Blue Spot

Senator rips auto industry at bailout hearing - Nov. 18, 2008

NEW YORK (CNNMoney.com) -- The case for a bailout of U.S. automakers came under sharp scrutiny on Tuesday at a congressional hearing that portrayed the Big Three as both short-sighted in their business strategies and central to the economy.

"Their board rooms in my view have been devoid of vision," said Sen. Christopher Dodd, D-Conn. "They have promoted and often driven the demand of inefficient, gas guzzling vehicles, and dismissed the threat of global warming."

Dodd, chairman of the Senate Banking Committee, spoke as Congress kicked off the first of two days of hearings over whether the government should extend a lifeline to the nation's troubled automakers.

The head of the powerful United Auto Workers union, testifying side by side with the industry's top CEOs, said the failure of one automaker would shatter consumer confidence in the other two.

"If one of these companies goes into bankruptcy, I'd be willing to bet it takes two, or possibly all three, with them," said Ron Gettelfinger , president of the autoworkers' union, said during questioning.

The industry, already struggling because of high labor costs and weak sales, is being stung as car buying grinds to a halt amid credit difficulties, job losses and fears of a recession. The industry has been lobbying hard for a $25 billion loan from the $700 billion bailout slated for the finance sector.

One Republican lawmaker, Sen. Michael Enzi of Wyoming, said he was uncertain a bailout would work.

"We have little evidence this $25 billion will do anything to promote long-term success," Enzi said.

But the industry and its advocates, as well as many experts, say that without federal help, General Motors (GM, Fortune 500) will likely go bankrupt within months, and that Ford (F, Fortune 500) and Chrysler LLC could soon follow.

Labels: Auto industry, Government Bailout, Unions

Emanuel Urges Aid for Auto Industry - NYTimes.com

In his first televised interviews since being named the chief of staff for President-elect Barack Obama, Rahm Emanuel on Sunday called for swifter action to lift the struggling auto industry and suggested Mr. Obama and President Bush might clash over a stimulus package.

On the first weekend since Mr. Obama was elected president, several of his aides said his administration would attempt to roll back a number of Bush administration policies, including tight restrictions on stem cell research and a push for oil and gas drilling in Utah. The statements indicated that the first few months of an Obama administration could bring about stark reversals on controversial policies.

But Mr. Obama’s aides emphasized that his first priority would be finding ways to repair the battered economy, whose latest woes include a steep drop-off in retail sales and the loss of millions of jobs. The auto industry has been particularly hard hit, with Ford and General Motors pleading for government help after car sales plummeted 18 percent this quarter. General Motors, the country’s largest carmaker, reported a $4.2 billion third-quarter operating loss, and said it may be on the brink of collapse.

Over the weekend, the Speaker of the House, Nancy Pelosi, and the Senate Majority leader, Harry Reid, sent a letter to the Bush administration requesting that funds from the $700 billion bailout package — intended for Wall Street — be used to help carmakers as well. But the White House has signaled that it would oppose such a measure.

When asked on ABC’s “This Week” where Mr. Obama stood on the issue, Mr. Emanuel seemed to suggest that Mr. Obama, as a last resort, might be open to tapping the rescue fund to help carmakers, calling the auto industry an “essential part of our industrial base.”

Labels: Auto industry, Economy, Financial, Government Bailout, Rahm Emanuel

In what could lead to another crippling blow to the Wall Street's image, Katie Couric examines Congressional hearings involving the alleged corrupt practices of former AIG CEOs.


House Committee on Oversight and Government Reform holds a hearing investigating what led to the taxpayer-funded bailout of insurance giant AIG. Rep. Elijah Cummings (D-MD) questioned witnesses regarding expenses incurred by AIG at a hotel that hosted a company conference after the government bailout that totaled up to $85 billion. Cummings cited charges totaling nearly half a million dollars, including thousands spent at the hotel salon and spa.

Labels: Corporatocracy, Economy, Financial, Government Bailout

Congress passes bailout, Bush signs into law | Reuters NEW YORK/WASHINGTON (Reuters) - The Congress approved a $700 billion bailout package for U.S. banks as efforts to head off a spreading global financial crisis hung in the balance.

The U.S. House of Representatives approved the financial rescue plan by a vote of 263-171. That vote sent the measure to U.S. President George W. Bush, who quickly signed it into law, concluding two weeks of haggling in Washington that had roiled and captivated global markets.

