
Senate passes financial bailout bill full of sweeteners - jasonlbaptiste
http://money.cnn.com/2008/10/01/news/economy/senate_rescuebill2/index.htm?cnn=yes
======
drusenko
As much as people seem to think otherwise, we're not giving a free $700B to
the financial industry. We're loaning money that needs to be re-payed. Why do
we need to loan money? Because credit has shored up and many a company's
credit rating has dropped, which makes it very difficult to get credit.

This is all caused by a set of bad bets placed on mortgages. The large
majority of these businesses are very sound, and there is still a huge amount
of underlying value there. You can be quick to point fingers at the wall st
trader types for placing bad bets, but everybody was complicit in this, even
(surprise surprise) the government, by lowering mortgage requirements.

Certain companies just can't go out of business. AIG, for example. AIG is
connected to almost every company in the US -- they provide all forms of
insurance. If AIG went out of business, all of that insurance would be
worthless, and almost every company in the US's credit rating would plummet,
thereby rendering their corporate paper (bonds) worthless. There are a lot of
reasons for depending on operational debt through bonds, even in the most
financially sound companies.

We could let other companies fail, but as they do, the market conditions
significantly worsen. As that happens, \- Retirement accounts will be
worthless, making retirement difficult or impossible for many Americans \- You
won't be able to get a mortgage to buy a new house \- Student loans won't be
available, making it much more difficult to attend college \- A very
significant amount of jobs will be lost as big corporations go out of
business, and small businesses are unable to meet their operational expenses
(payroll)

Ultimately, that means a very, very rough ride for the average American (on
main street, although I hate that term). If you're not going to be affected by
this (you're working at a funded startup, or you're a tenured professor, for
example), it's very easy to take the "let the market sort itself out
approach". But the average American will be hit hard, if no action is taken.

In that sense, nobody wants to give money to the people who caused the
problem. And we're not -- there are provisions (however imperfect) in the
bills that restrict executive compensation for participating companies.
Ultimately, it's also helpful to remember that this is a loan, and that it's
not a net $700B expense. In fact, when the economy stabilizes and credit
ratings return to normal, the equity position that the government has received
in AIG (80%) and participating companies should be very valuable -- these are
sound business, with one black spot (mortgage backed securities).

EDIT: A couple other points of clarification:

\- As a matter of fact, the rich pay the majority of taxes (top 1% earners
constitute 40% of total income tax, while top 10% earners constitute 70% of
total income tax) -- if anything, it's the rich paying for the bailout.

\- Check out <http://news.ycombinator.com/item?id=318690> for explanation on
the title of the house bill

~~~
anamax
> Certain companies just can't go out of business. AIG, for example. AIG is
> connected to almost every company in the US -- they provide all forms of
> insurance. If AIG went out of business, all of that insurance would be
> worthless,

And they'd stop paying AIG for this now worthless insurance. They'd take this
money and buy insurance from a different insurer.

These other insurers even will end up hiring many of the AIG folks.

> and almost every company in the US's credit rating would plummet

Wrong. Their credit rating doesn't depend on who they get their insurance
from.

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markbao
Differences between Senate bill and House bill, the cliffsnotes:

    
    
      - FDIC covered deposit insurance from $100,000 to $250,000 temporarily
      
      - To cover the loss resulting, FDIC will borrow from treasury
      
      - Renewable energy tax breaks to individuals among other breaks, like R&D credit for business,
        deducting state and local taxes on federal tax returns
      
      - Alternative Minimum Tax suspension increased for 1 more year, AMT prevented
        the wealthy from not paying taxes, the one where form 6251 should
        be filled out if income is >$75,000

~~~
ojbyrne
You left out the wooden arrows for children! ;-)

~~~
mrtron
In all seriousness how does items like that enter a bill such as this one?

I don't completely understand the process - but it just seems shocking that
somehow those line items were on there.

~~~
ojbyrne
I made fun, but someone I work with wants to see the entire excise tax on
wooden arrows repealed (he participates in the SCA). From an article on
bloomberg:

"The arrows provision seeks to reverse an anomaly in a 2004 law that created
the 39 cent excise tax on the weapons. Intended the levy more expensive
arrows, the tax also applies to arrows used by Boy Scouts and other youth
organizations that cost about 30 cents a piece. Ten manufacturers in nine U.S.
states stand to benefit from the change, according to a description of the
legislation from Wyden's office. "

[http://www.bloomberg.com/apps/news?pid=20601103&sid=aKd0...](http://www.bloomberg.com/apps/news?pid=20601103&sid=aKd0vyGN8L2k&refer=us)

~~~
DanielBMarkham
I'm sure the Boy Scouts and their wooden arrows are an important issue, but
what in the seven-and-a-half-names-for-God does this have to do with bailing
out the mortgage industry?

They should just have a reverse Christmas: build a giant Christmas tree and
have each of the lawmakers come up and write down what they would like to see
under it. Wooden arrows, AMT, raising the FDIC limit (which is actually
relevant)

Issues like fixing AMT are huge and have broad support. The only differences
are whether to raise taxes or not. Guess what? No need to make that choice
now, we'll just stick in a few billion to cover the difference for a while and
still NOT fix the AMT, thereby managing to look like we've solved something
while borrowing still more money than we can easily pay back.

~~~
llimllib
> they should just have a reverse Christmas: build a giant Christmas tree and
> have each of the lawmakers come up and write down what they would like to
> see under it.

Welcome to the omnibus spending bill!
<http://en.wikipedia.org/wiki/Omnibus_spending_bill>

------
jhancock
I sent in a message to my Senator asking for a provision to fund my startup
<http://shellshadow.com>.

I have scanned the final bill, but don't see ShellShadow mentioned anywhere!!!
Don't they understand that people will lose their jobs if my startup becomes
illiquid?

Edit: I rescanned the bill looking for language like "funds in support of
collaborative server support technologies", still nothing!!! Does anyone have
the phone number for the lobbyist that works for the Boy Scouts? I could use
some advice.

~~~
trevelyan
Great piece of software, Jon.

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BrandonM
Seriously, I realize I'm being another "not Hacker News" commenter, but it's
getting to the point where I really don't want to come here anymore. Around
the new year, I was excited about Ron Paul and frequented the politics
subreddit in order to get every snippet of news I could. It wasn't long,
though, before all of the "world is going to hell" topics just got to be
depressing, no matter how true some of them might have been.

It's now getting to the point where coming here is depressing as well, what
with all the topics about this financial crisis. I realize that it's an
important event that affects all of us, but there are very few things we have
control of in this matter. Like it or not, Congress is going to do whatever
they want regardless of how much we debate the issue.

So can we please move on and focus on the things we have some control over,
like our startups and other programming projects? Is anyone doing any fun and
interesting these days? :-)

~~~
silentbicycle
I don't mean this as a personal criticism (and I agree with the sentiment),
but I think the best way to help with this is probably to submit interesting
things and crowd out the political news.

(Of course, nobody else seemed very interested in the links I submitted
yesterday about the implementation of the Lua VM or JIT compiler, but it was
worth a try.)

~~~
BrandonM
Don't worry, I sympathize with you. About a week ago, I submitted what I
thought were a few interesting topics
(<http://news.ycombinator.com/item?id=314673> and
<http://news.ycombinator.com/item?id=311571>), but they didn't get much
interest.

------
mhb
Interesting phrasing by CNN: "The measure was passed by a vote of 74 to 25
_after more than three hours of floor debate_ in the Senate."

I wonder if they considered _"after less than four hours of floor debate..."_

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theschwa
You can add as many sweeteners as you want to a bunch of crap; it's still
going to taste like a bunch of crap.

~~~
auston
You sir, have obviously never had a chocolate glazed donut.

They taste great!

------
hugh
Well, I was gloriously uncertain about whether the last bill was a good idea
or not, and I'm happy to say that I have no clue whether this one is better or
worse.

Sometimes it's really nice to not have strong opinions on difficult subjects.

~~~
jumper
"Gloriously uncertain" describes how I feel about economics in general, never
mind the crazy finance economics around this whole mess, but what I do know is
that the specific provisions against oversight in the first bill screamed rank
corruption to me. I usually take rank corruption to be a clue pointing in the
"bad" direction... does any body know if the new one has provisions like that
in it?

Course, I do suspect I would be happier if I were neutral about it all like
you though! Terrible shame I get worked up over things... me though? I'd like
the chance to vote for this guy:
<http://www.sinfest.net/archive_page.php?comicID=2948>

~~~
gills
The 'provisions' are too weak and weasel-wordy for their execution to ever be
confirmed or denied.

------
gills
Hold on to your hats, folks...

Don't blink, you'll miss the $700B getting sucked into the deflation tornado.

~~~
kevinelliott
But, but, but, that $700bil is at the end of a blackhole. You can't see it
getting sucked in.

------
LPTS
How come there is no money for health care or getting renewable energy done,
but there is a ton of money for this all the sudden?

If I was a conspiracy theorist, I would say it's almost like they are setting
the stage so that once Obama won, he can't have any money to do universal
health care and renewable power. They should pay for this by repelling all of
George Bushes tax cuts to the wealthiest 10,000 people in america.

Privatize the wealth but make the public pay the bill when the bets don't pay
off? Fuck this shit. The rich that benefited from the deregulation that led to
the mess should pay. There should be riots in the streets.

And idiot americans are going to be glued to their TV's, with their brains
working the same way they work watching the Brady bunch, while Joe Biden tries
not to look smarter then Sarah Palin and thus appear an asshole to the Voting
on American Idol part of Americans Brains, while John McCains people play the
game of trying to get enough idiots to vote against their economic interests
on the basis of identity politics.

~~~
nazgulnarsil
_sigh_ how i wish what I'm about to say was common knowledge. the rich didn't
benefit from deregulation, they benefit from _regulation_ as the current bail
out plan is just the latest in a long series of capitulations to the
established pecking order at the expense of a truly free market (free
competition). The established players don't like capitalism, because
capitalism allows for large shifts in wealth.

~~~
ajkirwin
Wrong. No regulation OR good regulation is bad for them. They benefit from
PARTIAL regulation.

And regulation, much like circumcision, is as Robin Williams said. "You go all
the way, or just forget it!"

~~~
pchristensen
Regulation isn't inherently good or evil. There are good and bad regulations.
Hopefully we could get less BAD regulation and more GOOD regulation. Not
holding my breath.

Also, what is good for one group may be bad for another, and vice versa. Good
luck figuring that one out.

