Senate Banking Committee, Chris Dodd, including bankruptcy provisions in his bill. Barney Frank says he’s working hard to keep the provisions in. And what are we hearing from the Blue Dogs? Well, let’s look at their only press release about the crisis:
Members of the 49- Member Democratic Blue Dog Coalition and 40-Member Republican Tuesday Group met today with key economic experts to discuss responsible bipartisan solutions to the current crisis.
Chaired by Allen Boyd (FL-02), Dennis Moore (KS-03) and Mike Ross (AR-04), the Blue Dogs represent fiscally conservative Democrats. Chaired by Mark Kirk (IL-10) and Charles Dent (PA-15), the Tuesday Group represents moderate Republicans.
Together, the group discussed various legislative proposals with Tim Adams, Managing Director of the Lindsey Group; Robert Dugger, Managing Partner of the Tudor Investment Corporation; Albert Dwoskin, C.E.O. of A.J. Dwoskin and Associates; Maya MacGuineas, President of the Committee for a Responsible Federal Budget; and Marc Sumerlin, Managing Director of the Lindsey Group.
“We are committed to working together, as Democrats and Republicans, to find responsible solutions and reestablish confidence in our financial markets, said Allen Boyd. “This crisis threatens both jobs and savings of working Americans,” said Mark Kirk. “The situation demands bipartisanship and focus on putting people before politics.”
Both groups pledged to work together to ensure that workable, responsible solutions to this crisis are put forth by Congress.
Hmm. Nothing about bankruptcy protection. Probably just slipped their minds. Rep. Shuler, were you at that meeting? Because I’m sure you and the other Blue Dogs were lobbying the Republicans to keep people in their homes, right?
20 Comments
September 25th, 2008 at 6:42 pm
As far as I’m concerned, it’s no more my responsibility, as a taxpayer, to bail out mortgage lenders than it is to bail out irresponsible citizens who took out high risk adjustable rate loans.
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September 25th, 2008 at 6:43 pm
I just received this with no atribution…
I’m against the $85 BILLION bailout of AIG. Instead, I’m in favor of giving
$85,000,000,000 to America in a “We Deserve It” dividend. To make the math
simple, let’s assume there are 200,000,000 bona fide U.S. citizens, aged
18+.
Our population is about 301 million counting every man, woman and child. So,
200,000,000 might be a fair stab at legal US adults 18 and up. Now, divide
200 million, 18+ adults into $85 billon – that equals $425,000.00 each!
Yes, my plan is to give that $425,000 to every adult as a “We Deserve It”
dividend.
Of course, it would NOT be tax free. So, let’s assume a tax rate of 30%.
Every would pay $127,500.00 in taxes. That sends $25.5 billion right back to
Uncle Sam! It also means that every adult 18+ has $297,500.00 in their
pocket. A husband and wife would have $595,000.00!
What would you do with $297,500.00 to $595,000.00?
. Pay off your mortgage – housing crisis solved
. Repay college loans – what a great boost to new grads
. Put away money for college – it’ll really be there
. Save in a bank – create money to loan to entrepreneurs
. Buy a new car – create jobs
. Invest in the market – capital drives growth
. Pay for your parent’s medical insurance – health care improves
. Enable Deadbeat Dads to come clean – or else
Remember this is for every adult U.S. citizen, 18 and older (including the
folks who lost their jobs at Lehmann Brothers and every other company that
is cutting back) and of course, for those serving in our Armed Forces.
If we’re going to re-distribute wealth let’s really do it! Instead of
trickling out a puny $1,000.00 (“Obama vote buy”) economic incentive.
If we’re going to do an $85 billion bailout, let’s bail out every adult U.S.
citizen!!
As for AIG – liquidate it.
. Sell off its parts.
. Let American General go back to being American General.
. Sell off the real estate.
. Let the private sector bargain hunters cut it up and clean it up.
We deserve the money and AIG doesn’t. Sure it’s a crazy idea, but can you
imagine the coast-to-coast block party?!
How do you spell Economic Boom? W-e D-e-s-e-r-v-e I-t d-i-v-i-d-e-n-d! I
trust my fellow adult Americans to know how to use the $85 Billion “We
Deserve It” dividend more than I do the geniuses at AIG or in Washington,
D.C..
And remember, The Birk plan only really costs $59.5 billion because $25.5
billion is returned instantly in taxes to Uncle Sam. The vast majority of
the rest of the money would instantly begin to be circulated in the economy
increasing the sales tax income across the country. The names of every
politician who votes against We Deserve It should be published in local
papers every day before the November election.
Ahhh…I feel so much better getting that off my chest.
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September 25th, 2008 at 7:04 pm
For God’s sake do some math people!
The entire EPIC BAIL is estimated at $700,000,000,000. If we use the 200,000,000 person estimate, it comes out to $3,500 per person. Whoever’s sending this email around is a certified dumbass.
(and, this is no big deal, just a pet peeve – if you’re cutting and pasting an email, it’s better to deal with the spacing/margin issue)
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September 25th, 2008 at 7:09 pm
Heh, I’ve seen that mistake made numerous places Gordon.
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September 25th, 2008 at 8:03 pm
Clarence:
I refer you to this particular section of our comments policy, accessible by clicking the link directly below the text box:
This is your only warning.