Markets pivoted on passage of the bailout, with stocks drifting from highs and the dollar slipping as the focus began to shift from the immediate response to the financial crisis to signs of a gathering recession.

"This probably comes a bit too late. If this had been done earlier, it probably would have had a much bigger impact in restoring confidence," said Anna Piretti, economist at BNP Paribas in New York. "Over the past two weeks what we have seen is an accumulation of weak reports."

Earlier, the hobbled financial sector was bolstered as Wells Fargo & Co stepped in to buy Wachovia Corp.

But in signs of the spreading crisis, California said it was running out of money, France said the world stood on the "edge of the abyss" and European leaders divided over their response to the banking sector's difficulties.

U.S. Treasury Secretary Henry Paulson, who had been the administration's chief lobbyist for the plan, said regulators would get going quickly to implement the emergency power to start buying up distressed assets from banks.

Labels: Congress, Economy, Financial, Government Bailout

Senate passes financial bailout bill full of sweeteners - Oct. 1, 2008
Plan to buy $700B in troubled assets wins OK. Backers hope add-ons will yield more yes-votes in House.

NEW YORK (CNNMoney.com) -- 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.

Like the bill the House rejected, the core of the Senate bill is the Bush administration's plan to buy up to $700 billion of troubled assets from financial institutions.

Those assets, mostly mortgage-related, have caused a crisis of confidence in the credit markets. A major aim of the plan is to free up banks to start lending again once their balance sheets are cleared of toxic holdings.

But the Senate legislation also includes a number of new provisions aimed at Main Street.

The changes are intended to attract more votes in the House, in particular from House Republicans, two-thirds of whom voted against the bailout plan.

The House is expected to take up the Senate measure for a vote on Friday, according to aides to Democratic leaders.

The package adds provisions to the House version - including temporarily raising the FDIC insurance cap to $250,000 from $100,000. It says the FDIC may not charge member banks more to cover the increase in coverage. But that doesn't prevent the agency from raising premiums to cover existing concerns with the insurance fund, according to Jaret Seiberg, a financial services analyst at the Stanford Group, a policy research firm.

Instead, the bill allows the FDIC to borrow from the Treasury to cover any losses that might occur as a result of the higher insurance limit.

The bill also adds in three key elements designed to attract House Republican votes - particularly popular tax measures that have garnered bipartisan support.

It would extend a number of renewable energy tax breaks for individuals and businesses, including a deduction for the purchase of solar panels.

The Senate bill would also continue a host of other expiring tax breaks. Among them: the research and development credit for businesses and the credit that allows individuals to deduct state and local sales taxes on their federal returns.

In addition, the bill includes relief for another year from the Alternative Minimum Tax, without which millions of Americans would have to pay the so-called "income tax for the wealthy."

Labels: Economy, Financial, Government Bailout, Senate

Wall St.
Video sent by marc1a

With the Senate set to vote on a bailout proposal tomorrow, here's a look at the circus in NY, right outside the big tent.

Labels: Economy, Financial, Government Bailout

House Rejects Bailout Package, 228-205; Stocks Plunge - NYTimes.com

WASHINGTON — In a moment of historic drama in the Capitol and on Wall Street, the House of Representatives voted on Monday to reject a $700 billion rescue of the financial industry.

Stock markets plunged sharply at midday as it appeared that the measure would go down to defeat.

House leaders pushing for the package kept the voting period open for some 40 minutes past the allotted time, trying to convert “no” votes to “yes” votes by pointing to damage being done to the markets, but to no avail.

Supporters of the bill had argued that it was necessary to avoid a collapse of the economic system, a calamity that would drag down not just Wall Street investment houses but possibly the savings and portfolios of millions of Americans. Opponents said the bill was cobbled together in too much haste and might amount to throwing good money from taxpayers after bad investments from Wall Street gamblers.

Should the measure somehow clear the House on a second try, the Senate is expected to vote later in the week. The Jewish holidays and potential procedural obstacles made a vote before Wednesday virtually impossible, but Senate vote-counters predicted that there was enough support in the chamber for the measure to pass. President Bush has urged passage and spent much of the morning telephoning wavering Republicans to plead for their support.

Many House members who voted for the bill held their noses, figuratively speaking, as they did so. Representative John A. Boehner of Ohio, the Republican minority leader, said there was too much at stake not to support it. He urged members to reflect on the damage that a defeat of the measure could mean “to your friends, your neighbors, your constituents” as they might watch their retirement savings “shrivel up to zero.”

