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Wednesday, October 1, 2008

Senate set to vote on Bailout/Rescue

Items of Interest:

Intrade Bailout contract:
US Congress to approve a government bailout of banks on/before 31 Oct 2008

update — CNNMoney.com:
Senate passes bailout -- Plan to buy $700B in troubled assets wins OK. Backers hope add-ons will yield more yes-votes in House.

The Senate on Wednesday night passed a sweeping and controversial financial bailout similar in key ways to one rejected by the House just two days earlier.

The measure was passed by a vote of 74 to 25 after more than three hours of floor debate in the Senate. Presidential candidates Sens. Barack Obama, D-Illinois, and John McCain, R-Arizona, voted in favor...
Senate sets vote on financial bailout -- The Senate agreed to vote on Wednesday night on a $700 billion financial rescue package that will include a sharp increase in the amount of bank deposits insured by the FDIC, but also includes a package of tax breaks the House of Representatives has rejected.

Senate Democratic leader Harry Reid received unanimous consent from the Senate on Tuesday to schedule the vote on the revised package the White House says is needed to avoid a broad economic downturn...

NY Times:
Senate to Vote Today on the Bailout Plan -- Top lawmakers said the Senate proposal, worked out after a day of behind the scenes maneuvering, would include tax breaks for businesses and alternative energy and higher government insurance for bank deposits.

“It has been determined, in our judgment, this is the best thing to move forward,” said Senator Harry Reid, Democrat of Nevada and the majority leader, in announcing the surprise move...
U.S. auto sales plunge -- Sales sharply lower across industry as automakers, experts say credit squeeze, customer worries led to sharp drops in sales...
Thomas Friedman / NY Times:
Rescue the Rescue -- I was channel surfing on Monday, following the stock market’s nearly 800-point collapse, when a commentator on CNBC caught my attention. He was being asked to give advice to viewers as to what were the best positions to be in to ride out the market storm. Without missing a beat, he [Jeff Macke] answered: “Cash and fetal.”

I’m in both — because I know an unprecedented moment when I see one. I’ve been frightened for my country only a few times in my life: In 1962, when, even as a boy of 9, I followed the tension of the Cuban missile crisis; in 1963, with the assassination of J.F.K.; on Sept. 11, 2001; and on Monday, when the House Republicans brought down the bipartisan rescue package.

But this moment is the scariest of all for me because the previous three were all driven by real or potential attacks on the U.S. system by outsiders. This time, we are doing it to ourselves. This time, it’s our own failure to regulate our own financial system and to legislate the proper remedy that is doing us in....
Jennifer Rubin / Commentary: This Is What Comes From All That Anger
Sandy Levinson / Balkinization: Tom Friedman still can't connect the dots
Rasmussen Reports:
Voters Divided On Whether Wall Street Should Clean Up its Own Mess
Daniel Larison / Eunomia: Re-Branding Bailout Won't Help
Los Angeles Times:
Candidates call for bipartisan support of rescue plan
Paul Krugman:
Bailout narratives — There seem to be two prevailing narratives … -- There seem to be two prevailing narratives about the bailout plan(s). Both have elements of truth, but are fundamentally wrong... One narrative is that of the Wise Men and the Destructive Yahoos... The other narrative is that of the Evil Plotters and the Righteous Uprising.
David Leonhardt / New York Times:
Lesson From a Crisis: When Trust Vanishes, Worry — In 1929, Meyer Mishkin owned a shop in New York that sold silk shirts to workingmen. When the stock market crashed that October, he turned to his son, then a student at City College, and offered a version of this sentiment: It serves those rich scoundrels right.

A year later, as Wall Street’s problems were starting to spill into the broader economy, Mr. Mishkin’s store went out of business. He no longer had enough customers. His son had to go to work to support the family, and Mr. Mishkin never held a steady job again.

Frederic Mishkin — Meyer’s grandson and, until he stepped down a month ago, an ally of Ben Bernanke’s on the Federal Reserve Board — told me this story the other day, and its moral is obvious enough. Many people in Washington fear that the country is starting to spiral into a terrible downturn. And to their horror, they see the public, and many members of Congress, turning into modern-day Meyer Mishkins, more interested in punishing Wall Street than saving the economy...

comment: Frederic Miskin told this same story about his grandfather and the Great Depresson on CNBC on September 23rd. He then provided this logic for a bailout: "If Wall Street falls apart Main Street will get killed." But what form should the bailout/rescue take?
Dave Winer / Scripting News: The US Economy after Katrina
"Mark-to-Market" Accounting Rule Debate Continues

Barry Ritholtz / The Big Picture:
Understanding the Significance of Mark-to-Market Accounting --
"Suspending mark-to-market accounting, in essence, suspends reality." —Beth Brooke, global vice chair, at Ernst & Young
Misinformation, bad dope, and spin seem to be dominating the current discussion on Mark-to-Market accounting. Let's see if we cannot simplify the arcane complexity of the accounting rules regarding FASB 157.

Understand why this is even an issue: Many banks, brokers, and funds chose to invest in certain "financial products" that were difficult to value and were at times thinly traded. If you are looking for the underlying cause of why some arcane accounting rule is an issue, this is it...
Holman Jenkins / Wall Street Journal:
Mark-to-Market Mayhem -- The Paulson plan's defeat on Monday was not the end of the world, and may not even be lasting. But it does invite us to revisit the sideshow of mark-to-market accounting....

Accounting straddles the real and unreal, so it's hard to guess how much difference getting rid of mark-to-market might really make. The only way to find out is to try...

No accounting rule is worth $700 billion. Then again, the essence of the Paulson plan was to raise the value of bank assets to help banks escape the regulatory equity trap. Does that mean we can change an accounting rule and save Congress from having to appropriate $700 billion?

Let's find out.
Judith Burns / WSJ: Auditors Resist Effort To Change Mark-to-Market
Jesse Westbrook / Bloomberg: SEC, FASB Resist Calls to Suspend Fair-Value Rules
FASB.org: Summary of Statement No. 157 -- Fair Value Measurements

Brian Wesbury / WSJ: How to Start the Healing Now -- Fix accounting rules and private money will come... Mark-to-market accounting rules have turned a large problem into a humongous one...

Todd Harrison / Minyanville:
Random Thoughts: The Crying Game ...
If they suspend or shift "mark-to-model," I'm gonna perceive myself to be ten pounds thinner with a full head of hair. I mean, if we're gonna start making things up, why stop there?
Diana Olick / CNBC Realty Check:
Nobody Really Wants To Buy A House Right Now -- mortgage applications fell off a cliff again last week . . . Let’s face it, nobody really wants to buy a house right now . . .

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia