Bailout defeated 207 to 226

September 30th, 2008 at 7:45 am by David Farrar

The has voted down the US$700 billion bailout plan, and share markets have fallen further. Democrats voted around 3:2 in favour while Republicans voted around 2:1 against. The elections in a few weeks loom large – one of the problems of having such a short two year term.

Ironically Brian Fallow must have written his column in advance, saying:

American lawmakers may have pulled the and the rest of us back from the brink of economic calamity, but the path down from the clifftop remains long, tortuous and slippery.

Actually the lawmakers have pushed the world a bit closer to economic calamity.

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78 Responses to “Bailout defeated 207 to 226”

  1. tknorriss (327 comments) says:

    Congress has decided to stay in session to see if they can iron something out rather than close for the day. I think they realise that it is too important not to get through in some form.

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  2. Adolf Fiinkensein (2,704 comments) says:

    DPF, have you counted the number of times the Dopey Doncs have shouted ‘Its in the bag!’ when it isn’t? The first time was when they lied to try and keep McCain away and the second was when Sister Pelosi forgot the vote had not yet been taken and put the boot in.

    These are the people who seek to put up a president. They couldn’t organize a crap during a visit to the sewerage farm.

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  3. Redbaiter (11,880 comments) says:

    “Actually the lawmakers have pushed the world a bit closer to economic calamity.”

    It ain’t really as big a deal as certain quarters make it out to be.

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  4. dad4justice (6,594 comments) says:

    Roll on the depression.

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  5. petal (706 comments) says:

    “The People” are apparently phoning their representatives at 20:1 against for corporate greed to get public welfare. Of course, if this is cutting of noses to spite faces remains to be seen.

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  6. jafapete (757 comments) says:

    “Actually the REPUBLICAN lawmakers have pushed the world a bit closer to economic calamity.”

    The Republicans, starting with McCain’s transparent campaign stunt, have systematically undermined the whole negotiating process.

    Sorry Adolf, but the numbers spell it out loud and clear. At the end of the day, leaders are supposed to exercise influence, by whatever means, over other people. They’re supposed to deliver. The Dems delivered. McCain failed miserably.

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  7. JC (951 comments) says:

    Perhaps unfortunately, those voting against may be doing the right thing for the long term. The bailout was always just welfare for the few holding the system to ransom and a rationale for continuing along the same old path of socialising the wealth of a country.

    JC

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  8. Owen McShane (1,182 comments) says:

    Keeping the US bailout in proportion:
    Wendell Cox writes:

    England’s Mortgage Bailout: The High Cost of Town Planning
    The Daily Telegraph in London reports that the government bailout of mortgage lender Bradford and Bingley will raise the exposure of the United Kingdom taxpayers to £150 billion (nearly US$300 billion). Overall, this is approximately $5,000 per capita, considerably more than the $3,000 per capita United States taxpayer exposure likely after the nearly $800 billion in bailouts, including AIG and the proposed congressional package.

    It may be surprising that the cost in the UK would be competitive, much less higher than in the United States, until the causes are analyzed. Surely, US lenders appear to have been more profligate with their (and now taxpayers’) money than UK lenders. Yet the bloated prices have started to fall, as prices begin to return to reality.

    Lending profligacy was only the start of the problem. Blame town planning, or what is called “smart growth” in the United States.Elsewhere, we have documented the fact that the excessive price increases that led to the US mortgage meltdown were concentrated in markets with strong land use regulation (smart growth). In these markets, land use policies limited the amount of land available for development, interfered with the competitive pricing of land for development and otherwise increased costs. The smart growth markets, while accounting for only 30 percent of the population, represented more than 85 percent of the housing price increases. Without smart growth, the financial crisis might well have been handled in the United States without government intervention.
    For the rest, go to:
    http://demographia.blogspot.com/2008/09/englands-mortgage-bailout-high-cost-of.html

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  9. jafapete (757 comments) says:

    Redbaiter: “It ain’t really as big a deal as certain quarters make it out to be.”

    But Redbaiter, chief amongst those “certain quarters” is none other than the President of the United States of America. You remember, the man who you have defended so many times against accusations that he’s ever lied. Surely you’re not suggesting here that he’s, er, stretched the truth a little? Maybe just got it wrong, eh?

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  10. stephen (3,981 comments) says:

    So what do the anti-bail-outers want instead? Briefly say Ron Paul on Breakfast this morning going on about monetary reform-type stuff that I don’t understand at all, is that what they want?

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  11. Turpin (342 comments) says:

    Why should the American taxpayer pull the Finance moguls irons out of the fire?

    If this were a private bank coming in, like for Lehman Bros they would be gaining assets and holding people to account for bad practices.
    Why shouldn’t the American people have the same rights?

    Good for them I say, make the bastards pay.
    At the very least the owners need to lose assets to the tune of the bail out.
    Both with their companies being owned by the taxpayer and they need to pay back.
    While they’re at it they need to put the leaders through the ringer for shonky products and set cleat boundaries for the future.

    Yhe finance houses have had tons of dosh for making and selling shonky non-products all based on lies and bullshit.
    good for the Republicans for listening to the American heartland.

    I guess the ratios say a lot about the two parties and the American people.
    Lets hope it shows at the polls in Nov.

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  12. labrator (1,851 comments) says:

    I want people to learn their lesson, that’s kind’ve the lesson of capitalism, not to reward stupidity, that’s why markets go down as well as up. If I’d only had the cliche dollar for everytime someone told me that house prices won’t collapse I could buy a few of the ones that’ll be real cheap in 2 years time.

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  13. Redbaiter (11,880 comments) says:

    Jafapete- “Sorry Adolf, but the numbers spell it out loud and clear. /—/ The Dems delivered.”