The House debate was heated and, occasionally, emotional up to the last minute, as illustrated by the remarks of two California lawmakers.

Representative Darrell Issa, a Republican, said he was “resolute” in his opposition to the measure because it would betray party principles and amount to “a coffin on top of Ronald Reagan’s coffin.”

But Representative Maxine Waters, a Democrat, said the measure was vital to help financial institutions survive and keep people in their homes. “There’s plenty of blame to go around,” she said, and attaching blame should come later.

The House vote came after a weekend of tense negotiations produced a rescue plan that Congressional leaders said was greatly strengthened by new taxpayer safeguards. “If we defeat this bill today, it will be a very bad day for the financial sector of the economy,” Representative Barney Frank, Democrat of Massachusetts and the chairman of the Financial Services Committee, said as the debate began and the stock market opened sharply lower. The Standard & Poor’s 500 index was down almost 3.4 percent at midmorning.

Labels: Economy, Financial, Government Bailout

Lawmakers and the Bush administration must settle the details on a rescue intended to keep credit flowing and avert a recession.

Labels: Congress, Economy, Financial, Government Bailout

Talks Implode During a Day of Chaos; Fate of Bailout Plan Remains Unresolved - NYTimes.com

WASHINGTON — President Bush tried to assure Americans on Friday morning that lawmakers and the administration would be able come together and reach an agreement on a proposal to rescue the country’s financial system.

“We are going to get a package passed,” Mr. Bush said, a day after an earlier agreement dissolved amid a flurry of political rancor. “We will rise to the occasion. Democrats and Republicans are going to come together to get a rescue plan passed.”

Mr. Bush spoke as lawmakers and administration officials were gearing up for a second day of discussions about the shape of the $700 billion rescue package. Thursday’s agreement, which seemed like a sure thing by early afternoon, fell apart during a meeting later in the day at the White House.

Wall Street seemed to find some solace in Bush’s comments, Shares, which trading down more than 100 points, cut their loses in half.

Speaking from the White House just after the New York Stock Exchange opening bell, President Bush noted the disagreements among lawmakers about how the rescue should be shaped. “The legislative process is sometimes not very pretty,” he said.

But he said everyone in Washington agreed that action was needed immediately. “There are disagreements over aspects of the plan, but there is no disagreement that something substantial must be done,” he said.

For their part Friday morning, lawmakers from both parties staked out their positions on a round of morning talk shows. Ahead of the anticipated resumption of negotiations later in the morning, the House speaker, Nancy Pelosi, said the urgency of the moment meant that agreement would come within the next 24 hours.

“It will happen because it has to happen,” she said in an interview on ABC’s “Good Morning America, according to Reuters.

Separately, Representative Barney Frank, Democrat of Massachusetts, and the chairman of the House Financial Services Committee, said on Friday that an agreement depended on House Republicans ending their opposition and “dropping this revolt” against the plan proposed by the Bush administration, The Associated Press reported. He described the rival plan being proposed by Republicans as “an ambush.”

Labels: Congress, Economy, Financial, Government Bailout

JPMorgan to buy WaMu - Sep. 25, 2008

NEW YORK (CNNMoney.com) -- JPMorgan Chase acquired the banking assets of Washington Mutual late Thursday after the troubled thrift was seized by federal regulators, marking the biggest bank failure in the nation's history and the latest stunning twist in the ongoing credit crisis.

Under the deal, JPMorgan Chase will acquire all the banking operations of WaMu, including $307 billion in assets and $188 billion in deposits.

To put the size of WaMu in context, its assets are equal to about two-thirds of the combined book value assets of all 747 failed thrifts that were sold off by the Resolution Trust Corp. - the former government body that handled the S&L crisis from 1989 through 1995.

In exchange for scooping up WaMu, JPMorgan Chase (JPM, Fortune 500) will pay approximately $1.9 billion to the Federal Deposit Insurance Corporation.

Analysts were largely encouraged by the news even as JPMorgan Chase absorbs WaMu's toxic subprime and option-ARM mortgages as part of the deal.

"My initial impression is that this deal is 'generally OK'," wrote Nancy Bush, managing member at investment advisory firm NAB Research LLC, adding that there would be questions about the loan losses that JPMorgan took as part of the deal would be sufficient.

All told, JPMorgan Chase said it would recognize projected losses on the loan portfolio upfront by marking down the value of the loans by a whopping $31 billion.

