Bailout Money To Be 'Phased In'

UPDATE 3:28 pm

From The Post's Lori Montgomery on Capitol Hill:

House Financial Services Committee Chairman Barney Frank (D-Mass.) said the bailout deal reached by key lawmakers calls for dividing the $700 billion pricetag into three parts: Paulson would receive $250 billion immediately and another $100 billion upon White House certification of its necessity. The final $350 billion could be dispersed without additional Congressional approval, but Congress would be given 30 days to object.

The agreement also includes a strong oversight board for the bailout program, a ban on golden parachutes and other excessive compensation for executives at participating firms and protections for taxpayers, including a provision that would require participating companies to give taxpayers equity in their firms. It also includes relief for community banks that own now worthless stock in mortgage finance giants Fannie Mae and Freddie Mac, which were taken over by the government.

The main point of contention between Democrats and Republicans, Frank said, is a proposal to give bankruptcy judges new power to modify mortgages for homeowners, an idea that is widely viewed as a bargaining chip. Democratic presidential candidate Barack Obama (D-Ill.) has said the measure, which is fiercely opposed by the banking industry, should not be in the bill.

Meanwhile, House Democrats were still considering a plan to increase taxes to pay for a portion of the bailout, possibly by taxing stock transfers or levying a "surtax" on millionaires.

------

Rep. Barney Frank (D-Mass.), chairman of the House Financial Services committee, speaking on CNBC moments ago, said the Wall Street bailout plan will be "phased in" in installments, rather than giving Treasury $700 billion up front.

This appears to be an answer to the "blank check" problem Congress was wrestling with: Appearing to give Treasury Secretary Hank Paulson $700 billion upfront, which was proving politically unpopular.

Frank said Democrats and Republicans are "in agreement on all but one issue"-- whether bankruptcy laws should be applied to private residences, with the GOP opposing and Democrats favoring.

Wall Street acted almost immediately: The Dow, which has been rallying all day, pushing a 300-point gain, began fading. As of about 2:25 p.m., the Dow had shed nearly one-third of its gains on the day, and was trading just under 200 points up on the day.


-- Frank Ahrens

September 25, 2008; 2:31 PM ET  | Category:  business
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Comments

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How about a 700 billion dollar loan. let big corps and wall street see how it is to pay back money they don't have.

Posted by: Jill | September 25, 2008 2:42 PM

"phasers on STUN", aye captain.

Posted by: judge alan | September 25, 2008 2:43 PM

But but but, there was NO DEAL and McCain had to sweep in and save the day!!!

Posted by: Elrod | September 25, 2008 2:51 PM

I'm glad to see that the money will be given in installment, seeing that Paulson and Beneke says their not sure the bailout will even work. In my concern to a 700 billion check up front, I wrote to my Senator. So this is good.

Posted by: Janet | September 25, 2008 2:51 PM

oh jill its the treasury dept they just PRINT money.
pay it back? a loan? tsh tsh

they would cliam bankruptcy first
the law is written to enrich the rich not to enable the poor.
why then the world would be topsy tirvy with MERIT and CAPABILITY the mark of a mans worth
rather than political connections and such things AS BREEDING.
HAVE YOU NO SENSE the upper class rules over us with a benein attitude of suffering us being lower than them.
we are their pet people born to SERVE THEIR NEEDS.
why its our DUTY.
sort of like the untouchables of india.

at least that is how they rich actually think&feel about people,

Posted by: judge alan | September 25, 2008 2:52 PM

I've got to give it to the Republicans, they opened up with an outrageous gambit: no oversight of any kind, not even judicial review of fraud and theft, give us the money now or we will shoot ourselves, no executive pay cap or the executive will not take the money, never mind without the money the executive may soon not get any pay at all.

And they let the Dems fall over themselves with outrage and then jubilation for making the Republicans "give in" on all these "major" stumbling blocks.

All the while the 700 billions will still go out the door in exchange for junk, no not even junk but toxic bonds instead.

Obama talks about lipstick on a pig. Well this is lipstick on a pig with foot and mouth disease. And the Dems, Obama included, will swallow it whole.

Posted by: Anonymous | September 25, 2008 3:05 PM

It's good to see somebody in Congress riding herd on this process.

Hank Paulson is a Wall Street CEO by inclination and experience. Wall Street CEOs are of a type: they believe that the solution to any problem is greater personal control for them. Because they operate on the assumption that they (and they alone) have the necessary intelligence, wisdom, and drive to make things come out right, they see it as only fitting.

Anybody who has ever spent two hours in the company of a prominent Wall Street CEO knows that these individuals should never be entrusted with anything beyond the selfish accumulation of cash. If that's what the country needs at the present time, then go to it. But don't turn your back on him.