    Democrat votes-

    Yes- 140

    No- 95

    A bit of a Bushism there Pete???

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  14. stephen (3,981 comments) says:

    labrator, check this out then:
    http://bigpicture.typepad.com/comments/2008/08/detroit-housing.html

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  15. radar (318 comments) says:

    “It ain’t really as big a deal as certain quarters make it out to be.”

    Thanks for that, Redbaiter. You have given me a huge sense of relief, and I am sure others too.

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  16. jafapete (757 comments) says:

    “So what do the anti-bail-outers want instead?”

    Stephen, you need to watch Faux News if you want to learn about the far-right, oops, conservative position. They even had a leading conservative congressperson on yesterday explaining why he and other Republicans would vote against the bail-out. (Remarkable prescience, eh, Adolf, given that it was some 20 or so hours before Pelosi’s speech.)

    McCain’s sole contribution to the White house meeting on Thursday was, having passed up the opportunity to say soemthing earlier, to ask about considering this alternative position. What a waste of space.

    One thing about the GOP. It takes the serious prospect of defeat to bring out the worst in them.

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  17. Glutaemus Maximus (2,207 comments) says:

    So pleased that they knocked it back.

    The bankers are always quick to point out everyone else’s problems. Now it has come back to haunt them.

    The whole event has been a scam for the shareholders. The top brass never miss a trick.

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  18. jafapete (757 comments) says:

    “A bit of a Bushism there Pete???”

    Nope, Redbaiter, just a refusal to let the Republicans save all their sorry butts for their sick-makingly opportunitistic approach to a crisis largely (though not entirely) of their own making.

    Despite what you say, my mortgage comes up in a few months and I find this whole business more than scary. That’s because the Australian-owned banks here have been borrowing cheap overseas and taking advantage of our overly high interest rates to cream big profits. I expect them to repay my loyalty, and that of other kiwi customers, in much the same manner as the ANZ is treating its hard-working staff.

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  19. big bruv (14,224 comments) says:

    Plastic Pelosi shows why the world should be very scared of socialists, she is a bitter and twisted little witch who thinks nothing of pushing millions of her countrymen into poverty just so her party can grab the reigns of power and like all socialists in power she does not really care as she is insulated from the real pain.

    While the pain will be long and millions will be hurt the eventual outcome may well be good for the future

    When this is all over the innocent members of the public who have lost tens of thousands will be totally intolerant of the welfare state, we will see a growing call for personal responsibility and less acceptance for the bleeding heart liberals out there.
    The public will no longer accept things like “positive discrimination” and home loans for losers, the public will wake up to the fact that the world is not fair and that wealth and prosperity is not a god given bloody right, it is something that one has to work for, the long lines of losers waiting for govt handouts will be a thing of the past.

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  20. labrator (1,851 comments) says:

    @stephen: I feel very sorry for the economically uninformed who were encouraged under the guise of “affordable housing” to take on financial risks they couldn’t afford. And when I see our government rushing through “affordable housing” right after the peak of the market just to please the voting masses it frustrates me greatly.

    Housing by its nature has to be affordable in the long run because at the end of the day people have to live in houses. The problem arises when people are so economically illiterate that they say things like “house prices only go up” and “you can’t go wrong with bricks and mortar” with a straight face and can’t be swayed despite reams of historical evidence to the contrary.

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  21. mygumboot (15 comments) says:

    Thanks Aldolf for the count at No Minister. the Dems defeated the bill

    60% for 40% against Democrats
    66% for to 33% against Republicans

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  22. kiwipolemicist (393 comments) says:

    “Actually the lawmakers have pushed the world a bit closer to economic calamity”.

    Finally, a sensible decision from the politicians. The package would have simply bought another, larger calamity later: i.e. it’s better to take the pain now rather than a larger one later. The depression that began in 1929 would have been over by 1931/32 instead of 1946 if the government had left things alone instead of trying to fix things. Why is this? Because the current problems arise from the central banking system that allows the government to create money out of thin air (fractional reserve banking), and because the rescue package would have required the same magical and poisonous money. We (the US, NZ, the world) have permanent inflation due to the government constantly printing new money and eroding the value of the existing money: the Official Cash Rate is the Reserve Bank’s way of trying to control the inflation that the Reserve Bank system creates!. This system is doing exactly what Hitler did when he created hyperinflation prior to WW2; never forget that the current problem is the fault of those who perpetuate the central banking system.

    http://mises.org/story/3131 covers the “rescue” package.

    For indepth reading go to http://www.mises.org/story/3128 and find the links for the following (click on the PDF symbol):
    * America’s Great Depression
    * The Mystery of Banking
    * The Case Against the Fed (the Fed is the US equivalent of our Reserve Bank)

    I have specifically mentioned these books because Rothbard writes very well, not at all what you’d expect from an economist.

    The only solution to the crisis is to end the central banking system – a policy straight from the Communist Manifesto – and return to a genuine gold dollar. Governments don’t like this idea because they lose the power that comes with being able to create money out of thin air.

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  23. stephen (3,981 comments) says:

    Stephen, you need to watch Faux News if you want to learn about the far-right, oops, conservative position. They even had a leading conservative congressperson on yesterday explaining why he and other Republicans would vote against the bail-out.

    I didn’t honestly believe there were that many ‘far righters’ in Congress! 228?!

    Good points Labrator – one doesn’t often (or I don’t) hear about people biting off more than they can chew, even when the government was doing its bit for affordable housing.

    “I could buy a few of the ones that’ll be real cheap in 2 years time.”

    Don’t need to wait 2 years, as you saw in the link…

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  24. jafapete (757 comments) says:

    BigBruv: “…like all socialists in power she does not really care as she is insulated from the real pain. While the pain will be long and millions will be hurt the eventual outcome may well be good for the future.”

