FINANCIAL CRISIS: Financial Meltdown
Obama calls on Americans to support rescue plan
Associated Press, September 30, 2008
Barack Obama [has] called for Americans to get behind attempts to salvage a $700 billion rescue plan for the financial sector, saying that if Wall Street fails ordinary people will also be hurt.
“This is no longer just a Wall Street crisis. It’s an American crisis, and it’s the American economy that needs this rescue plan,” Obama [said, adding that] Congress should put aside politics and act on the legislation quickly.
“To the Democrats and Republicans who opposed this plan yesterday, I say: Step up to the plate and do what’s right for this country.
“And to all Americans, I say this: If I am president of the United States, this rescue plan will not be the end of what we do to strengthen this economy. It will only be the beginning.”
Obama called for bipartisanship in a time of financial crisis.
“While there is plenty of blame to go around and many in Washington and on Wall Street who deserve it, all of us now have a responsibility to solve this crisis because it affects the financial well-being of every single American.
“There will be time to punish those who set this fire, but now is the moment for us to come together and put the fire out.”
Obama talked with [President] Bush, Senate Majority Leader Harry Reid and other leaders Tuesday about resurrecting the recovery plan.
He also sought to reassure the public, saying the plan had been “misunderstood and poorly communicated.”
“This is not a plan to just hand over $700 billion of your money to a few banks on Wall Street,” he said.
“If we do not act, it will be harder for you to get:
• a mortgage for your home,
• the loan you need to go to college, or
• [the] loan you need to buy a car to get to work.
“Businesses won’t be able to get the loans they need to:
• open new factories,
• hire more workers, or
• make payroll for the workers they have.
“Thousands of businesses could close around the country.
“Millions of jobs could be lost.”
Obama and [John] McCain announced separately their backing for a plan that some House Republicans had pushed earlier: raising the federal deposit insurance limit from $100,000 to $250,000 [to]:
• reassure nervous Americans,
• shore up the economy,
• help small businesses.
Obama urges bailout bill’s passage
Reuters, September 30, 2008
[Today] Barack Obama:
• urged lawmakers to return to the negotiating table to work on a financial rescue deal and
• offered a new proposal he said could help attract support.
[He] suggested:
• raising the limit on bank deposits guaranteed by the federal government to $250,000 from its current level of $100,000 [to] “expand federal deposit insurance for families and small businesses who have invested their money in our banks.”
Obama said a failure by Congress to come together on a plan “would be catastrophic for our economy and our families.”
[He] said the deposit insurance proposal might [draw] more interest toward the bill.
Lawmakers who rejected [the bill said] the plan does little beyond cleaning up Wall Street’s mess.
“I will be talking to leaders and members of Congress later today to offer this idea and urge them to act without delay to pass a rescue plan,” Obama said.
Obama says Congress ultimately will pass bailout
Reuters, September 29, 2008
Barack Obama said he believed Congress would ultimately pass a proposed $700 billion Wall Street financial bailout, despite an initial rejection by the House of Representatives.
“I’m confident that we’re going to get there. It’s going to be a little rocky,” said Obama, who added that “things are never smooth in Congress.”
The Democratic White House hopeful said he had spoken by phone with
• U.S. Treasury Secretary Henry Paulson,
• House Speaker Nancy Pelosi
• and other lawmakers following the rejection of the measure by the House.
House defeats $700B financial markets bailout
Associated Press, September 29, 2008
The House has defeated the $700 billion emergency rescue package, 228-205.
Stocks plummeted on Wall Street even before the vote to reject the bill was announced on the House floor.
Dems, some in GOP question McCain’s intervention
Associated Press, September 25, 2008
John McCain’s self-portrait as a bold leader willing to set politics aside to save an endangered financial bailout plan took a pounding Thursday from top Democrats and even some fellow Republicans.
Top Democrats ridiculed McCain’s claim Wednesday that negotiations were going nowhere, necessitating his hasty return to Washington to intervene while suspending his campaign.