If good things emerge, he'll take credit. If they don't, he'll shift the blame.

Don't take it personally. It's their nature.

Posted by: samson151 | September 25, 2008 3:10 PM

heh. so the dow drops on the news that the bailout will be phased in and the $700 billion not turned over to the piggies all at once.

oink. oink.

grab your ankles, america.

Posted by: linda | September 25, 2008 3:27 PM

"Buy the rumor, sell the news."

Only chumps buy stock AFTER the deal is announced...

Posted by: Chris | September 25, 2008 3:33 PM

This is what people get when they keep voting in the SAME TWO PARTIES... vote 3rd Party or just dont vote.

go Ralph Nader, go Ron Paul, anyone but the same crooks!

Posted by: wowisdabomb | September 25, 2008 3:35 PM

if the economy continues to falter, it will be the dems fault...the people should let their displeasure be known on election day...

Posted by: Dwight | September 25, 2008 3:42 PM

So, what exactly did John "here to save the day" McCain do to make this happen?

Oh yeah, nothin'.

Posted by: corbett | September 25, 2008 3:49 PM

Now we need to shore up the REAL economy because the bad consumer debts are NOWHERE NEAR OVER!

If people keep losing jobs, and we don't replace the job with solar panel and windmill manufacturing factory operations HERE AT HOME mortgages will keep failing ALL OVER AMERICA and we'll be riiiiight back where we started!

Posted by: JBE | September 25, 2008 3:49 PM

How many Earmarks will be attached to each "phase".....

Posted by: Millie Bea | September 25, 2008 3:54 PM

Dwight - I don't think anyone is saying that the economy is going to suddenly get better from this. We're just going to go into a regular old depression instead of the Great Depression II

Posted by: Josh | September 25, 2008 3:55 PM

Isn't it typical that Bush lets a crisis develop over years than "rolls it out in September", just like the run up to the war.
If all those Senators and other politicians think this is such a good idea, I think it's fair to ask them to put forward 90% of their personal wealth as the first down payment. After all, President Bush said we'd get all that money back, so why doesn't Paulson, Cheney and Bush ante up? Certainly they wouldn't risk our money but not their own, right?

Posted by: Marc Edward | September 25, 2008 3:59 PM

Another Democratic cave in to BUSH. 250 billon up front, another 100 billion when BUSH SAYS SO and 350 billion without Congressional approval, Oh, but they hve 30 days to object!!! What kind of crap is this??? Where is the oversite - I want my tax money back!!!

Posted by: Steve | September 25, 2008 4:10 PM

"Dwight - I don't think anyone is saying that the economy is going to suddenly get better from this. We're just going to go into a regular old depression instead of the Great Depression II
Posted by: Josh | September 25, 2008 3:55 PM"

true, but either way the dems own it...will they shoot themselves in the foot like when they went on vacation instead of voting for an energy bill that would have lowered gas prices...

Posted by: Dwight | September 25, 2008 4:12 PM

I don't have a good feeling about this.

Posted by: Sara B. | September 25, 2008 4:22 PM

Obama said that a small clause that would permit judges to adjust interest rates for bankrupt homeowner's should not be in the bill? Meet the new boss, same as the old boss.... I donated to him, but now I'm voting for Nader.

Posted by: Lev Bronstein | September 25, 2008 4:30 PM

taxing stock transfers is a stupid idea. It will create a run on the market of folks trying to dump their stock pre-tax. I know that was the first thing that came to my mind.

Posted by: rcc_2000 | September 25, 2008 4:31 PM

To the reporters, a request for clarification -- You state:
"Democratic presidential candidate Barack Obama (D-Ill.) has said the measure, which is fiercely opposed by the banking industry, should not be in the bill."
But Obama's announced principles have consistently included helping homeowners stay in their homes. I don't think he's taking the banking industry's side in this. And if he's willing to leave it out of this particular bill, it would only be with the understanding that a home mortgage law would be taken up immediately to address the issue.

Unless he's said something new in the past 24 hours. Sources please. Your claim is being picked up and causing extreme angst in various parts of the blogosphere.

Posted by: cjm51 | September 25, 2008 4:37 PM

CJM 51, don't count on anything being "taken up" after this bill gets passed. It will all be swiftly forgotten.

Posted by: Lev Bronstein | September 25, 2008 4:47 PM

I don't have a good feeling about this.

