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34
38
Yes No
Debate Score:72
Arguments:38
Total Votes:83
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 Yes (16)
 
 No (22)

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Do you want Congress to approve the $700B bailout plan?

Do you think it's necessary?

Congress announced today (9/28/08) that they have drafted a proposed bill to provide up to $700 billion to shore up the U.S. financial system. The bill, entitled the Emergency Economic Stabilization Act of 2008, allows the Treasury to buy "mortgages and other assets that are clogging the balance sheets of financial institutions," according to an official summary. Do you agree that this is necessary? Do you want your dollars used to bailout banks that made bad bets?

Yes

Side Score: 34
VS.

No

Side Score: 38
5 points

In principal I am against tax payer money subsidizing the reckless "casino" behavior of those on Wall Street and let's admit it, the foolish financial decisions of those on Main Street. The many should not have to suffer because of the actions of the few. But the problem is that if we don't help these lenders out, we all will suffer. This is the consensus despite ideological House Republican complaints. This is a failure of the market. These ideological law makers had almost a decade of what they wanted: an unregulated economy. And if they want to be true to their ideology, then millions will suffer because of these policies. They had the gall on Friday to stall legislation and push for cutting capital gains taxes and do nothing about the current crisis.

This bailout in its current form makes sense because it not only will staunch - and perhaps solve - the crisis. It helps out citizens who are struggling to pay their mortgages and will put in punitive (though not as harsh as I would like) measure to limit executive pay. Pay for a job done miserably. This economy hinges on economic growth and if credit is not readily available, growth cannot continue on a wide scale. This means jobs will not be created - they will be lost. This means people will not be able to invest in cars, homes, or education. No one likes this idea of all paying for a few, but if this does not happen, we all will suffer. This is a case of the government trying to work for its people. The government - who are elected directly and indirectly by us - need not be evil. It has the capacity for good.

Side: yes
Inkwell(328) Disputed
1 point

Since you have apparently seen a bill which is still being written, please explain to me how this bill helps folks with mortgages they cannot afford. The only way this happens is if the government buys the mortgage and then renegotiates it, which means they get paid back less than the $700B. Next explain to me what bad decisions "Wall Street" made that is like gambling at a casino. Wall Street bought packages of mortgages that had been securitized for one reason. Congress said it was ok when they mandated Fannie and Freddie to do the same thing. Without Congress pushing Fannie and Freddie to buy up these bad loans waiting to happen, Wall Street, or more specifically institutional investors which include not only hedge funds but Union pension funds, would have been more risk adverse.

As for deregulation, Glass Steagall occurred with the blessing of Clinton and Rubin, and it is no coincidence that most of the firms who survived were those who diversified as Glass Steagall prevented AND those mergers actually INCREASED regulation to industries less regulated than the banks who bought them.

And if the issue is Republican desire for deregulation, why did the unholy triumvirate of Chucky, Barney and Chrissy torpedo administration efforts at reforming regulation of Fannie and Freddie when the current crisis was first identified by Greenspan? And if your answer doesn't start with "because Fannie, Freddie and ACORN are gold mines for them", don't bother answering.

Lastly, executive compensation has nothing to do with this issue. It is a circle jerk to make you feel good without actually doing anything. If you want to address executive compensation fine, I am against it but go ahead, just don't tack these unrelated pandering temper tantrums onto a bill that is supposed to actually accomplish something. You would be much better off taking your pound of flesh from the people you praise, the ones who started this whole thing in the first place. Congress. They are NOT working for the people. If they had NOT been stopped by the House Republicans, the bill would have sent 20% of any profits to ACORN to fund the congressional campaigns as they have for years. What House Republicans did was keep the fox from being put in charge of protecting the hen house. No ideological stubbornness there, just practical common sense.

Side: No
fruble(455) Disputed
5 points

Responses

(1) You said:

Next explain to me what bad decisions "Wall Street" made that is like gambling at a casino. Wall Street bought packages of mortgages that had been securitized for one reason. Congress said it was ok when they mandated Fannie and Freddie to do the same thing.

Well, no. These mortgages were securitized and investment banks bought these packages for a bigger reason: they saw the potential for enormous profits. The lax regulation structure permited this to happen. Error 1: Home buyers, bankers, and investers all assumed that house prices would continue to rise. Error 2: mortgage lenders did not conventional financial background checks. I've heard that some didn't even need proof of having a job. Error 3: Rating agencies failed to do their jobs and look at the value of these packages that were repackage, repackage, and repackaged again as they were sold to bigger and bigger buyers.

And even if Fannie and Freddie were mandated to do buy these packages, it was the choice of those operating in the free market to buy these bad loans. McCain called this "casino" behavior because even he saw (or Steve Smidt) that investors were betting on risky investments to succeed. What happened to personal responsibility and accountability?

(2) You said:

"As for deregulation, Glass Steagall occurred with the blessing of Clinton and Rubin..."

