Economic stimulus/tax rebates

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Da fix is in...

US reaches bailout deal in bid to stem crisis
Sun Sep 28, 2008 WASHINGTON (Reuters) - U.S. lawmakers on Sunday were set to sign off on a deal to create a $700 billion government fund to buy bad debt from ailing banks in a bid to stem a credit crisis threatening the global economy.

After marathon talks into the wee hours of Sunday morning, congressional leaders from both parties emerged with an agreement that altered key parts of a Wall Street bailout program initially proposed by the Bush administration. The preceding week of negotiations over the rescue package roiled financial markets and altered the course of the U.S. presidential campaign less than six weeks before the election.

"We've made great progress," House of Representatives Speaker Nancy Pelosi told reporters after the talks. Treasury Secretary Henry Paulson lobbied hard for the package -- the largest bailout in U.S. history -- saying it would keep credit markets from grinding to a halt under the burden of bad mortgage-backed bonds created by banks at a time when it looked like home prices had nowhere to go but up.

Congress was racing to reach an agreement before Asian financial markets open on Monday to avoid a repeat of last week's white-knuckle volatility. It was unclear when the House and the Senate would vote on the bailout legislation, or whether last-minute hitches might arise. U.S. President George W. Bush spoke with Pelosi on Saturday evening and news of a deal was welcomed at the White House.

More U.S. reaches outline for bailout deal | Politics | Reuters

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The Real Costs of the Bailouts
SEPTEMBER 28, 2008 - Last week, as federal regulators seized Washington Mutual in the largest US banking failure, Congress was grappling with whether to spend $700 billion of public money to fix the financial industry's troubles.

Lawmakers' initial reaction to the Treasury Department's staggering request: shock. That sum amounts to about a quarter of the U.S. government's annual spending. It's more than the Pentagon's annual budget, more than the nation pays out each year in Social Security benefits and more than the federal government's cost for Medicare and Medicaid. Members of Congress then asked the questions that continue to be on many Americans' minds:

* How will the U.S. pay for this program and the previously announced aid to Bear Stearns, Fannie Mae, Freddie Mac and American International Group? (The Washington Mutual seizure doesn't add to the U.S. tab because the bulk of WaMu's operations are being taken over by J.P. Morgan Chase without cost to the Federal Deposit Insurance Corp.)

* And what will these efforts end up costing us all in taxes?

Part of the answer is known today but other aspects -- including the ultimate tab for these rescue programs -- may not be clear for years or even decades.

$1 Trillion Commitment

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Still gotta pass the House, guess they needed more time to figure out what earmarks they gonna tack on...

Senate passes bailout
October 1, 2008: Plan to buy $700B in troubled assets wins OK. Backers hope add-ons will yield more yes-votes in House.

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. Both 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 legislation, if passed by the House, would usher in one of the most far-reaching interventions in the economy since the Great Depression. Advocates say the plan is crucial to government efforts to attack a credit crisis that threatens the economy and would free up banks to lend more. Opponents say it rewards bad decisions by Wall Street, puts taxpayers at risk and fails to address the real economic problems facing Americans.

"If we do not act responsibly today, we risk a crisis in which senior citizens across America will lose their retirement savings, small businesses won't make payroll .. and families won't be able to obtain mortgages for their homes or cars," said Senate Majority Leader Harry Reid, D-Nev., moments before the vote. Because of Senate add-ons, the bill's initial price tag will be higher than the $700 billion that the Treasury would use to buy troubled assets. But over time, supporters say, taxpayers are likely to make back much if not all of the money the Treasury uses because it will be investing in assets with underlying value.

How the Senate bill differs

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House Conservatives Introduce ‘Free Market’ Substitute for Bailout
Wednesday, October 01, 2008 - Following the defeat of the $700-billion bailout package on Monday, Rep. Jeb Hensarling (R-Texas), chairman of the Republican Study Committee (RSC), introduced a bill that he said relies on the free market rather than the federal government to solve the nation’s financial problems.