Rep. Barney Frank of Massachusetts, the chief House Democrat on the bill, said, “all of a sudden, now that we are on the verge of making a deal, John McCain airdrops himself to help us make the deal.”
President Bush’s biggest worry is House Republicans, many of whom seemed unimpressed Thursday with McCain’s heightened interest.
Several said it was essential that both McCain and his Democratic opponent, Barack Obama, back the bailout plan together, which they appeared to do in joining Bush and other congressional leaders at a White House meeting Thursday.
“If McCain and Obama would stand together and take this off the table” as a sharply partisan issue, then wary House Republicans might get on board, said Rep. Zach Wamp, R-Tenn.
Obama rejects McCain’s call to delay debate
Associated Press, September 24, 2008
John McCain has announced he’ll stop all advertising, fundraising and other campaign events to return to Washington and work for a bipartisan solution to the financial crisis.
Obama said he would proceed with his debate preparations while consulting with bailout negotiators and Treasury Secretary Henry Paulson.
“It’s my belief that this is exactly the time when the American people need to hear from the person who, in approximately 40 days, will be responsible for dealing with this mess,” Obama said. “It’s going to be part of the president’s job to deal with more than one thing at once.”
Even as McCain said he was putting the good of the country ahead of politics, his surprise announcement was clearly political.
It was an attempt to try to outmaneuver Obama on an issue in which he’s trailing, the economy, as the Democrat gains in polls.
Obama repeatedly stressed at [a] news conference that he called McCain first to propose that they issue a joint statement in support of a package to help fix the economy as soon as possible.
He said McCain called back several hours later and agreed to the idea of a statement but also said he wanted to postpone the debate and hold joint meetings in Washington.
Obama said he suggested they first issue a joint statement showing bipartisanship.
“When I got back to the hotel, he had gone on television to announce what he was going to do,” Obama said.
McCain seeks to delay debate to focus on economy
Associated Press, September 24, 2008
John McCain is directing his staff to work with Obama’s campaign and the presidential debate commission to delay Friday’s debate because of the economic crisis.
McCain said he wants President Bush to convene a leadership meeting in Washington that would include him and Obama.
The Obama campaign said Obama called McCain around 8:30 a.m. Wednesday to propose that they issue a joint statement in support of a package to help fix the economy as soon as possible.
McCain called back six hours later and agreed to the idea of the statement, the Obama campaign said.
McCain’s statement was issued to the media a few minutes later:
“We must meet as Americans, not as Democrats or Republicans, and we must meet until this crisis is resolved.”
White House yields on chiefs’ pay, Bush to speak
Associated Press, September 24, 2008
The White House bowed on a crucial change in the $700 billion financial bailout plan Wednesday.
Treasury Secretary Henry Paulson had agreed to demands to limit the pay packages of executives whose companies would benefit from the proposed bailout.
The heart of the plan involves the government buying up sour assets of tottering financial firms
• to keep them from going under and
• to stave off a potentially severe recession [with] lost jobs and further home foreclosures.
Lawmakers have strenuously objected to the plan over the past two days, Republicans complaining about federal intervention in private business and Democrats pressing to tack on help for beleaguered homeowners.
Democrats also have called for:
• greater protection for taxpayers, possibly by requiring that the government receive partial ownership—and a share of future profits—of companies that accept help through the proposed bailout,
• allowing bankruptcy judges to rewrite mortgages to ease the burden on consumers who are facing foreclosure,
• provisions that give Congress greater authority over the bailout, a demand that has been accepted in principle.
Bailout debate rages
Reuters, September 24, 2008
The White House’s proposed $700 billion financial bailout met skepticism and anger from lawmakers on Wednesday, stoking fresh anxiety on Wall Street despite a $5 billion investment by billionaire Warren Buffett in embattled banking titan Goldman Sachs Group Inc, which is transforming itself into a traditional bank.
Lawmakers [will] not approve the proposal without changes, including:
• more protections for taxpayers and
• restrictions on the pay of executive at companies that unload their bad assets.
New data showed existing home prices suffered a record drop in August, adding to concerns over home foreclosures and loan defaults.