Quite possibly the biggest losers in Thursday's deal, however, are WaMu's stock and debt holders, who were effectively wiped out.

Among that group was the private equity giant TPG, which was part of a consortium of investors that acquired a stake in WaMu for $7 billion in April.

JPMorgan Chase reportedly had made a previous bid for WaMu around that time for about $8 a share which was snubbed by WaMu, according to news reports at the time.

Tough times for banks
The fall of WaMu is the latest turn in a dizzying two weeks that have seen the bankruptcy of Lehman Brothers, the acquisition of Merrill Lynch by Bank of America (BAC, Fortune 500) and the near collapse of insurance giant AIG (AIG, Fortune 500).

The widening credit crisis has prompted President Bush to seek from Congress extraordinary authority to spend as much a $700 billion to bail out the nation's financial system by purchasing toxic assets from banks.

President Bush, in a televised address Friday morning, said the nation's economy is at risk, adding he believed that Congress will move quickly on a bailout proposal.

"We've got a big problem," he said.

Regulators acknowledged they were encouraged to get a deal done but JPMorgan Chase's Dimon stressed to investors that a potential bailout by the government was not a factor.

Labels: Economy, Financial, Government Bailout

Barack Obama advisor Robert Gibbs says "debate is going to happen" - Lynn Sweet

WASHINGTON--"I believe the debate is going to happen as scheduled," said Barack Obama top advisor Robert Gibbs on Thursday morning about the first presidential debate scheduled for Friday night in Oxford, Mississippi.

John McCain said he will not show up if Congress had not made a deal on an economic bailout package. McCain, Obama and the congressional leaders meet with President Bush at the White House this afternoon to find common ground on a rescue plan. Congress balked at the $700 billion bill Bush sent to Capitol Hill. Bush on Wednesday night signaled he is open to a bi-partisan compromise.

While the debate is supposed to be focused on national security and international affairs, Gibbs said the rivals have been told the subject of the financial crisis would be incorporated in the questioning.

"I think it will be an important, the beginning of an important series of events in the campaign...an opportunity, the debates are an opportunity for Sen. Obama to talk about his judgment and his vision for the country and I think also we'll see Sen. McCain, somebody who bragged repeatedly about his knowledge on foreign policy issues, so obviously he goes into the debate with an advantage on that terrain," Gibbs said, downplaying expectations.

Gibbs spoke at a reporters breakfast hosted by the Christian Science Monitor.

Labels: General Election 2008, Government Bailout

Bloomberg.com: Worldwide

Sept. 24 (Bloomberg) -- Billionaire investor Warren Buffett, calling the market turmoil ``an economic Pearl Harbor,'' said Treasury Secretary Henry Paulson's $700 billion proposal to prop up the U.S. financial system is ``absolutely necessary.''

``The market could not have taken another week'' like last week, Buffett told CNBC today, a day after saying his Berkshire Hathaway Inc. will buy a $5 billion stake in Goldman Sachs Group Inc. ``I think it was the last thing Hank Paulson wanted to do, but there's no Plan B for this.''

Paulson and Federal Reserve Chairman Ben S. Bernanke are pushing Congress to quickly approve the plan to remove illiquid assets from the banking system. Lawmakers have balked at rubber- stamping the proposal, with Democrats demanding it include support for homeowners and limits on executive pay and Republicans questioning the plan's reach and size.

``I am betting on the Congress doing the right thing for the American public and passing this bill,'' Buffett said. The economy is ``everybody's problem,'' he said, likening it to ``a bathtub -- you can't have cold water in the front and hot water in the back.''

Berkshire is buying the stake in Goldman, Paulson's former firm, after three of the investment bank's biggest competitors went bankrupt or were forced into emergency sales. He has already agreed to spend at least $25 billion this year to acquire companies, finance buyouts and purchase securities for Omaha, Nebraska-based Berkshire.

``I certainly have a vote of confidence in Goldman and vote of confidence in Congress,'' said Buffett, who is investing in the firm after it lost 40 percent of its market value in the past year.

Buffett, who last year complained that he couldn't find companies big enough to buy, said he's not a fan of cash.

``It's nice to have a lot of money, but you know, you don't want to keep it around forever,'' Buffett said. ``I prefer buying things. Otherwise, it's a little like saving sex for your old age.''

Labels: Congress, Economy, Financial, Government Bailout