    Let me get this right, BB. Pelosi doesn’t really care about the pain because she’s an insulated socialist. But you think that despite the “millions” who will be hurt and the pain being “long”, it’s all for the best. I’m impressed by how little you seem to care. Sure you’re not hankering to be an insulated socialist yourself?

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  25. labrator (1,851 comments) says:

    @stephen: Those houses are $1 because of the debt burden on them and $1 is the lowest amount of money required for a legal purchase to occur (in my non-legal terms). I think it was Barings bank that was bought for 1 GBP after its collapse. I doubt any of those houses will sell at all in the current market.

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  26. philu (12,989 comments) says:

    redbaiter..the republicans voted 2-1 against it..

    ..(and funnily enough..i agree with them..not passing this ‘gift’ to the uber-rich..)

    ..and i have spent the morning canvassing stories that present alternatives..

    ..but this whole rotten superstructure needs to be cleaned out..to go..

    ..(and here..as well as there..)

    ..and the ultimate irony in all of this..

    ..is that the freedoms/excesses of the ‘free/de-regulated-markets’..

    ..in their 30 year reign..

    ..are what are bringing about a seismic change..

    ..and the ‘socialising’/communalising of sooo much..

    ..(this will have to come about..as govts become the haven of last resort..and take equity/full ownership.).

    and ‘de-regulation’..?

    ..new regulations will fall like snow..!

    ..bankers won’t be able to put their underpants on in the morning..

    ..without getting gummint approval/over-seeing..

    ..and the good news is..

    ..that we have a ‘new deal’ coming..

    ..and it’s guaranteed to be pretty ‘green’..

    ..basically..after a period of much grief..

    ..societies are going to have to undergo major changes..

    ..and/as the ‘growth is all’ world-view..

    ..is proven to be bankrupt on all levels..

    ..phil(whoar.co.nz)

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  27. francis (617 comments) says:

    Pelosi’s poisonously partisan polemic pushed a dozen or more swing Republicans into the ‘nay’ block – she could have delivered the same speech after the bill had passed but just couldn’t help herself.

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  28. Redbaiter (11,880 comments) says:

    “One thing about the GOP. It takes the serious prospect of defeat to bring out the worst in them.”

    Pete, will you get real?? 95 Democrats voted against the bill. (Maybe they’re at last acknowledging the truth that its all the result of their damned legislative interference in the markets anyway.)

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  29. kiwipolemicist (393 comments) says:

    Another brilliant book giving background to the present crisis is here:
    http://mises.org/money.asp

    This explains everything you need to know about the present crisis, fractional reserve banking, central banking, etc. It’s not as frightening as it sounds, it’s all in plain english.

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  30. Owen McShane (1,182 comments) says:

    Keeping the US bailout in perspective.
    Wendell Cox writes:
    England’s Mortgage Bailout: The High Cost of Town Planning
    The Daily Telegraph in London reports that the government bailout of mortgage lender Bradford and Bingley will raise the exposure of the United Kingdom taxpayers to £150 billion (nearly $300 billion). Overall, this is approximately $5,000 per capita, considerably more than the $3,000 per capita United States taxpayer exposure likely after the nearly $800 billion in bailouts, including AIG and the proposed congressional package.

    It may be surprising that the cost in the UK would be competitive, much less higher than in the United States, until the causes are analyzed. Surely, US lenders appear to have been more profligate with their (and now taxpayers’) money than UK lenders. Yet the bloated prices have started to fall, as prices begin to return to reality.

    Lending profligacy was only the start of the problem. Blame town planning, or what is called “smart growth” in the United States.Elsewhere, we have documented the fact that the excessive price increases that led to the US mortgage meltdown were concentrated in markets with strong land use regulation (smart growth). In these markets, land use policies limited the amount of land available for development, interfered with the competitive pricing of land for development and otherwise increased costs. The smart growth markets, while accounting for only 30 percent of the population, represented more than 85 percent of the housing price increases. Without smart growth, the financial crisis might well have been handled in the United States without government intervention.

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  31. philu (12,989 comments) says:

    so..let me get this right..

    ..big bruv is arguing for the biggest handout ever of government/taxpayer money..

    ..to prop up a failed business-plan/-model..

    ..and i..a green leftie..am arguing against it..

    ..has the universe been flipped on its’ head..?

    ..and i thought righties were against ‘handouts’ of taxpayers money..?

    w.t.f. happened to that foundation stone/pillar of your belief-system..?

    whoar..!

    phil(whoar.co.nz)

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  32. stephen (3,981 comments) says:

    Labrator…mmhmm. I got that link from a TVHE post from a while back, but there was no mention of that at all, the reasoning was essentially ‘Detroit is shithole’.

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  33. big bruv (14,224 comments) says:

    Jafa

    “Let me get this right, BB. Pelosi doesn’t really care about the pain because she’s an insulated socialist”

    Yes, spot on, she does not really give a shit as her lust for power is the driving force behind this move.

    “But you think that despite the “millions” who will be hurt and the pain being “long”, it’s all for the best.”

    That is not what I said Comrade but then you socialists never let the truth get in the way of your corrupt ways, like most I feel for those who are about to possibly lose their life savings and like most on the right I am fucking angry at the way the pinko’s are using this tragic event as a way to further their corrupt cause.
    The reality is Comrade Redeye that the only reason we are in this situation is because people like you insist that everybody deserves an equal chance to own a home or have the luxuries of life without having to work for them.

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  34. Adolf Fiinkensein (2,704 comments) says:

    The socialist apologists on this thread who rave on about the problem being caused largely by Republicans need to read a bit of history and find out which party it was that opened up the sub prime box of tricks in the first place, which party took bribes to keep the regulators away ($160k to Obama) and which of the current gang of loud mouth Democrats aggressively promoted ‘affordable housing’ for people who can’t afford housing.