Instead of mandating that the U.S. Treasury purchase up to $700 billion in teetering mortgages and mortgage-backed securities, as the plan backed by the Bush administration and congressional leadership mandated, the RSC alternative would try to restore confidence in the mortgage market by insuring all such investments at 100 percent of their value. Under the plan, mortgages that Treasury officials deemed to be risky would be insured at a higher premium than mortgages considered stable. The mortgages would be insured by the federal government, i.e., tax dollars. Thus, the plan is not pure free market but is more reasonable than an outright federal purchase of the mortgages with tax dollars, suggested Hensarling.

“In order to fundamentally deal with the crisis, some part of the full faith and credit of the government will have to be behind it [the solution],” Hensarling told CNSNews.com, and this would shore-up confidence in the mortgage and mortgage-backed securities markets. “But Wall Street ought to be paying for that, and we ought to be limiting taxpayer exposure.” The plan also includes provisions important to Democrats that had been a part of the Bush plan, such as a provision that would severely limit the size of the “golden parachute” an executive, whose failing companies opted into the government’s insurance plan, could receive and ensuring that financial institutions participating in the program would have to disclose more about their mortgage-asset holdings.

Hensarling said at a press conference Monday that under ordinary circumstances conservatives would not consider granting the federal government such powers of intervention, but in these “extraordinary times” his caucus realizes that compromise is necessary. “We come here ready to swallow hard, but we can’t swallow everything,” said Hensarling. “We do not feel that models such as loans secured by assets and the insurance model received the attention they were due. On a normal day, a conservative would run for the exits from either of those plans, but these are extraordinary times.”

More http://www.cnsnews.com/public/conten...x?RsrcID=36631

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Ol' Warren was on Charlie Rose sayin' he wantin' a piece of the action...

Buffett: Bailout may not be big enough
October 2, 2008: Investment guru says $700 billion bailout is crucial, but that it may not be large enough to solve the credit crisis.

Warren Buffett said Thursday that it is crucial to the global economy that the controversial $700 billion Wall Street bailout passes, but warned that the pricetag may have to rise. Buffett also proposed that the U.S. Treasury Department and private investors team up to buy the troubled mortgage assets behind the crisis gripping markets worldwide. "If we don't get [this] solved next week, I may go back to delivering papers," said Buffett during an appearance at Fortune's Most Powerful Women Summit in Aviara, Calif.

Buffett, the chairman and CEO of Berkshire Hathaway (BRK.A), likened the recent turmoil in the markets to an "economic Pearl Harbor" and said that a quick response is needed. "We've never seen anything like this where perfectly credit-worthy companies can't get funds," he said. He didn't estimate how much more money would be needed to buy enough toxic mortgage investments in order to create a more stable market and get credit flowing. On Wednesday, the Senate passed a $700 billion bailout package. The House is expected to vote on the revised bill on Friday, four days after rejecting an earlier version.

Buffett suggested that a partnership between Treasury and private investors to buy the assets. "One easy way to do part of the program is to say to anybody - hedge fund operators, Wall Street firms, or anybody else - that the Treasury will lend you 80% of the purchase cost of a bunch of distressed assets," he said, explaining the concept of his proposal. The investors benefit from borrowing at lower rates, but Treasury gets first claims any returns from the sale of those assets before investors would get a penny.

"Now you have someone with 20% skin in the game," he explained. "Believe me I won't be overpaying if I'm buying with that kind of leverage. And you have someone [the investors] to manage the assets to the extent they need to be managed." Buffett said that the bill that passed the Senate Wednesday evening isn't perfect, but that it's crucial to prevent the global economy from grinding to a halt. He then warned it will take a while to work and that the economy is going to struggle even with its passage. "Anyone who thinks this bill is a panacea is [making] a mistake," he said. "Without it, it's a disaster."

