No Deal Yet, Talks Resume Tomorrow

Treasury Secretary Hank Paulson's late-night talks with key lawmakers on the $700 billion Wall Street bailout have ended for tonight with no deal struck, The Post's Lori Montgomery reports.

Talks will resume tomorrow morning at 11:30 a.m.

Rep. Barney Frank (D-Mass.) said progress was made tonight but blamed Republicans for the hold-up.

The talks tonight included Paulson, Frank, Sen. Judd Gregg (R-N.H.), Sen. Chris Dodd (D-Conn.) and Rep. Spencer Bachus (R-Ala.), though Bachus said he was not authorized to negotiate for his caucus.

Frank and other House Democrats have blamed Sen. John McCain (R-Ariz.), who suspended his presidential campaign to participate in the bailout talks, for stalling the deal.

-- Frank Ahrens

September 25, 2008; 10:33 PM ET  | Category:  business
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The US government should use any bailout money to invest exactly the way Buffett did.
Instead of buying toxic debt, they should invest in preferred shares with a yield and get stock warrants.
This would increase bank capital and allow them to ride out the storm and dispose the debt on their own.
If its good enough for Warren, then it is good enough for the rest of us.

Wish we could all get such a sweet deal. He is getting perpetual preferred stock that will pay him a juicy 10% coupon yield, and is getting warrants as a sweetener on the side that allow him to buy common stock for 8% lower than the current price at some time in the future.

What is a warrant? A warrant is a security giving the holder the right, but not the obligation, to purchase the underlying security at a specified price in the future. Much like the stock options that are granted to CEO's to come into a company and help it grow. If the stock goes up you exercise the warrant at the previous low price for instant large profit. If the stock price goes down you don't exercise the warrant. All upside potential, no downside risk. Meanwhile he collects the 10% dividend yield on the preferred, which is a cushion if the preferred should decline further in price.

Posted by: US Taxpayers | September 25, 2008 10:43 PM

Paulson walked into the room where Democrats were caucusing after today's meeting at the White House and pleaded with them, "Please don't blow this up."

Rep. Barney Frank, D-Mass., chair of the House Financial Services Committee was livid saying, "Don't say that to us after all we've been through!"

House Speaker Nancy Pelosi said, "We're not the ones trying to blow this up; it's the House Republicans."

"I know, I know," Paulson replied.

Posted by: Anonymous | September 25, 2008 11:05 PM

No amount of negotiation / minor modifications is going to change the fundamental facts:

The plan simply is unlikely to work in its present form --- it is architectured wrong.

It is intended to basically hand money over to Financial Institutions holding unmarketable, illiquid, and debt that not only may have little value --- but NEGATIVE value in that it cost money to hold them.

A mortgage gone bad costs the lender money to hold in taxes, maintenance, resale costs, court costs, etc. that are not likely to be recovered from any party when there is little equity in the home (or the price of the home has gone down so much that the equity is more than wiped out.

What the banks are going to do is not to sell packaged loans (as it is) to the treasury, but only sell the worst of the worst --- meaning loans where not only do the feds not be able to recover money, but have to pay to get rid of the foreclosed properties or to pay maintenance on them.

What they need is not to buy bad loans, but recapitalize the banks --- a more broad solution that let the banks find the most expedient / cheapest way to get rid of the non-performing mortgages.

Posted by: Smith | September 25, 2008 11:40 PM

What is needed is send McCain to face Obama and debate and not run and for the Republicans and Democrat from both Houses to sit until a final resolution is acceptable to both parties even though some might have to pinch their noses. THE DEBATE MUST GO ON AND CENTER ON THE ECONOMY. The American People have a right to hear and see the two men one of which will be the leader of the United States of America. There is no EXCUSE for McCain.

Posted by: George | September 26, 2008 10:02 AM

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