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  35. Glutaemus Maximus (2,207 comments) says:

    so..let me get this right..

    ..big bruv is arguing for the biggest handout ever of government/taxpayer money..

    ..to prop up a failed business-plan/-model..

    ..and i..a green leftie..am arguing against it..

    ..has the universe been flipped on its’ head..?

    ..and i thought righties were against ‘handouts’ of taxpayers money..?

    w.t.f. happened to that foundation stone/pillar of your belief-system..?

    whoar..!

    phil(whoar.co.nz)

    So let me get this right. Why do you keep coming back for grief?

    You are such good fun, and are always welcome.

    We love rubbing you down with a pork chop!

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  36. jafapete (757 comments) says:

    Mygumboot or Adolf, Can you explain how you get those percentage figures. The actual vote was:

    Democrats
    140 for
    95 against

    Republicans
    65 for
    133 against
    1 non-voter (Jerry Weller (R-IL))

    The percentages are as DPF has them: Democrats 59.6%:40.4%; Republicans 32.7%:66.8%:0.5%

    Yes, you can argue that had another 12 Democrats voted in favour, then the bailout would have passed. But the same applies to the Republicans.

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  37. philu (12,989 comments) says:

    you can howl to the sky..adolf..

    ..but..’it’s over’..eh..?

    ..and must now just play out..

    ..as the excesses are corrected..

    ..and one of my main reasons for being against this bailout/handout..

    ..is that it would be good money chasing bad..

    ..and wouldn’t work..

    ..cos’ the retail sector/commercial real estate/personal debt/housing..and (shudder!)..the derivatives..

    ..all still have to crash/play out..

    ..phil(whoar.co.nz)

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  38. Glutaemus Maximus (2,207 comments) says:

    For once, I have to agree with Philu.

    Aircraft bag required.

    I hope that all the naughty bankers go tits up in the States.

    At the end of the day. Correction is required.

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  39. jafapete (757 comments) says:

    BigBrov, I think that you are being more than a little disingenuous when you say that I have misrepresented your 8.23am (DPF-time) comment. I think that any reasonable person would agree that “all for the best” fairly sums up:

    “… the eventual outcome may well be good for the future. When this is all over the innocent members of the public who have lost tens of thousands will be totally intolerant of the welfare state, we will see a growing call for personal responsibility and less acceptance for the bleeding heart liberals out there.
    The public will no longer accept things like “positive discrimination” and home loans for losers, the public will wake up to the fact that the world is not fair and that wealth and prosperity is not a god given bloody right, it is something that one has to work for, the long lines of losers waiting for govt handouts will be a thing of the past.”

    Sounds like you think that these are good outcomes, no? I’m happy to let others decide.

    Further, you say, “… the only reason we are in this situation is because people like you insist that everybody deserves an equal chance to own a home or have the luxuries of life without having to work for them.”

    (1) I’ve never said that, although I do think that it is a bad thing for people to sleep in cardboard boxes under bridges. Perhaps you disagree?
    (2) The causes of the current financial meltdown are quite complicated.

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  40. AlexFreeman (6 comments) says:

    Free marketeers cannot have it both ways David – you cannot be allowed to do anything you want unhindered and when it turns to shit have all your bad debts socialised.

    I don’t think American tax payers should bailout greedy Wall Street bankers that have embraced the free market – boom and bust! Accept it.

    And, we’ll just need to think a bit more about what the world is going to look like post easy credit.

    [DPF: I don’t think the intention is to save the greedy bankers. The intention is to stop a knock down effect which could see major banks collapse and mum and dad investors lose all their money.]

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  41. big bruv (14,224 comments) says:

    Phool

    “it’s over”

    Despite your wishes I know you are wrong Phool, however one thing that will definitely be “over” is the Green party.

    Come election day the one thing that will be on the minds of the voters is the economy, most of middle NZ will be more worried about paying the mortgage and keeping their jobs than they will be about trendy Green issues.
    The people of NZ know that a vote for the Greens is a vote for higher taxes and a vote for the big spending Labour party, the cushy sickly white liberal element will forget about “Green issues” when they are faced with cutting back on the weekly chardonnay bill.

    Be careful of what you wish for Phool.

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  42. dime (10,215 comments) says:

    philu – youre only against it cause its going to help out big business, not people on welfare.

    big question – is this gonna hurt mccain or obama???

    personally i think mccain is gonna be fucked.. bad economy = take it out on the governing party.

    bright side – will be fun to watch what whacky antics obama gets up to as president! Palin v osama in 2012?

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  43. berend (1,690 comments) says:

    DPF: Actually the lawmakers have pushed the world a bit closer to economic calamity.

    Yeah right. Stupid lawmakers for listening to their constituents. Abolish democracy and let the wise govern this world.

    DPF, you have abolished any pretence at being a market liberal, and now democracy is gone out of the window as well?

    Thank God for America, and thank God for Americans. They just defied the class that knows best. What a country, it would never happen here that politicians actually listen to their constituents. And you know why? Because you never get sacked here for your performance. Tightly regulated elections make sure incumbents are in no danger. You can’t spend money, you can’t advertise on TV, you can’t do this, you can’t do that. And John Key is gonna change none of that.

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  44. philu (12,989 comments) says:

    “..[DPF: I don’t think the intention is to save the greedy bankers. The intention is to stop a knock down effect which could see major banks collapse and mum and dad investors lose all their money.].”

    no..dpf..the owners/sharehoders/current executives would lose their shirts..

    ..and the banks/investment houses will be ‘nationalised’..

    ..with the gummint taking ownership..