Other related developments include:
• The U.S. dollar fell and global stocks see-sawed as unease about the bailout kept investors on edge and boosted safe havens like short-term U.S. Treasuries.
• Japan’s third-largest bank, Sumitomo Mitsui Financial Group Inc, plans to invest in Goldman Sachs.
• Japanese financial firms [also recently] bought Lehman assets and a stake in Morgan Stanley.
• Concern that banks remain reluctant to lend to one another triggered a surge in demand for U.S. Treasury bills.
• Business confidence weakened in Germany, France and Italy in September, stoking fears that the euro zone is sinking into recession as the effects of U.S. financial market turmoil spread.
• The FBI is investigating potential mortgage fraud involving senior executives at Fannie Mae, Freddie Mac, Lehman and AIG.
Congress objects to lack of help aimed at homeowners
New York Times, September 23, 2008
Congress and the administration negotiated intensely to resolve major sticking points in the proposed vast economic bailout plan.
House Republicans seemed the least receptive of all.
Federal Reserve Chairman Ben Bernanke warned the senators that if they failed to pass the $700 billion plan, they risked:
• causing a recession,
• increasing joblessness and
• pushing more homes into foreclosure.
Lawmakers objected strenuously to:
• the broad authority requested by Treasury Secretary Henry Paulson,
• the lack of additional steps to help homeowners avoid foreclosure and
• the absence of any demands for ownership stakes in the banks that would be helped.
Democrats grew concerned that a lack of Republican support, particularly in the House, could leave them in an undesired alliance with the Bush administration.
Democrats were waiting for Republicans to signal that they had enough votes to support the bailout.
Before that happens, lawmakers were waiting to see a final version of the plan.
Democrats were pushing hardest for provisions that would:
• require the Treasury to obtain warrants that would convert into equity in the companies helped and
• limit salaries of executives whose firms participate in the bailout.
Both presidential candidates have called for such limits.
The White House is eager for a deal on the plan, recognizing that markets around the world are fluctuating daily.
“I get some sense that we’re flying by the seat of our pants,” said Senator Robert Menendez, Democrat of New Jersey.
Senator Charles E. Schumer, Democrat of New York, proposed:
• limiting financing to $150 billion, and
• budgeting more in three months, after its progress could be assessed.
Several senators said they thought the best way to protect taxpayers was by requiring the Treasury Department to take warrants, which are instruments that are convertible into shares, as it did in its rescue of Fannie Mae, Freddie Mac and the American International Group.
But Paulson said that could limit participation in the program, especially if companies decided to hold onto their troubled assets rather than cede some control to the Treasury Department.
If that happened, Paulson said, the program would not do enough to get the market moving again.
But he and Bernanke did not clear up confusion about how the bailout plan would work in practice.
House Democrats were also reviving a push to grant bankruptcy judges the authority to modify the terms of mortgages on primary residences to lower payments for strapped borrowers.
Christopher Cox, chairman of the Securities and Exchange Commission, said there were two major holes in the current rules: oversight of investment banks and of the market for credit default swaps.
Senator Jim Bunning, a Kentucky Republican, said the plan would do nothing to stem the slide in housing prices or help people pay their mortgages.
He said it was using taxpayer dollars to “prop up and clean up the balance sheets of Wall Street.”
Obama: Wall Street bailout may delay spending programs
Reuters, September 23, 2008
Barack Obama said on Tuesday a $700 billion Wall Street rescue plan would likely delay some campaign spending promises.
Obama said if elected he might have to phase in some of his plans such as an overhaul of the U.S. health care system.
His campaign has estimated the cost of his health plan at between $50 billion and $65 billion a year.
Obama [said] though the rescue plan is pegged at costing $700 billion, “We don’t anticipate that all that money gets spent right away and we don't anticipate that all that money is lost.”
It is unclear what impact the plan would have on the U.S. budget, he said.
“Does that mean that I can do everything that I’ve called for in this campaign right away, probably not. I think that we are going to have to phase it in. A lot of it is going to depend on what our tax revenues look like,” Obama said.