Buffett: $700 billion bailout may not be be big enough - Oct. 2, 2008

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Hedge fund blues are just beginning
October 2, 2008: When even a profitable fund closes, that's a sign there's trouble ahead.

The domino nature of the looming hedge fund crisis is neatly illustrated by the troubles of a high-flying New York fund with a niche that was supposed to be recession proof. Laurus Capital Management, which manages $1.6 billion and has posted nearly 16% annual returns since 2001, is shuttering an $800 million portfolio after its largest investor said it would withdraw $300 million.

While investors are fleeing capital markets globally as both credit and equity investments falter, Laurus' strategy of making private investments in public entities, known as PIPEs, was thought to be largely immune from this cycle. The fund buys bonds and warrants convertible into equity in small companies whose stocks trade for pennies a share. In a credit crunch, a PIPEs fund should be able to find attractive would-be debtors in need of capital.

And to a point, the PIPEs strategy has worked, with Laurus returning about 2.7% through the end of August while hedge funds generally have shown losses this year. The problem is that big institutional investors are growing unsure about hedge funds in general, and the big investor in the Laurus fund, the alternative strategies unit of Northwestern Mutual's Russell Investments, has suffered losses in its hedge fund portfolio.

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Credit markets still constipated...

Credit still tight after House OK's bailout
October 3, 2008: No relief for lending stranglehold, even as House sends bill to Bush. Treasurys rise as stocks sell off, on rumors of a rate cut.

Though a financial rescue plan was passed Friday, credit still remained tighter than ever. The House voted in favor of the Treasury's $700 billion plan to buy up troubled assets from financial institutions. Those assets, mostly mortgage-related, have caused the credit markets to seize up.

The bill now goes to President Bush to sign into law. But even with a rescue plan on the horizon that is designed to restore liquidity to the credit markets, banks still opted to hoard cash rather than lend to one another Friday.

Even if the bailout ultimately works to unlock credit markets, it would potentially take time. Institutions that sell their bad assets to the government could have to sell those securities at a huge discount, resulting in large writedowns. As a result, experts say it may be months after the legislation is enacted until banks start to see some relief.

"It will take some time for the markets to recover - this bill will not be an overnight cure," said Peter Cardillo, chief market economist with Avalon Partners. Meanwhile, banks remained hesitant to take on more risky loans while dragging their anchors of their own troubled assets.

Credit measures at all-time highs

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Proof the recession is already here...

Under-employed and under the radar
October 3, 2008: A growing number of people are working part-time jobs because they can't find full-time work, or abandoning their job search altogether.

The economic crisis has taken a severe toll on the nation's workforce. But while much of the discussion centers around layoffs and unemployment, a growing number of Americans are becoming under-employed - struggling to pay their bills on a smaller salary, or completely giving up on finding any work. Unemployment claims have climbed to 7-year highs, but the number of people who have settled for part-time work or given up on finding a job altogether is the worst it's been in over 14 years, but isn't included in the official unemployment rate.

Because of the slowing economy and credit crunch, companies are not only laying off workers, but also scaling back hours and shifting some full-time employees to part-time shifts. That can make it extremely difficult for those workers already having trouble making ends meet in the face of higher gas prices and mounting expenses. "Even workers who hold onto their jobs during a downturn can suffer on this dimension," according to Heidi Shierholz an economist at the Economic Policy Institute, a research group based in Washington. "Those additional 10 hours of work can be the difference for a family being able to make their rent, fill their gas tank, heat their homes."

The under-employment rate, which counts those without jobs who have become discouraged and stopped looking for work, as well as part-time workers who want full-time jobs, rose to 11% from 10.7%, the highest rate since April 1994, according to the Labor Department's monthly jobs report. The report also breaks down the specific number of people working part-time jobs because they couldn't find full-time work or their hours had been cut back due to slack conditions, which jumped by 337,000 people to 6.1 million. That's the first time there have been more than 6 million part-time workers wanting full-time jobs since 1993. That reading is up more than a third from a year ago, the biggest 12-month jump since the period right after the Sept. 11 terrorist attacks. Other than that short 2001 spike in the reading, there hasn't been a jump like this since the deep recession of 1982.

More http://money.cnn.com/2008/10/03/pf/u...ment/index.htm

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Granny already checkin' the mailbox for a second stimulus check...

US Officials Discuss Second Economic Stimulus Package
Washington 20 October 2008 - Officials in Washington are openly discussing the possibility of another federal stimulus package to boost the troubled U.S. economy.

This year has already seen two aggressive steps by the federal government to prop up the economy. In February, as the economy was slowing down, Congress passed a $150 billion stimulus package that featured rebate checks for middle- and lower-income taxpayers.

Earlier this month, amid a worsening credit crisis, President Bush signed a $700 billion financial rescue bill, $250 billion of which is being used to boost capital for troubled American banks. Now, U.S. officials are openly discussing the merits of a third government economic intervention. Testifying on Capitol Hill Monday, Federal Reserve Chairman Ben Bernanke said Congress should consider another stimulus package.

"The uncertainty currently surrounding the economic outlook is unusually large," said Ben Bernanke. "Any fiscal action inevitably involves trade-offs - not only among current needs and objectives, but also because commitments of resources today can burden future generations and constrain future policy options. That being said, with the economy likely to be weak for several quarters and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate."

More VOA News - US Officials Discuss Second Economic Stimulus Package

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Use the second stimulus to fix infrastructure...

Stimulus cash or infrastructure?
Wed., Oct. 22, 2008 WASHINGTON - Many economists see more long-term benefit in tackling big projects

The $600 rebate checks provided by the federal stimulus package earlier this year may have been popular among taxpayers, but many economists think any future effort should focus on infrastructure spending and other targeted measures. Spending on new roads, bridges and other public works projects would create jobs and provide more of a lasting boost to the economy than another round of rebate checks, several economists said. They contend a common concern about infrastructure spending — that it takes time to gear up and may not kick in until after the recession is over — is less compelling now because the U.S. economy likely will experience an extended downturn.

"We're going to be in a longer period of weak growth and high unemployment" than was expected earlier this year, said Laurence Meyer, vice chairman of Macroeconomic Advisers and a former Federal Reserve governor. Any new stimulus needs to "have more legs" than the rebate checks, he said. House Speaker Nancy Pelosi of California and fellow congressional Democrats are pushing a new stimulus package that could cost as much as $150 billion, though some economists think the total should be $300 billion or higher.

Federal Reserve Chairman Ben Bernanke boosted their efforts Monday when he said a stimulus package "seems appropriate" as the economy is "likely to be weak for several quarters" and there is "some risk of a protracted slowdown." After Bernanke's remarks, the White House said it was open to additional action. Still, other analysts cautioned that infrastructure spending is subject to political pressures that can make it less effective.

"You don't want to build more bridges to nowhere," said Brian Bethune, U.S. economist at the consulting firm Global Insight, referring to the infamous bridge in Alaska that connected a sparsely populated island to the rest of the state. But Bethune said the package could include tax credits for companies that invest in wind, solar and other alternative energy, because the financing for many such projects has dried up due to the financial crisis.

More Stimulus debate: Cash vs. infrastructure - Economy in Turmoil - MSNBC.com

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Sheila Bair - Superwoman...

One failed bank gets the housing fix right
October 24, 2008: When the FDIC seized mortgage giant IndyMac it was one of the biggest bank failures ever. Now the troubled lender just may lead us out of the housing mess.

The battered economy is in desperate need of a housing fix, and one failed bank just may have the answer. On Thursday FDIC Chairwoman Sheila Bair told the Senate Banking Committee about the success her agency has had in helping struggling borrowers at IndyMac, which the FDIC took over this summer.

Bair, the nation's leading bank regulator, thinks this foreclosure prevention program can work for other banks. "Our hope is that the program we announced at IndyMac Federal will serve as a catalyst to promote more loan modifications for troubled borrowers across the country," she told the committee.

She's not alone. While individual lenders, loan servicers and non-profit foreclosure prevention outfits have been chipping away at the staggering housing crisis on a case by case basis, IndyMac, under the FDIC's leadership, became the first bank to establish a set protocol to modify home loans.

Speeding the process

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IndyMac, FDIC are models for mortgage relief
Saturday, October 25, 2008 - Maribel Carrillo is one of the new, happy-ending stories for bank regulators who hope to stem the foreclosure pandemic by modifying delinquent mortgages in bulk.

Carrillo, 32, lost her $150,000-a-year job managing a record label in Los Angeles earlier this year. With her family's construction business sputtering, she and her husband soon fell behind on their home loan on their four-bedroom ranch home in Los Angeles. After missing three payments, the Carrillos were $9,800 behind on their mortgage with IndyMac Bank. But after the Federal Deposit Insurance Corp. seized IndyMac, the bank agreed to modify Carrillo's loan, dropping her monthly payment from about $3,000 to about $1,600 for five years.

Under the FDIC's orders, about 4,000 IndyMac borrowers so far have been given more-affordable mortgages. By Friday, the bank was expected to have sent out more than 15,000 modification offers to borrowers, who are saving $430 per month on average. IndyMac's efforts, which are designed to save the FDIC money by curbing losses on foreclosed homes, are being closely watched nationwide. In fact, Bank of America Corp. is taking a similar approach with newly acquired Countrywide Financial Corp. as part of an $8.4 billion, 12-state legal settlement reached this month.

And now some congressional Democrats and state officials say the FDIC's approach should be replicated as the Treasury Department buys billions in troubled mortgage debt as part of a $700 billion financial industry bailout. "The country is in crisis," said Iowa Attorney General Tom Miller. "This is something that everybody should do." And frankly, with home prices off 18 percent nationally from their peak in mid-2006, and more in places like California, Nevada and Florida, aggressive loan modifications now make more financial sense for lenders, said Steve Bailey, a former Countrywide executive who heads up Bank of America's loan administration division.

MORE

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Fearless W workin' on it...

The Next Bailout: Helping Homeowners in Distress
Thursday, Oct. 30, 2008 - A week into difficult talks, agencies within the Bush Administration are struggling to agree on a far-reaching new plan that would rescue homeowners with mortgage woes and ease the vicious foreclosure cycle that plagues the housing market.

Participants in the talks, including officials from the Treasury Department, the Federal Deposit Insurance Corp. (FDIC), the Department of Housing and Urban Development (HUD) and other agencies, are focusing on two possible plans, say sources familiar with the discussions. The first plan, backed by FDIC chairwoman Sheila Bair, would create an incentive for banks to change the terms of troubled mortgages by guaranteeing mortgages for millions of Americans who are struggling with their house payments but are otherwise creditworthy. The plan would use up to $50 billion of the $700 billion in bailout funding approved recently by Congress and would draw on new loan-guarantee authority passed under the bill. The Federal Government would guarantee loans readjusted for homeowners who can show annual income worth 38% of the debt on their house. Under the plan, lenders would be encouraged to lengthen loan terms and make other adjustments in order to lower monthly payments to help borrowers keep their homes.

Those principles are similar to the ones the FDIC worked out for the 60,000-odd bad home loans it took on when it closed IndyMac, a failed California bank, last summer. Bair outlined her proposal in testimony on Oct. 23 before the Senate Banking Committee. "The government could establish standards for loan modifications and provide guarantees for loans meeting those standards," she said. "By doing so, unaffordable loans could be converted into loans that are sustainable over the long term." At the same hearing, Neel Kashkari, the acting assistant Treasury Secretary in charge of the $700 billion bailout package, said his department is "passionate about doing something about foreclosures and encouraging loan modifications."

