Current+Eli

[|Tentative Agreement on Bailout Legislation 9/28/08]

Bullets 1. "includes pay limits for some executives whose firms seek help" 2. "requires the government to use its new role as owner of distressed mortgage-backed securities to make more aggressive efforts to prevent home foreclosures" 3. allows the government to own part of some of the companies that receive bailout money, so that taxpayers can benefit if those companies become profitable again 4. creates a Congressional panel to monitor and regulate this bailout process 5. allows the Secretary of the Treasury to issue insurance for some kinds of financial investments
 * The Democratic and Republican members of Congress, and the White House, have agreed on terms for a bill to help solve the financial crisis
 * The bill would allow the U. S. Treasury to spend up to $700 billion to buy debt from financial companies
 * Writing the bill involved a lot of negotiation between legislators, the White House, and the presidential candidates
 * To help out ordinary Americans, what House Speaker Pelosi calls "Main Street," the bill does more than free up money to help out financial firms. It also:
 * It is not yet clear how this bill will be paid for; negotiators left that to be decided by the next president
 * Many voters have complained to legislators that they do not like the idea of taxpayers bailing out Wall Street firms and investors and Republicans have not completely committed to voting for the bill

Questions How will it affect the elections that so many voters do not like this bailout idea? Will Republicans blame Democrats for the bailout bill even though the administration asked for it and both parties negotiated its terms? How would insurance for investments work? Why did the House Republicans want that idea included in the bill? If 3-4,000,000 Americans lost their jobs, how high would the unemployment rate be? What percentage of the workforce is 3-4,000,000?

[|$700 Bill./ from 1:15 pm 9/24/08]

Bullets
 * President Bush will give a talk to the public to build support for the Wall Street bailout plan
 * Treasury Secretary Henry M. Paulson Jr. testified for two days to the House Financial Services Committee. He admitted that Americans are right to feel angry at how much money managers on Wall Street are being paid even while taxpayers are being asked to bail them out.
 * McCain argued that presidential debates should be delayed; Obama disagreed.
 * Democrats want Republicans to take responsibility for this situation because they have been in power for the last 8 years, and because they believe that business does not have to be regulated or accountable to the public.
 * Ben Bernanke, the Chairman of the Federal Reserve, also testified before Congress; he said Americans cannot expect to sell as much abroad during the second half of the year so the economy will be weaker than it was during the first half. The core of the problem is the "sagging housing market"

[|Fed's $85 Billion Loan to AIG/ from 9/16/08]

[|NPR: "Global Pool of Money Got Too Hungry"] Subprime mortgage crisis -- banks loaned money to people without making people prove that they could pay back Why did bankers stop using the ordinary rules of lending? What did bankers say? "Global pool of money" -- pension funds, insurance companies, governments investing 70 trillion dollars more than everyone spends on stuff they buy in a year. They used to invest it in bonds but between 2000-2006 the amount of money invested doubled because poor countries started to make things that rich countries wanted. Wall Street created a new bond based on the US housing market. They bought up mortgages and pooled them and then sold shares to create a "mortgage-backed bond" that took advantage of the growth in US housing prices. But everyone who could afford a mortgage already had one, so lenders in around 2003 started to loan to people who could not really repay their loans. Banks didn't care because (1) houses were rising in value (2) they were planning to sell the mortgages to Wall Street anyway and wouldn't have to administer the risky loans. Now the bonds are losing money because so many people are foreclosing on their mortgage loans. But while people were making money they kept doing these risky business deals.