Posted by: Sara B. | September 25, 2008 4:22 PM

Sara neither do I. Many experts have said that the $700 billion bailout may not "work." How would success be defined? Consider the shifting definitions of "winning" in Iraq. It's difficult to see how this bailout could solve or ameliorate the many other problems in this economy. And as some have said (e.g., CBO yesterday), the bailout could make things worse.

Posted by: denisethum | September 25, 2008 4:47 PM

>>>> Another Democratic cave in to BUSH. 250 billon up front, another 100 billion when BUSH SAYS SO and 350 billion without Congressional approval, Oh, but they hve 30 days to object!!! What kind of crap is this??? Where is the oversite - I want my tax money back!!!

Yeah he will spend the 250 by election day. By Thanksgiving he will want the 100 to keep the giving spirit of the Season going. After Xmas he'll take the rest to jump start the new year. The money will be gone by the time Bush clears out his desk on Jan 20. The problem will still be around.

President Obama, if he is as honest as his supporters claim, will have to submit a massive tax bill. Around 7000 per worker to cover the loss. And some more for another bailout.

Posted by: Anonymous | September 25, 2008 4:50 PM

Huffington Post, referring to Obama...

Last night, he announced that he'd urged Democratic leaders in Congress not to pursue efforts to include an economic stimulus package in the bailout, or to push for a provision giving bankruptcy judges the power to rework mortgage rates because it might derail a deal.

Posted by: Lev Bronstein | September 25, 2008 4:55 PM

This $700 billion bailout does sound like a terrible idea as more information and ideas become available. It also does not help that this Administration has been wrong on so many big issues over the past six or seven years (i.e. ignoring warnings regarding 9/11, the response to Hurricanes Katrina and Rita in the Gulf Coast, the Iraq War, etc.). Why should the American people trust the leaders in Washington with more taxpayer dollars?

I am glad that Congress did not hand over a blank check as of yet and that there are some stipulations, but I truly believe there should be many more that are far more stringent. It is essential that the taxpater get equity in these firms and that the profits pay for the bailout first, not to the CEOs, boards or other shareholders. This bailout should pay for itself years down the road and we should all learn our lessen.

There are a few comments regarding one of the sticking points of the bailout plan which would allow bankruptcy judges to re-adjust mortgage rates. Upon hearing this, I thought it was a bargaining chip that the Democrats were trying to use to force the other stipulations. I don't have a problem with Obama not supporting this provision for a couple of reasons, first, I don't want to see a run on bankruptcy filings for the purpose of re-adjusting mortgage rates. The bankruptcy code used to eliminate individuals credit card debt and Congress proposed and then actually changed the law because creditors lobbied hard for this change, a number of people filed just to beat the enactment date of the change. Second, I don't think we want judges all over the country setting different mortgage rates for people or assessing people's homes. It is bad enough that the government is purchasing these bundles of bad mortgages with overinflated prices. I would much rather see legislation that set reasonable rates and capped rates at a level related to the Fed rate, maybe a max of 3 points above the Fed rate at the time of the loan.

Posted by: B. Calm | September 25, 2008 5:43 PM

If you want to tell anybody anything on election day with your vote, vote for progressives whether Democrats, Independents or Greens to go to Congress, your state house, your state legislature and your county or city council. Volunteer to work on one or more of these campaigns as I'm doing, health problems and all. But for pete's sake support Obama. I know, he, as a single member of the Senate, compromised again. He knows and we all must know that there is a great deal of work to be done. It definitely will not happen if McCain/Palin are elected. America will be a sinking ship with either of them at the helm. Use your heads. We don't have Utopia. It will not be possible if there aren't enough votes in Congress to underpin Obama's progressive hopes and plans. Or we can replace King George with King John followed soon after by Queen Sarah. Is that what you want?

Posted by: Pat Williams | September 25, 2008 5:46 PM

"Paulson would receive $250 billion immediately and another $100 billion upon White House certification of its necessity." WH certification?? They've got to be kidding!! Those are the crooks that got us into this mess. Of COURSE they'll say the money is necessary and they'll ask for MORE and MORE and MORE before this is ever over.

Posted by: Anonymous | September 25, 2008 7:31 PM

It is nice to see most of the items are in there that I want, BUT there is too much wiggle room in it still. Why don't they just say 350 billion up front. White House certification? Now that is funny coming from an administration that has done nothing but borrow and spend. As for the rest of the money, what difference does it make for Congress to have 30 days to object if the money has already been dispersed. That is like asking a drug addict to hold on to your stash and not use it while you go to the store.

Posted by: moonsha | September 25, 2008 9:16 PM

Ofcourse I will need to see the actual wording in the bill that is written up for this deal proposal, but it better address the items below,

What makes the oversight board strong? What authority is given to them?

Define golden parachute? Specifics or no deal.