A second plan being discussed calls for the expansion of existing housing-assistance programs run by the Department of Housing and Urban Development, according to an Administration official. The official said there were advantages to using existing HUD programs rather than starting a new one from scratch, adding that it was unclear who would administer the FDIC's plan. "There's a lot of work to do to flesh out [Bair's] idea," the official said. Congress and both candidates for President have also discussed potential homeowner-bailout programs of their own.

More The Next Bailout: Helping Homeowners in Distress - TIME

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Will a Gov't. Loan Modification Plan Work?...

Stuck in a Mortgage Mess? 'Modify' It!
Oct. 31, 2008 - A government plan allowing "modification" of mortgages could help 3 million.

Denise Harris is worried about her children. Since her divorce, it's been tough to make her mortgage payments and she's afraid that her family will soon have to move out of their Arizona home. The children, ages 9 and 13, "don't want to move. They've gone through a divorce already and I wanted stability for our lives," Harris said, "but Mommy's got to find a creative way to make it work right now." If the federal government offered a plan to help her modify her mortgage, Harris said, "it would mean everything."

Modifying loans is part of a new proposal now under consideration by the government, a person familiar with the matter told ABCNews.com. The proposal, by the Federal Deposit Insurance Corp., is similar to measures being implemented by the FDIC at the failed California-based bank IndyMac.

Unlike a previous government mortgage relief plan -- the Help for Homeowners plan, which Congress approved in July -- the new plan isn't dependent on a lender's willingness to write down a loan's principal. Instead, other loan modifications are favored -- namely, lowering interest rates and lengthening loan terms. In exchange for the modifications, the government would guarantee the loans. Some experts say that, so far, it sounds like a good idea.

"When a real big financial bubble deflates, which is what we're in the midst of here. ... Any one thing you do is not going to be enough," said Alex Pollock, the former president of the Federal Home Loan Bank of Chicago and a resident scholar at the American Enterprise Institute. "You have to try different things and this is a reasonable thing [to] try."

According to published reports, a government loan modification plan could aid 3 million homeowners, would cost up to $50 billion and could be funded by the government's new $700 billion financial rescue package. But officials at the Treasury Department said Thursday that it was too early to discuss specific proposals.

More ABC News: Will a Gov't. Loan Modification Plan Work?

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We're runnin' outta blacktop...

Asphalt shortage delays road repairs nationwide
Sun Nov 9, `08 – Expect a bumpier drive. An asphalt shortage is delaying road maintenance projects in communities nationwide.

Asphalt is becoming scarce as U.S. refiners overhaul their equipment to maximize output of highly profitable fuels such as diesel and gasoline, using inexpensive — and hard to process — crude oil. To make things worse, refiners are also cutting back on the production of a petrochemical that many states mix into asphalt to make roads more durable. Dozens of road repairs were delayed last summer and municipalities around the country may face another shortfall next summer. Road-maintenance projects that have gone forward cost significantly more as the price of asphalt nearly tripled over the past year.

The dearth of asphalt compounds the challenges states, counties and cities already face in fixing bridges, highways, local streets and other critical infrastructure at a time when budgets are squeezed by falling income, sales and real-estate tax revenues — not to mention higher costs for fuel, steel and other raw materials. In Utah, as many as 50 road maintenance projects were delayed this summer by the shortage of asphalt — including one for a highway that leads to one of the state's top tourist spots, Park City and its skiing resorts. Those delays add millions of dollars of extra costs, including labor. "It strains an already strained budget," said Jim McMinimee, director of project development for the Utah Department of Transportation.

Municipalities in Alaska, New York, Colorado, Oklahoma, Idaho, Wyoming, Arizona, Nevada and Washington state also blamed road work delays on asphalt shortages. In the past, about 40 percent of an oil barrel would be turned into asphalt products and now it's around 10 percent, McMinimee said. In all, thousands of miles of highways, city streets and small country roads are being affected, state and industry officials say.

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