Completely wrong. Glass Steagal was enacted in 1933. Unless you think that Clinton and Rubin jumped into a time machine, went to the future and had advanced genetic cosmetic surgery done to make them look like Depression era Congressmen, and then went back to the 30's and passed the bill, then ok. But this isn't the Family Guy and it didn't happen. Glass Steagal led to the creation of the FDIC and separated commercial banks from investment banks. Look up the info here at wikipedia.

What you are talking about is the Graham-Leach-Bliley Act. Cosponsored by my former Texas Senator Phil Graham (R), this was the bill that lifted regulation. And true Clinton signed the bill, but both parties are to blame for its passage. After conference, the legislation was veto proof.

(3) You said:

"Lastly, executive compensation has nothing to do with this issue."

While I agree that executive compensation may seem like a peripheral issue and it may not at the heart of the solution, it does play a significant role. Congress's phones have been ringing like crazy in response to this bailout. Citizens have a right to know if their dollars are going to executives who did a poor job at management. If anything, these punitive measures lend Congress the moral legitimacy to pass legislation.

But if you don't want the bailout to ensue, then fine. Let the wealthy have their money while the majority suffer through economic hardship. For the sake of everyone, though, I hope the opposition comes up with a better plan if they disagree with this one.

(4) Apology accepted.

Side: yes
1 point

owe you an apology, Fruble. Apparently the bill hit the net sometime after 8PM tonight in a somewhat complete form. I am looking at it now.

Side: yes
3 points

By the time all is said and done, the taxpayer won't lose a dime.

The government will buy these assets for dirt cheap. In two to three years, when the market is better, these assets should be worth more than the government bought them for.

And if they aren't, then the bill has a clause that says "any losses will be assesed to the banks" so that taxpayers don't lose any money.

We need a big bailout to get credit moving. If it doesn't happen, we may see another great depression.

Side: yes
Inkwell(328) Disputed
1 point

I am not sure you are correct. I am not sure that investors will sell for 30 cents on the dollar. I am also not sure that the housing market will bounce back so quickly. There is a lot of pressure to keep stocks and housing from bouncing back up quickly. There is going to be a lot of money that consumers don't put back into the system by spending as they used to do and is used to pay down debt and put into savings. The consumer is the engine for growth and I think he is going to withhold fuel for the next boom. Investors, including institutional investors are not chasing these speculative gains you are predicting. They are in gold and TBills and bonds. Look at what happened to yields today. The main short term problem is keeping money in the banks and out of safe havens like TBills. We are going to have to do something like the Cramer suggestion of increasing FDIC guarantees of deposits to prevent a run on commercial regional banks. The issues here are so big that I cannot even begin to understand or even detect the pitfalls awaiting us at every turn. I do know that Congressional leadership is not our friend in this. They started this problem. I do know that anger over executive compensation and other silly knee jerk pandering is counterproductive.

The revolution of the House Republicans is a GOOD sign. Someone is thinking about the issues and not about partisan politics. The Bush plan was a joke and the Democratic modifications were more of the same. Congress is the problem, not the solution. Hopefully now the Congress can go back to work and cobble together a bill to actually fix something without pandering to people's fears and worries and frankly ignorance of the real issues. This was a bad bill and its death is a good thing. The Dems are on TV right now trying to make this a partisan issue but over 40% of the Dems refused to vote for this abomination too. It is not about partisanship as much as it is about backbone. Who had the backbone to buck the leadership of their own party. They all need to come back with a bill that goes beyond this one with none of the nonsense intended to make a scapegoat or pander to voters.There are bigger issues than the mortgages and they need to be addressed as well. Liquidity, bank runs, currency issues, dollar issues . . . if we don't have a comprehensive approach, we will just throw away money as usual when Congress signs something into law.

Side: No
Cdelvalle(196) Disputed
2 points

Congress is the problem?

I don't think that's the case at all. I think who bears responsibility are the banks who ignored risk and started lending in this manner. I also blame the last 20 years of financial deregulation which led us right into the mess we're in today.

I agree, we have a problem of confidence. I also think FDIC reserves should be boosted (wait, isn't that Congress who does that?!?).

And Lastly, i think the president, fed chairman, and treasury secretary should go in front of the nation everyday and remind people that there is plenty of cash in the system and that nobody is going to lose their accounts.

With that said, as long as banks are holding on to bad assets and hoarding cash to anticipate future losses, then the credit markets will not function normally.

Have you seen what's happening in the commercial paper and credit default markets? It's crazy. Margin calls of well over $150 billion were made last week alone.

What happened today, was nothing more than politics. It's an election season and certain republicans want to keep their "Free market" credentials before re-election.

I can nearly guarantee that if this crisis had occurred after the elections, the bill would have made it through congress just fine.

Side: yes
3 points

The knee-jerk response is to say "no!" because it all came from greed, mismanagement, and lack of oversight and regulations. But the sad truth is that the economy truly will fail if our financial institutions fail.

It is imperative, however, that there be severe restrictions on CEO salaries and golden parachutes. Also, there must be an oversight panel that keeps track of and approves of how every penny is spent. The original bailout was an unfettered blank check, which is the same as giving a sub prime loan to an individual who can't afford to make the payments. It is this kind of irresponsibility that started the whole downfall!