How much equity will be in the provision? If taxpayers are giving 700 billion there damn sure better be 700 billion in equity. When you invest you are supposed to get what you put in and not some percentage. AND taxpayers should be put at the front of the line in terms of payout on the equity.

Posted by: moonsha | September 25, 2008 9:28 PM

The Congress does not have the power to transfer this much power to the Executive Branch, without amending the Constitution. This bailout of Wall Street robber barons is a massive restructuring or our government and financial systems that should not be made without modifying the Constitution.

This move will change the entire power relationship between the Congress and the Executive Branch, as well as the power relationship between American citizens and our government. To give governmental powers and obligations to financial institutions over our populace is clearly outside of the realm of the Constitution.

There is no sunset provision on many of the main powers granted by this legislation and thus these powers will become a permanent change to our government.

Let's face the truth and respond accordingly. The same political sellouts in Washington, DC who have been giving big business and liberal social agendas anything they want have been doing the same behind the scenes by removing most of the laws and regulation management on that level as well.

Over the last ten years they have removed or ignored most of the regulations that were put in place to assure another great depression never happened again.

They are desperate for more power and money to delay the inevitable and to assure that your average American citizen takes on most of the burden! Including bailing out foreign banks that are in the U.S.!

So, we have a President with approval ratings in the low 20 percentiles rushing out to ask a Congress with a 9% approval rating to give them unprecedented powers, amnesty from oversight and court prosecutions, and another 700 Billion+ dollars guaranteed by the taxpayers and the full force of the American government to extract that money and interest from us all. They have made slaves of us!

They say the power and funds must be delivered within days to avoid a global economic meltdown that will have dire consequences for us all.

It's a shame to think that there are many Americans left in our nation who believe a word of what comes out of the mouths of any of these traitors in the Bush administration. Politicians in Washington, DC are fearful of losing their jobs if the true economic consequences manifest BEFORE election day, instead of after, and thus the politicians give the appearance of doing something huge.

First, there is no assurance or even likelihood that this unprecedented bailout and amnesty for Wall Street traders will work. They have already thrown hundreds of billions of dollars of your money into bailouts for Barons, Fannie Mack, Fanny May, and AIG. The 700B+ more they claim they need this week is probably what they estimate is needed to prevent the collapse till after Nov 4, 2008 which is election day.

The requested bailout bill would establish unprecedented powers for the Executive Branch to keep borrowing large sums, many analysts believe that the true costs could range between 1 to 5.5 Trillion dollars of your money!

They want the power to designate private financial companies and banks "as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them" (Sect. 2-B-3).

Upon passage of this legislation, going to the bank will be similar to going to the DMV, tax offices, or any government agency. The banks will be more under the control of the Executive Branch and inversely your bankers will be your government. MORE FREEDOM TAKEN AND BIG BROTHER WATCHING!!

The secretary will be allowed to buy and sell mortgage securities and then use the funds from any sales to pay for administrative costs and other measures in this program, instead of returning the funds to the taxpayers.

The real kicker is found in Section 8, where it reads "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."

No more power and money in exchange for their failures!

Let the financial chips fall where they may and let the market corrections occur and if the consequences for the American public are dire, let us shift through the ashes and rubble of their greed and the excess created to determine how and why this happened. Let Congress use their investigatory power to launch inquiries to determine who should have their assets seized and who is going to prison for this treachery.

This monopoly game is over. It is time to enforce the rules and start over. It is time for many of those in high places to go to jail!

Posted by: Anonymous | September 25, 2008 11:30 PM

Well, "key negotiators", this is your chance.
"The Plan Will Pass",
says He Who Knows All and Shall Be Obeyed.

He's DARING you to say no.
If you're patriots who care more about your country than about saving a malicious president's hide, you will, of course do exactly that, just as I will.

You will say NO.
And you will underline it.

Posted by: wardropper | September 26, 2008 10:18 AM

Well, "key negotiators", this is your chance.
"The Plan Will Pass",
says He Who Knows All and Shall Be Obeyed.

He's DARING you to say no.
If you're patriots who care more about your country than about saving a malicious president's hide, you will, of course do exactly that, just as I will.

You will say NO.
And you will underline it.

Posted by: wardropper | September 26, 2008 10:18 AM

Well, "key negotiators", this is your chance.
"The Plan Will Pass",
says He Who Knows All and Shall Be Obeyed.

He's DARING you to say no.
If you're patriots who care more about your country than about saving a malicious president's hide, you will, of course do exactly that, just as I will.

You will say NO.
And you will underline it.

Posted by: wardropper | September 26, 2008 10:20 AM

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