Obama said he still thought a middle-class tax cut was essential:
“I think the middle-class tax cut that I’ve talked about—95 percent of Americans getting a tax cut—is something that still makes sense in this kind of environment,” he said.
The Wall Street bailout proposed by the Bush administration would cost almost as much as Washington has spent fighting the wars in Iraq and Afghanistan since late 2001.
The estimated cost of those wars so far is around $800 billion, with about two-thirds of that for combat in Iraq.
Together, the wars and the bailout could add about $1.5 trillion to a national debt quickly approaching $10 trillion.
The sweeping proposal would have the Treasury buy up bad mortgage-related debts from financial institutions, including U.S. subsidiaries of foreign banks.
Neither Obama nor McCain has said he would oppose the plan being negotiated with Congress, although both have been critical of it.
The turmoil poses a political challenge for both candidates:
• Neither wants to be seen as against a deal that could avert a much bigger crisis,
• nor do they want to be too closely tied to a plan that has been criticized as a lifeline for Wall Street when homeowners and ordinary Americans are suffering.
“We want to make sure that taxpayers are benefiting,” Obama said.
“It can’t be simply a bailout for investors, CEOs, shareholders. They’ve got to take a hit for the bad decisions that they make.”
McCain has been outspokenly critical of the federal bailout in an effort to:
• distance himself from the unpopular administration of fellow Republican President Bush and
• strike a populist tone by decrying the Wall Street greed he says led to the financial meltdown.
McCain and Obama are
• calling for a bipartisan board to oversee the rescue and
• are insisting no Wall Street executives profit from taxpayer dollars.
Meanwhile, A CNN poll released on Monday showed more Americans thought Obama would do a better job handling an economic crisis than McCain.
Obama vows deep cuts in spending
Associated Press, Monday, September 22, 2008
Barack Obama moved to claim the mantle of fiscal responsibility in a roiling economy, vowing Monday to slash federal spending on contractors by 10 percent and saving $40 billion.
Obama said the $700 billion economic bailout plan proposed by the Bush administration and congressional leaders is forcing a renewed look at federal spending.
As president, he said he would create a White House team headed by a chief performance officer to monitor the efficiency of government spending.
“We will:
• fire government managers who aren’t getting results,
• cut funding for programs that are wasting your money and
• use technology and lessons from the private sector to improve efficiency across every level of government.”
Obama has urged Democrats and Republicans to join forces to approve a bailout of the troubled financial industry that saves the industry and protects taxpayers.
He linked the turmoil to federal spending that has soared out of control.
Under Bush, spending on contractors has more than doubled, from $203 billion in 2000 to $412 billion in 2006.
Obama warned that the election is hard fought because special interests are fighting hard to keep their place at the table.
“We are up against a very powerful entrenched status quo in Washington who will say anything and do anything and fight with everything they’ve got to keep things just the way they are.”
McCain says economy in crisis
Associated Press, September 22, 2008
John McCain on Monday called for greater oversight of the Bush administration’s proposed bailout of U.S. financial markets, saying the massive $700 billion plan being crafted by Treasury Secretary Henry Paulson needed broader supervision.
“Never before in the history of our nation has so much power and money been concentrated in the hands of one person. This arrangement makes me deeply uncomfortable,” he said.
“We will not solve a problem caused by poor oversight with a plan that has no oversight.”
McCain praised Paulson and said he had spoken to him several times over the weekend.
But he nonetheless called for a bipartisan oversight board to supervise the proposed bailout, to be led by Warren Buffett or another widely respected business leader.
McCain suggested former Massachusetts governor Mitt Romney and New York Mayor Michael Bloomberg be part of the effort as well.
Obama, McCain square off over financial bailout plans
Agence Française de Presse (AFP), September 21, 2008
Barack Obama and John McCain both said Sunday they would study the Bush administration’s proposed bail out of Wall Street and work across the political aisle, following the U.S. government’s request to Congress for clearance to buy 700 billion dollars in distressed mortgages.
But bitter differences were exposed as Obama accused McCain of wanting to “gamble” away Americans’ life savings and deregulate healthcare at a time of market crisis.