    ..so those mums ‘n dads don’t lose everything..

    ..and..cos’ dpf..

    ..this model bailout would not have worked..

    ..and in paulsens initial ‘urgent’ plan..would have been a short-term solution only..

    ..and just ‘golden-parachuted’ the imbeciles who did this..

    ..into a comfortable retirement..(!)

    ..as i already noted..the retail etc. sectors have yet to crash..

    ..and they will..

    ..phil(whoar.co.nz)

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  45. gd (1,780 comments) says:

    as an avowed capitalist this is indeed a sad day Governments have not excercised good governance in ensuring that the corporates were subject to good corproate governance rules.

    This is all about Risk Management or in this case Bad Risk management

    A toxic combination of massive fraud and ignorance.

    The big end of town has profited on the bad of incredibly bad risk management aided and abetted by pollies and civil servants who either didnt understand didnt care as to the consquences.

    I liken it to an apple seller in the markets . He fills a barrel with rotten apples up to near the top and then puts a layer of nice juicy crisp apples on the top and sell the barrel as being all the best ones.

    The big question is what happens the next time And there will be a next time because I dont see any evidence of moves by governments to stop it happening again.

    This was a disaster that didnt need to happen Dumb pollies Dumb civil servants and crooked bankers and financiers are to blame.

    Sadly as always it is the citizens who pay the price.

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  46. francis (617 comments) says:

    Deciding to punish the bankers by denying the bailout is a little like taking a machine gun to a crowd of civilians because there are a couple of jihadists mingling among them.

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  47. Ross Miller (1,618 comments) says:

    I am waiting for lightning to strike as a write this ….

    philu’s 8.51 post is spot on

    May I please be forgiven for agreeing with philu

    Although lets not forget a major cause of the present crisis was the democrats ‘heavying’ of financial institutions to grant mortgages to those with little or no equity and little or no chance of meeting their commitments.

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  48. berend (1,690 comments) says:

    gd: as an avowed capitalist this is indeed a sad day Governments have not excercised good governance in ensuring that the corporates were subject to good corproate governance rules.

    Nonsense gd, the problem was the regulation. Banks had to make mortgages to people who could not afford them and were sued when they didn’t. See this video: http://www.youtube.com/watch?v=NU6fuFrdCJY

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  49. PaulL (5,449 comments) says:

    Francis: there is no punishment in denying a bailout. A bailout isn’t a right, therefore not giving it isn’t punishment. The question is why we would reward the bankers – bailing them out would seem to suggest that the problems were not forseeable, and that therefore we should help them. In reality it was forseeable, and the banks should have forseen it before the rest of us. That they didn’t is on their head, and they should really take the consequences.

    The only possible logic for a bailout is if it shortens the crisis. Consideration of whom might lose money should not be involved at all – people who invest carry a risk of losing their money, that is the nature of investing. They must carry that risk. However, if it can be demonstrated that the bailout is a wise investment of government money because:
    a) it increases the long term tax take (economic growth comes back earlier)
    b) it is profitable (many of the assets currently marked down are actually worth more than the govt would buy them for)
    c) it somehow increases the welfare of the poorest (those who own the houses, not those who own the banks)

    Then I’d be all for it.

    My view is that point c) isn’t true unless someone agrees a way to devalue the mortgages themselves. So someone who bought for $200K with a $180K mortgage, and now has a house worth $150K, if we write their mortgage down to $150K, I’d probably be in for that to some extent – it’s helping the poor. Although, nobody bails me out when my car loses value…

    Point b) I’m not all that comfortable with either. I know the NZ govt ended up making money on BNZ, and in fact so far on Air NZ as well. But I’m fundamentally against the government making investments like this – they really are quite bad at it in general. It becomes a habit, and any old thing starts getting bailed out.

    Point a) is actually a good argument. But then, the lefties never were up for tax cuts on the basis that they’d long-term increase the tax take, so why do this either.

    I personally think that the rush by Democrats to this bail out is just illustrating the extent to which the Democrats have become the party of wealth – trendy west or east coast living liberals, with large houses, large mortgages, and plenty of share investments. Republicans come from flyover country, and they own land rather than houses. They’re probably not so concerned about this whole thing – the value of their assets is largely tied up in what productive use they can be put to, and therefore to commodity prices, not to artificially inflated housing prices.

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  50. Glutaemus Maximus (2,207 comments) says:

    Bonus payments to Bank Directors went to their heads. In America the Clinton administration leant on all the Institutions to lend, almost at any price or risk.

    However the fact remains that the market needs to sort itself out.

    The only real winners are the craven Hedge Fund Managers.

    Evil and cynical operators.

    The whole process needs to be shut down, and the whole idea of shorting needs to be legislated against.

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  51. berend (1,690 comments) says:

    It might be interesting to quote Rush Limbaugh at length on this:

    Mr. Snerdley told me during the break here at the top of the hour that he’s received a bunch of phone calls from some of you who are angry that I am not detailing the agreement that will soon be voted on in the House of Representatives. That’s right, my friends, I’m not detailing it, because the details are irrelevant. The Treasury Secretary’s been empowered to do whatever he wants to do, whenever he wants to do it. You can go through this and you can read the details all you want, but let me tell you the truth here. For every person you hear saying this is going to strengthen the market, it’s the exact opposite. The market cannot possibly be strengthened by virtue of this bailout because the market has yet to work. The market’s not being allowed to work here. The losers haven’t been flushed out. We’re papering over the losers. The market is not working. This is not the market fixing this, and the market is the only thing that can fix it. This is a temporary patch to deal with people’s psychology while at the same time toying with their psychology by creating this crisis mentality in everyone that something has to be done or else. We face Armageddon, we face a depression.