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September 25th, 2008 at 8:07 pm
Excellent post, Doug.
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September 25th, 2008 at 9:24 pm
Oops. Link for Blue Dog press release.
This meeting happened today, by the way. I wonder if it was before or after John McCain and the House Republicans came up with this:
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September 25th, 2008 at 9:31 pm
I like this fun quote:
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September 25th, 2008 at 9:34 pm
The Bush administration has never really had any use for data, why start now?
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September 25th, 2008 at 9:54 pm
For heaven’s sake, or for the sake of trees, delete it. I am not married to it. I sent it as a humorous thingee with total ignorance of the policy. And I appreciate the one and only warning. If I get ousted, man, I will get my life back and the addiction will be over.
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September 25th, 2008 at 10:38 pm
Yeah, right. Total ignorance of a policy that’s been in place long before you ever discovered us, the existence of which is announced clearly and conveniently between the box you type the comment into and the button you push to submit the comment. You have to move your mouse over the announcement to get to the button, for the love of Benji!
If you haven’t done so already, please read it.
Anyway, we all have e-mail. It’s probably safe to assume that when you get something like that in your inbox, we all got it as well from other well-meaning friends, relatives and co-workers. Some more than others. (That same e-mail was forwarded to me fourteen times today. Seriously.)
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September 26th, 2008 at 12:28 am
Bobaloo, please note that we’re not talking about taxpayers rescuing overextended homeowners. We’re just talking about allowing people to keep their homes by reducing or extending their mortgages – and this is after they’ve declared bankruptcy, with all the penalties that imposes.
This kind of relief should have been made available months ago. It’s only possible now because Congress is being asked to nationalize the finance industry.
In other news, the latest developments seem to have made impossible the center-right coalition I described. My guess is that unless there’s a serious stock market crash, we won’t see any bailout at all. Fine with me. I still wonder what the Blue Dog position would have been on bankruptcy protection (makes mental note to research how Blue Dogs voted on the Bankruptcy Bill).
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September 26th, 2008 at 2:15 am
Instead of buying up the bad loans, what if we buy the good loans off these faltering financial institutions? It will give them the cash they need to keep going while not transfering toxic balance sheet woes to the public at large. Still a bailout, but better at least.
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September 26th, 2008 at 8:47 am
Doug, if you’re talking about nationalizing the finance industry, you’re talking, in some shape, way or form, about taxpayers footing the bill.
It’s a sorry situation to be sure, and we’ll all be affected by the loan industry and individuals reckless decisions, but I can’t seem to find my sympathy.
I have no idea why you folks would trust the government any more than you’d trust a corporation.
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September 26th, 2008 at 10:24 am
Marc Ambinder: “The CW in Washington this morning is that McCain’s suggestion for the grand, high-stakes summit meeting was the very thing that caused all of Washington to explode.”
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September 26th, 2008 at 11:48 am
that was 7 month ago! so why the sudden rush? some one is playing us, again!
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September 26th, 2008 at 12:14 pm
Bobaloo,
I took your bit about “irresponsible citizens who took out high risk adjustable rate loans” to mean that we shouldn’t include bankruptcy relief – through the courts – in the bailout. Sorry if that wasn’t clear.
I think we’re in agreement on rescuing banks, though I also think that there’s no question that a lot of people who seem to know a lot about economics seem to disagree with us. Paul Krugman, for instance:
I’m just saying that if there has to be a bailout, then at the very least, bankruptcy protection should be a part of it.
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September 26th, 2008 at 12:37 pm
I got one of those high-risk loans from Countrywide in 2003. No money down, 20% fixed rate, 80% adjustable. They offered us a lot more than we needed, and we took only the cost of the house. ASAP, we refinanced into a 100% fixed rate.
Fortunately, my wife and I both have advanced degrees and have been able to maneuver well enough that we’ve not been in any great risk of losing our home. For those who have become unemployed or were not savvy enough to refinance bad loans/not take an exorbitant loan, it’s a different story. The lender I went to was definitely pushing us to get more than we could afford.
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September 26th, 2008 at 12:45 pm
I am guessing.
If the bailouts continue, we will pay for it with heavy inflation. Within four years, we will be paying double what we are paying today for all commodities.
If we don’t do the bailouts, we will pay for it with a seriously crippled economy for several years. There isn’t a great win for us in the future here. When politicians promise the moon and deliver it, someone will eventually pay. You are working for government “freebies” through May of each year. No wonder you can’t pay your bills. There is no free lunch and that includes breakfast and supper too.
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September 26th, 2008 at 2:30 pm
Clarence,
You have no idea whether anyone reading this is working for government “freebies” through May. Not only is that figure totally bogus, it’s an average, not a median, and includes the taxes paid by Bill Gates, Michael Jordan, and Paris Hilton.
I would guess that 90% of the people who will read your comment stop paying for necessary government services – including things like a Medicare, Medicaid, college loans, etc., etc. – and the defense budget, and interest on the federal debt by about the first or second week in February. March 1 at the latest. Oh, and since that figure supposedly includes state and local taxes, too, they’ve also paid for firefighters, police, sewers, and – hell, I don’t know – the public boat ramps at Lake Lure by that time, too.
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