Obama [wants] to ensure the plan relieves hard-pressed workers, not just company bosses and shareholders.
Obama wants the eventual package to be “part of an overall plan not just for Wall Street but for Main Street, [a plan that] protects taxpayers to the fullest extent possible, and helps homeowners stay in their homes.”
McCain said: “This financial crisis requires leadership and action in order to:
• restore a sound foundation to financial markets,
• get our economy on its feet, and
• eliminate this burden on hard-working middle-class Americans.”
McCain also touted his plan for a Mortgage and Financial Institutions Trust that would:
• “proactively resolve troubled financial institutions,
• enforce discipline on management and shareholders, and
• minimize the burden on the taxpayer.”
In the latest Gallup daily tracking poll, Obama matched his record high of 50 percent against 44 percent for McCain.
Obama [has criticized] McCain’s career-long belief in market deregulation before the Republican switched tack this week.
Obama observed that in the current issue of Contingencies, the journal of the American Academy of Actuaries, McCain touted his plan to fix the U.S. health care crisis by injecting a dose of Wall Street competition into insurance.
Obama said McCain “wants to run health care like they’ve been running Wall Street.”
McCain: If I were prez, I’d fire SEC chairman Cox
Associated Press, September 18, 2008
John McCain said Thursday he would fire Securities and Exchange Chairman Christopher Cox if he were president, accusing the former GOP congressman of betraying the public’s trust.
McCain criticized the Bush-appointed leader of the federal agency that regulates U.S. stocks and securities:
“The chairman of the SEC serves at the appointment of the president and, in my view, has betrayed the public’s trust,” McCain said. “If I were president today, I would fire him.”
Cox’s term ends in June 2009.
Earlier this week, Obama criticized McCain for responding to the financial turmoil on Wall Street by suggesting the creation of a high-level commission to study its causes.
McCain has proposed creating a trust to work with the private sector and regulators to identify mortgage and financial institutions that are weak and to take measures to strengthen them.
“For troubled institutions, this will provide an orderly process through which to identify bad loans and eventually sell them.”
McCain has shifted from saying up front that the country’s economic fundamentals were strong.
Since he endured widespread ridicule for that view, he has said the economy is in “crisis” but that the fundamental productivity of the American worker endures.
On Tuesday, McCain said flatly that he opposed an AIG bailout.
On Wednesday, when it was announced, he said it had been “forced” on the country.
On Thursday, McCain accused Obama of failing to take a stand on the bailout although McCain too has not said whether he agreed or disagreed with the government's action.
“When AIG was bailed out, I didn’t like it, but I understood it needed to be done to protect hard-working Americans with insurance policies and annuities,” McCain said.
“Senator Obama didn’t take a position.”
In fact, Obama’s response was similar to McCain’s:
He [said] on Wednesday that the government “must not bail out the shareholders or the management of AIG that were making big profits when times were good. They shouldn’t be bailed out when times are bad.”
Obama: Economic fix should also help Main Street
Associated Press on Democratic Radio Address, September 20, 2008
Barack Obama said today “We need to:
• help people cope with rising gas and food prices,
• spark job creation by repairing our schools and our roads,
• help states avoid painful budget cuts and tax increases, and
• help homeowners stay in their homes, and also
• ensure that the solution we design doesn’t reward particular companies, or irresponsible borrowers or lenders, or CEOs, some of whom helped cause this mess.”
McCain says Fed should stop government bailouts
Associated Press, September 19, 2008
According to John McCain:
• The Federal Reserve needs to stop bailing out failed financial institutions.
• The Fed should get back to “its core business of responsibly managing our money supply and inflation.”
• The Fed should focus on shoring up the dollar and keeping inflation low.
As president, McCain will:
• create a Mortgage and Financial Institutions Trust to help homeowners avoid foreclosure.
• propose and sign into law changes to prevent financial firms from concealing “bad practices.”
Adviser: Obama won’t second-guess the Fed
National Public Radio, Morning Edition, September 18, 2008
Jason Furman, Senior Economic Adviser to Senator Obama: “We need:
• more requirements about how much capital some of these institutions hold and how much liquidity they have on their hands.