    I want to read to you again the preamble to the Constitution of the United States, and then I want to read to you the purpose of the Emergency Economic Stabilization Act of 2008. Here’s the preamble to the Constitution. It’s not insignificant. The Constitution is the framework, the foundation of our capitalist system. It is the reason that we have remained the greatest country in the history of earth. “We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.” There’s nothing in there about ensuring the general welfare, just promoting it. Here is what is being proposed by the Congress and being voted on today: “Emergency Economic Stabilization Act of 2008. Purposes: Provides authority to the Treasury Secretary to restore liquidity and stability to the US financial system and to ensure the economic well-being of Americans.”

    Now, you can go get as specific as you want, you can go look at all details that you want of this bill, of this piece of legislation, and you can go to the things that were in it that have been thrown out, the bad things that were thrown out, you can look at some of the good things you think have been thrown in, Treasury Secretary, authority to ensure the economic well-being of Americans? That’s endless, that’s limitless. That’s absurd, and it’s known as socialism. We’re about to pass a law here that has as its stated purpose the Secretary of Treasury ensuring the economic well-being of Americans. That’s a frightening statement to me. Is that the job of the Secretary of the Treasury? What the heck kind of law is this? And who is he? Who is any Treasury Secretary? I don’t need to read another word. I don’t need the details. The Congress is giving the Treasury Secretary the job of ensuring the economic well-being of Americans. I’d call that central planning. I would call that an assault on the foundation of our economy. I’d call that a capitulation to people who have every intention of imposing change like we’ve never seen. The kind of people who would use police to strip away First Amendment rights, the kind of people who intentionally lie in campaign ads ’cause they know they’ll be held unaccountable by the propaganda ministers in the Drive-By Media.

    The Treasury Secretary can’t ensure anything anyway, and he shouldn’t. An honest man would resign if he was told that that was his job. You mean to tell me my job now is to ensure the economic well-being of Americans? Sorry, I can’t do that. Tell me how the hell I’m supposed to pull this off, especially with you guys providing oversight here if you don’t like what I’m doing? And then what happens if we get a Republican secretary of the Treasury in here who goes against what your intentions are, what’s going to happen to him after you guys in Congress get through with him? I don’t know, folks. Everybody’s falling prey to the crisis. Everybody’s falling prey to the manufactured crisis. I don’t doubt that something needs to be done, but the market is where whatever needs to be done needs to happen, and it’s not happening in the market. It’s happening in Washington, DC. It’s happening on however number of pieces of paper the legislation is. The market works.

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  52. unaha-closp (1,067 comments) says:

    The whole process needs to be shut down, and the whole idea of shorting needs to be legislated against.

    This is one of the stupidist, kneejerk acts of the current market regulators. When a market is predicted to fall short sellers gaurantee to buyers for lower priced shares in the future to cover their short position. When a market falls an influx of short sellers stabilises the market by buying the lower priced stock as they have previously agreed to. Take short selling out of the equation and all that happens is that there is no stabilisation to a slide. You get bigger and nastier falls, because no one in their right mind will buy during the slide and everyone will wait for the market to reach absolute rock bottom. And because no-one is buying, the market falls further.

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  53. gd (1,780 comments) says:

    berend there is a difference between good governance and bad governance Regulation is another animal all together

    there is good regulation and there is bad regulation and then there is no regulation

    Where there is a vacumn you can be sure some bastards will seek to expolit the situation This is basic human nature

    Good governance is all about minimal but effective regulation.

    You seek to stop the bad guys whilst not stopping the good guys.

    Its all about principles based governance

    Think the 10 Commandments as a start. then allow the Courts to excercise good judgment on the factss of each case and punish accordingly

    Look at Sarbanes Oxley This law is the size of the New York telephone book and its all bullshit

    It doesnt work

    Reason It trys to cover all the bases and ends up covering few.

    the lawyers and accountants dream up ways around it then the law makers like the guy following the elephant at the circus come along to try and clean up the mess.

    Doesnt work
    We need KISS regulation with very severe penalties when required I like the Muslim solution

    Id have these rogue bankers hands chopped off

    They wouldnt do it again and their crooked mates would think twice.

    Now thats my style of regulation Hit em hard Hit en often

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  54. Grant Michael McKenna (1,110 comments) says:

    unaha-closp; our minds are made up! Don’t confuse us with the facts!

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  55. labrator (1,851 comments) says:

    @unaha-closp: Yeah I can’t stand how suddenly people who don’t even know how the share market works, get up and start telling you that short selling is the root of all evil. Yet, If I told them that the housing market was near it’s peak and that they could sell their house, rent for 3 years and buy their house back for 20% less, they’d probably be all for it as they don’t recognise that as shorting.

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  56. redeye (633 comments) says:

    “Palin v osama in 2012?”

    Comic post of the year!

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  57. redeye (633 comments) says:

    Rep. Barney Frank;
    “We have come together on a bill to alleviate the crisis, and because somebody hurt their feelings, they decide to punish the country? I mean, I would not have imputed that degree of pettiness and hypersensitivity. … There were 12 Republican members who were ready to stand up for the economic interests of America, but not if anybody insulted them. I’ll make an offer. Give me those 12 people’s names and I will go talk uncharacteristically nicely to them and tell them what wonderful people they are and maybe they’ll now think about the country.”

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  58. freethinker (677 comments) says:

    This crisis will prove a once in a century watershed and things will change – I cannot see what those changes will be but the uncertainty worries me greatly.

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  59. berend (1,690 comments) says:

    gd: berend there is a difference between good governance and bad governance Regulation is another animal all together

    gd, lots of this was caused by regulation. You think even more would have stopped it? Every fricking socialist system has come crashing down, and you guys want to erect one over and over again. Just read Rush Limbaugh’s speech. Than you might understand that this was an insane attempt to fix what wasn’t broken. I trust Bush on the war, but not on much else. Same for McBama and O’Cain. Only Mrs. Palin had the temerity to think aloud that she was disappointed with a bailout.

