No Runny Eggs

You know I wouldn’t miss this fun. John McCain and Barack Obama will be focusing on foreign policy and national security tonight from Ole’ Miss. Jim Lehrer will provide the “moderation”, and Shoebox and I will provide the libation.

For those new to the NRE liveblog experience, I do paraphrase a lot, questions will be italicized, answers will be in plain text, and my commentary in-line with either a question or an answer will be in parentheses. Commentary outside of a question or answer will also be in plain text. Let the drinking begin.

Fox News is reporting that Sen. Ted Kennedy (D-MA) has been taken to a Cape Cod hospital, and that his condition is not immediately known.

May the Lord extend His healing hand on the Senator.

Revisions/extensions (11:00 pm 9/26/2008) – Sen. Kennedy suffered a “mild seizure”, and should already be back home (the update in the linked Fox News story said that he had been cleared to return home sometime before the debate started).

Here is the plan being offered by the House Republicans.   From Politico.com:

* Rather than providing taxpayer funded purchases of frozen mortgage assets, we should adopt a mortgage insurance approach to solve the problem.

* Currently the federal government insures approximately half of all mortgage backed securities. (MBS) We can insure the rest of current outstanding MBS; however, rather than taxpayers funding insurance, the holders of these assets should pay for it. Treasury Department can design a system to charge premiums to the holders of MBS to fully finance this insurance.

* Have Private Capital Injection to the Financial Markets, Not Tax Dollars. Instead of injecting taxpayer capital into the market to produce liquidity, private capital can be drawn into the market by removing regulatory and tax barriers that are currently blocking private capital formation. Too much private capital is sitting on the sidelines during this crisis.

* Temporary tax relief provisions can help companies free up capital to maintain operations, create jobs, and lend to one another. In addition, we should allow for a temporary suspension of dividend payments by financial institutions and other regulatory measures to address the problems surrounding private capital liquidity.  

*Immediate Transparency, Oversight, and Market Reform. Require participating firms to disclose to Treasury the value of their mortgage assets on their books, the value of any private bids within the last year for such assets, and their last audit report.

* Wall Street Executives should not benefit from taxpayer funding. Call on the SEC to review the performance of the Credit Rating Agencies and their ability to accurately reflect the risks of these failed investment securities.  

*Create a blue ribbon panel with representatives of Treasury, SEC, and the Fed to make recommendations to Congress for reforms of the financial sector by January 1, 2009.

My gut reaction:

Insurance – OK but what are the rates and do the companies have the cash to pay for the insurance? Liquidity has been a huge issue so how does making them pay more $ help that problem?

Private Capital – Yeah, motherhood, apple pie, “God bless America!” Capital isn’t coming into these markets until they see opportunity. You can’t just say “do it” and expect seriously spooked investors to hop back in.

Tax relief – I don’t get this one at all. These companies are writing off these loans and creating significant tax losses. I can’t imagine that many of them will have much net income that this even matters.

Transparency – Amen

Executives not benefiting – Amen

Blue Ribbon Panel – haven’t seen one yet that really helped but OK

My gut is that while this probably protects the taxpayer more, I don’t know that it would provide the enema that these markets seem to need.

Your thoughts?

Revisions/extensions (4:15 pm 9/26/2008, steveegg) – There’s a couple of bullet points not mentioned by Politico in the release from Paul Ryan, my Congresscritter and main sponsor of the House Republican plan:

– Limit Federal Exposure for High Risk Loans: Mandate that the GSEs no longer
securitize any unsound mortgages

– Call on the SEC to audit reports of failed companies to ensure that the financial
standing of these troubled companies was accurately portrayed.

I haven’t seen the specifics of the tax and regulatory relief, but I strongly suspect that relief will extend beyond the financial sector. Additional cash would allow companies to rely less on the non-existent credit market to function.

Revisions/extensions (4:15 pm 9/26/2008, shoebox)   – One thing I haven’t seen in any of the information being debated is an elimination or a set aside of the requirement to “mark to market.”   As I understand the issue, the “liquidity crunch” is being largely caused by two issues 1. banks are afraid that lending to another institution could leave them exposed as the perception is that any institution could file bankruptcy at any time, therefore, no inter institution loans.   2.   the bankruptcy scenario is being created because the institutions have insufficient capital as they continue to write down loans each time someone else has a fire sale.   The point being that much of this problem is not a liquidity issue in the sense of their not being enough money floating around but liquidity in the sense that they cannot lend anymore because the the capital they have remaining is already “pledged” for their existing loans

As more and more information becomes available about the meeting yesterday at the White House and the Republican revolt against the bailout plan, it is more and more obvious that political gamesmanship is what has occurred during his week and not any kind of “successful negotiations!”

It first appeared that John McCain’s announcement to come to Washington had caused the Democrats and Republicans to find a compromise.   I thought that’s what had happened when Chris Dodd announced about noon yesterday that an agreement in principle had been reached.

It appeared then, that the White House meeting would be nothing more than a bunch of handshaking and self congratulations amongst the Washington political leadership from both sides.

Instead, according to various articles, Republicans announced that they were not supportive of the amended proposal and argued for a different plan.

How do I know that the entire negotiation was just a political manuevering?   This quote from an article by the “News Agency Who Shall Not be Named:”

The Massachusetts Democrat said leading Democrats on Capitol Hill were shocked by the level of divisiveness that surfaced at Thursday’s extraordinary White House meeting, leaving six days of intensive efforts to agree on a bailout plan in tatters only hours after key congressional players of both parties had declared they were in accord on the outlines of a $700 billion bill.

(emphasis mine)
How do you negotiate one of the largest, market impacting deals ever, announce you have a “deal in principle” and then get “shocked by the level of divisiveness?”

Simple, the “negotiated” plan was never negotiated. As the Dems have done time after time, they decided what they wanted to do, found a couple of invertebrate Republicans to pick off to perform ventriloquist acts with and announced “an agreement in principle” that never, ever was agreed to.

The Dems are now grousing that without Republican support, they won’t pass the bailout bill! Why not? If they’re so sure that what they’re doing is the right thing, do it! They have the votes in both chambers and the support of the President. Nothing prevents them from passing their bill immediately!
Nothing that is except for a complete lack of leadership and spine. The Democrats are great at sniping and Monday morning quarterbacking but don’t have the courage of their own convictions when real leadership is required!

We haven’t dragged this out for a while but it seems appropriate. This is a video that describes what the Dems believe leadership to be:

It’s time for some leadership. The public has not been convinced that a bailout needs to occur. Someone needs to chart a course of action and convince both Congress and the American People that it is the right thing to do. If John McCain and Barack Obama want to be the next President, now is the time for them to show their ability to lead. I’m still convinced that this is the gunfight at the OK campaign.

Americans are hungry for leadership on this issue.  Will we find  any leaders, anywhere, in Washington?