• to enforce the rules on the books.
• a different attitude in government when it comes to our leading financial institutions.
• to prop up our economy as a whole with a fiscal stimulus.
• far more ambitious measures to deal with the root of this problem, which is in the housing sector.”
Adviser: McCain wants reform on wall street
National Public Radio, Morning Edition, September 16, 2008
Douglas Holtz-Eakin, Chief Economic Adviser to Senator McCain:
• “The goal would be to have a comprehensive regulatory reform so every [same type of economic] transaction has the same regulation.
• We [need] an efficient regulatory system.
• Fannie and Freddie should be smaller, should be broken up and sold off to the private sector.
• We need to make sure the playing field is level and everyone gets a fair chance.
• CEO pay ought to be very clearly displayed and then put in front of the shareholders for a vote.
• Those with poor skills and low education do not succeed in this economy. [McCain] has proposed to reform dramatically our K-12 education system so that we stop failing so many young Americans.”
Obama accuses McCain of ignoring Wall St. excesses
Reuters, September 16, 2008
• Barack Obama sought on Tuesday to link his Republican rival to the turmoil sweeping Wall Street;
• John McCain fired back that Obama had close ties to the troubled mortgage industry.
• Obama accused McCain of being an opponent of government regulation who turned a blind eye to market recklessness;
• McCain answered back that Obama had taken big donations from mortgage giants Freddie Mac and Fannie Mae.
• Both Obama and McCain took a populist tone in campaign speeches, blaming the crisis on greedy people who took excessive risks.
• Obama, who has long called for tighter financial regulations, lambasted McCain as a recent convert to the idea;
• The McCain campaign highlighted McCain’s past calls to rein in Fannie Mae and Freddie Mac, the two mortgage giants whose financial troubles prompted their takeover by the federal government.
• McCain also put forth a proposal on Tuesday to set up a commission like the one that investigated the September 11 attacks to study what led to the current U.S. financial crisis and offer solutions;
• Obama ridiculed the idea: “Here’s the thing—this isn’t 9/11. We know how we got into this mess.”
McCain: Economy’s fundamentals strong
Associated Press, September 15, 2008
John McCain said Monday he still believes the fundamentals of the nation’s economy are strong even as the uncertain fate of two of Wall Street’s oldest institutions sent stocks tumbling.
He agreed there should be no taxpayer-financed bailout of Lehman Brothers even as the investment banking giant filed for bankruptcy.
Meanwhile, Merrill Lynch was selling itself to Bank of America for less than half of the iconic brokerage firm’s recent value.
Reacting to the turmoil on Wall Street, the Dow dropped some 300 points.
“Our economy, I believe, still, the fundamentals of our economy are strong, but these are very, very difficult times, so I promise you: We will never put America in this position again. We will clean up Wall Street.”
McCain underscored his message with a new campaign television commercial that seemed to contradict his rosier assessment of the country’s economic health.
Titled “Crisis,” it said: “Our economy is in crisis. Only proven reformers John McCain and Sarah Palin can fix it. Tougher rules on Wall Street to protect your life savings. No special interest giveaways. Lower taxes to create new jobs. Offshore drilling to reduce gas prices.”
The Obama campaign ridiculed the commercial:
“Today of all days, John McCain’s stubborn insistence that the ‘fundamentals of the economy are strong’ shows that he is disturbingly out of touch with what’s going in the lives of ordinary Americans.
“Even as his own ads try to convince him that the economy is in crisis, apparently his 26 years in Washington have left him incapable of understanding that the policies he supports have created an historic economic crisis.”
Over the weekend, advisers both to McCain and Obama said they did not favor a government bailout of Lehman Brothers like that previously provided to Fannie Mae and Freddie Mac.
The government also helped engineer the recent sale of Bear Stearns Cos. to J.P. Morgan & Co.
McCain reiterated that position, saying, “We believe the time has come and gone that taxpayers should be viewed as the solution to problems not of their making.”
|