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  60. berend (1,690 comments) says:

    redey, the Barney Frank who said in 2004 on the problems with Fannie Mae and Freddie Mac:

    This — You — you — you seem to me saying, “Well, these are areas which could raise safety and soundness problems.” I don’t see anything in your report that raises safety and soundness problems.

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  61. Bevan (3,232 comments) says:

    The Republicans, starting with McCain’s transparent campaign stunt, have systematically undermined the whole negotiating process.

    Last I checked the Democrats had a majority in Congress. Dont blame the minority for voting against when the controlling party cant get their own shit together.

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  62. gd (1,780 comments) says:

    NO NO NO Berend read what I said I refered to Sarbanes Oxley vs the 10 Commandments.

    Most government regulation is complete BULLSHIT It slows down the good operators and does nothing to stop the bad operators.

    Trouble is a combination of dipshit pollies civil servants and lawyers continues to ensure we get dipshit legislation and regulation.

    If there had been good regulation the bankers and financiers would not have been able to make the bullshit loans they did but the good operators would have still been able to fund good projects.

    this was all about Risk Management It aint ro0cket science despite what the high priests of finance will tell you.

    Good risk management means getting the result you want without coming unstuck .

    For Christs sake the mere term NINJA should have sent warning bells off I mean who the hell would lend money to someone with no income no job no assets.

    call that responsible corproate governance?

    I dont yet thats why these arseholes did to cream the huge bonuses they got.

    Short termisim is the experession

    Caring not for the outcome just for the immediate result.

    Well if it wasnt so tragic someon us would be laughing at the whole shambles. I mean here you have all these so called experts running around like headless chooks because they couldnt get to grips with good corproate governnace 101

    the very stuff they gets taught in good business schools to 1st year students

    Give me a break

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  63. redeye (633 comments) says:

    Berend, probably the same Barney Frank (how many are there?). But sadly you’ve missed the point. Which, to help you along, was aimed at the sharp witted posters that blamed Pelosi’s speech for it not passing.

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  64. jafapete (757 comments) says:

    redeye, That “sharp-witted” bit is a jest, surely?

    On those thin-skinned Republicans who let their feelings get in the way of their duty to their country — Country First, anyone? — you should see McCain’s chief economics adviser trying to spin all this, and getting chewed up and spat out. Haven’t enjoyed an interview so much since both Couric/Palin interviews. It’s at http://www.huffingtonpost.com/2008/09/29/mccain-camp-blames-obama_n_130359.html

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  65. Paul Williams (880 comments) says:

    That’s because the Australian-owned banks here have been borrowing cheap overseas and taking advantage of our overly high interest rates to cream big profits.

    Jafa, your point is entirely valid and I agree with your logic; we have a stake in the bailout, particularly because we’re a small and exposed economy dependent on commodity exports to offset out reliance on domestic demand… however, the Australian-owned banks aren’t overly exposed to the US situation. At least not in terms of their Australian operations. I think ANZ took the largest hit with the demise of Lehman but it was still less that $150m and is not entirely lost. Are their NZ operations more exposed, I’ve not had a look?

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  66. Rex Widerstrom (5,013 comments) says:

    Thanks to those who’ve been debating this with far greater understanding of the situation than I can muster. But – to cite but one aspect of the problem – my understanding is that if the bailout doesn’t go through, credit will simply dry up (or become prohbitively expensive) no matter how secure the borrower so small business will find it impossible to fund normal cashflow fluctuations through borrowing. Which in turn will lead to otherwise perfectly solvent businesses running into trouble and possibly shutting their doors.

    I’m all for letting the greedy Masters of the Universe responsible for this watch their universe shrink (ideally to the size of a 6 x 8 cell in some cases) but if it starts putting productive businesses out of business when – all other things being equal – there’s nothing fundamnetally wrong with them, that surely cannot be a good thing.

    Perhaps there’s something I’m missing here, but I’d have thought any money injected at this point ought to be targeted at ensuring credit remained available for solvent businesses that needed it, rather than handing it out to those who’ve proven they’re incompetent?

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  67. gd (1,780 comments) says:

    Rex the problem is much and all as the bailout is necessary it does nothing to prevent the same thing happening again . And next time the numbers will be a multiple\
    \

    What is needed is a change in individual and collective behaviour and thats where good governance comes in

    think carrot and stick Carrot is encouraging good behaviour Stick is enforcing it

    in this case its about corproate governance As I keep repeating. This was not caused by the little green Martians as some would have it.

    it was caused by human beings acting in a bad way./ Governments need to establish a regulatory frame work to prevent this happening again

    If they cant or wont do that then they are unfit to govern.

    As I said before it aint rocket science It doesnt need to be complicated

    Just establish the basic principles and the penalities for bad behaviour.

    The problem is pollies and civil servants cant get the policy settings right they over complicate which plays into the hands of the bad guys who then find ways around the regs/laws

    It comes down to prudence and fiducary duty

    The people responsible for this cockup did not act in a prudent manner nor did they excercise their fiduary duty.

    End of stort Dont pass GO Dont collect $200

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  68. jafapete (757 comments) says:

    Rex,

    You come so close. Yes, it is all about stopping the financial system imploding and the credit from drying up altogether. Well, we can expect more bank failures now, and not just in the US. But if we’re lucky the collapse of credit won’t precipitate a major recession. And we’ll get a revised version of the failed plan before too long, as Robert Reich suggests. If we’re unlucky…

    It’s not about the fat cats. Or it shouldn’t be. But for many ordinary people, the idea that the fat cats would somehow benefit was too much. (Initially at least. Rasmussen reported today that “Opposition to bailout plan falls dramatically”.) And there being an election in a couple of months, some congresspersons put their ass before their country. Hell, who do you think found the idea of giving money to the rich most objectionable? The liberals or the people who skew tax-cuts to the super-rich?

    Okay, there were the Republican Study Committee conservatives who came up with the idea of insuring the toxic debts (mortgage-backed securities not already insured) and somehow magicking away the cost. Note that the proposal was a one-pager.

    At the end of the day, any banking system collapse requires recapitalization to avoid credit drying up and economic disaster, as studies of similar disasters and responses shows.

    I personally don’t think that buying toxic assets is the best solution, but then, what do you expect from Bush? There are other models, and the best outcome would be for the US legislators to consider some of the others. But quick. And without the spoiler interfering again.

    gd, Are you suggesting that they ignore the imminent threat of collapse and concentrate on the long-term solution?

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  69. francis (617 comments) says:

    Sorry PaulL, my comment was directed at those who oppose the bailout because they think it’s a vehicle to rescue bankers and they want them punished. It’s a vehicle, instead, to avert wider economic collapse. I recognise that many here, on both sides of the spectrum, have doubts that the collapse of the banks will lead to that outcome. I disagree with that group. And just one more point. While the debt instuments may be “toxic” to one degree or another, what they service certainly isn’t.

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  70. side show bob (3,410 comments) says:

    For what it’s worth, this problem seems to have more to do with egos rather then economics.

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  71. berend (1,690 comments) says:

    gd: his was all about Risk Management

    Not really. Firms believed Fannie Mae and Freddie Mac were guaranteed by the government. Banks were sued for not giving mortgages to people who could not afford it. Look it up. This was all about regulation. Big problems can only be caused by big government.

    If you don’t believe it, just look at the politicians who got the most money from Fannie Mae and Freddie Mac. You might recognise some familiar names there.

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  72. gd (1,780 comments) says:

    berend exactly as I said Bad governance What sort of dumb arse government regulates so people get loans that they cant afford to pay back.

    it would be cheaper for the Gumint to just buy the bloody house and let them live there rent free

    What sort of governemnt allow banks to be sued if they dont give loans to people who cant afford to pay them back

    This is bad governance toxic governance Governance that is doomed to failure.

    Good Risk management is all about knowing the risk and making good decisions

    bad risk management is either not knowing or not caring as to the risk or going ahead anyway.

    Do you know its common for Boards to simply factor in cash penalties when deciding to do a deal and then doing it regardless of the law ethics and morals.

    So you have to make the penalty so big as to make them not prepared to take the risk.

    Thats the only way to stop bad human behaviour

    Again it aint rocket science

    Its very simple.

    But of course these dumb arse pollies and civil servants just show how useless they really are and or how immoral and unethical they are

    the rely on people like you berend and others to just take it shrug your shoulders and say Oh well I cant do anything about it

    they are predators they are the enemy they are to be reviled for what they are

    they deserve to live in interesting times

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  73. OECD rank 22 kiwi (2,760 comments) says:

    Maybe Pelosi should shut her mouth the next time they have a vote.

    Can you imagine what a disaster zone the US will become if Obama becomes president? If the White House, Congress and Senate are all controlled by the Jackass party(Democrats) then the US will have taken a big step in the direction of destroying their own country. This is of course what Lefties want as they are envious, jealous and stridently Anti-American.

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  74. DJP6-25 (1,390 comments) says:

    berend: Thanks for the vid, it explains everything.

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  75. tom hunter (5,134 comments) says:

    But sadly you’ve missed the point. Which, to help you along, was aimed at the sharp witted posters that blamed Pelosi’s speech for it not passing.

    Apparently they did not miss the point as much as you. Which is to say that when Pelosi climbed on to her hind legs and started her partisan braying it twigged the Republicans in two ways. First, that this was going to be played as a partisan stunt where the Dems would get a publicly toxic bill passed without their weakest members being exposed and the Republicans could be hung with the result more than the ruling party. Second, this perhaps was not the crisis it has been played out as.

    And now more information has come to light. The Democrats’ House whip, Jim Clyburn said that he hadn’t even begun “whipping” Democratic representatives, and wouldn’t do so unless and until he got orders from Nancy Pelosi. Then, Democratic Congressman Peter DeFazio told NPR that he never was “whipped” on the bill.

    Curiouser and curiouser. Oh well, perhaps it’s of a piece with the following video in which Republicans try to impose more regulations on Fannie Mae – and get stymied by the Dems. Apparently they were able to vote pretty much the straight ticket back in 2005.

    Key phrases to remember: Republicans wanted more regulations. Democrats were sufficiently whipped to enable filibusters.

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  76. Scott (1,807 comments) says:

    Is history repeating itself? Would the bail out actually work?

    The chairman of new Yorks great national City Bank said in the first week of October: “market generally are now in a healthy condition. The last six weeks have done an immense amount of good by shaking down prices.” on Thursday, October 24, as soon as the stock exchange to opened, brokers saw at once that prices were being shaken down much more than was good for them.

    Hundreds of thousands of shares were being thrown on the market, causing a panic, and by noon that day Michell met the rest of New Yorks bankers who agreed to spend 50 million pounds right then, to help keep up prices. The desperate remedy worked; when the stock exchange closed, prices were fairly steady.

    The following Tuesday though, not even the bankers could stop Wall Street panic. 16 million shares were put on the market, millions of pounds of paper profits disappeared, and in the next few days newspapers began publishing regular reports of suicides. The great American slump brought on by overproduction, artificial commodity prices and too much credit had begun.
    — Daily Express October 1929

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