"The first few hours were intense and contentious, participants said, marked by shouting over executive pay and a last-minute Democratic request for a fee on the financial services industry to cover the cost of the bailout program."

I trust Barack Obama and my Democratic representatives to make sure that the bailout protects and serves the taxpayers. Yes, Main Street, not Wall Street.

Supporting Evidence: Sweeping Bailout Bill Unveiled (www.washingtonpost.com)
Side: yes

I'm inclined to agree on you with this with one exception. Is the sad truth that the economy WILL fail if some of our financial institutions fail?

The portion about CEO salaries is a part of what irks me and from that same article; "According to a recent report by the Institute for Policy Studies, the chief executives of large U.S. companies made an average of $10.5 million last year, 344 times the pay of the average worker." Considering there have already been 'Golden Parachutes' seen in the skies before so many companies went down...and those because they saw the handwriting on the wall. We must find a way to bring these Gold Digging executivess to justice and penalize them monetarily for life if needs be.

Any bank, like Bank of America, JP Morgan/Chase or financial institution that is still viable should be buying up some debt here. I don't trust Ben Bernake or Paulson or practically anyone else in this matter but I listened to a video the other day that made some sense to me. I admit, I am NO financial wizard by any stretch of the imagination and don't usually get involved in discussion revolving around finances but please watch this and see if it makes any sense to you as it did me. I am of the opinion that NO taxpayer dollars go to bail these crooks out. Find the way to let them help themselves as they have to our money and investments.

The Way To Actually FIX This Problem
Side: No
Inkwell(328) Disputed
1 point

wow, if any of that made some sense to you, you are way beyond me. I understood so little of it I can barely comment on it. I assume level three assets are derivatives such as mortgage backed securities and asset default swaps but am not sure. Disclosure is never a bad idea but it does have costs to it. I have no idea of the possibility, costs and effects of taking derivatives off OTC and onto an exchange but i do like the idea on the surface of stopping the arbitrage of such securities. I find it hard to believe that this would solve a large part of the crisis but I admit freely most of this is over my head. Leverage is something I have been talking about and I agree with that part.

Maybe I just have a problem trusting someone named "Carl, your ticker guy" with fixing our economy. :)

Side: No
Cdelvalle(196) Disputed
1 point

I agree with everything except your last statement.

Did you know that Barack Obama signed a bill that prevented reform of Fannie and Freddie back in 2005? Had that bill passed, Fannie and Freddie would have been fixed then, and not bailed out (Causing the mess it did) now.

From a recent response...

"A bill passed the Senate Banking Committee that would create a regulator that would cause Fannie and Freddie to rid their investments in high risk paper as well as additional oversight. Too bad the bill didn't pass, because things would be a lot different today. The bill never made it to the Senate floor because the democrats blocked it.

It was Senate Bill #190 and was, incidentally, co-sponsored by Senator John McCain, blocked by Senator Chris Dodd (who received over $125,000 in campaign contributions from Fannie and Freddie), Senator Barack Obama (who received over $165,000 from Fannie and Freddie), Senator Hillary Clinton (who received over $75,000 from Fannie and Freddie). You can throw Barney Franks in there too."

I don't trust Barack because I don't trust any politician. They are all opportunists who are bought out by the elite.

Side: No

We should bail them out to prevent a larger problem... BUT, they need to pay back the loan, with interest!

Side: yes
2 points

Who should pay them back with interest? The homeowner who is having his foreclosure forestalled by a govt bailout and will likely have his mortgage renegotiated to an extent that he can afford? The banks who made him the loan merely to collect their fees and then pass on the bad loan ticking like a time bomb to either Freddie or Fannie or some private equity investor? Or the private investor/Freddie/Fannie whom we are bailing out of their mistake? Or congress who dictated that all three of these players HAD to participate in this boondoggle? Just who should pay this interest?

Side: yes

From a different perspective, perhaps Americans should consider their standing as a member of the world economy. International investors want their investments returned. They were lenders whom brokers sold mortgages to. They were shareholders in Bear Stearns, in AIG. When an American broker uses foreign money to give trailer trash a home, the American broker earns the money, the American citizen gets the home, but if it fails, it's not the broker or the homeowner who looses out, it's the foreign investor. These investors were sold falsely classified investments, what should have been rated D but were instead marketed as AAA. Now, how will the international financial community feel about this gross subversion of trust? Do you think, if they never get any of their investment back, that they would ever again invest in America? America has a reputation to hold. The world has been hurt. If you do not address this loss of confidence, then the world will hurt America back. IF a bailout does not occur, and foreign investors do not get their money back, then America can wave foreign investment goodbye. That is why congress needs to bail out the banks, to protect America's reputation, or at least, salvage it.

P.S. This is in reference to the second bailout proposition.

Side: yes
0 points

yes i beleive that we need this because at the rate were going we will be in the middle of the next great depression in just a few years. WE NEED THIS BILL!!!!!!!!!!!

Side: yes
3 points

First of all, anyone who answers your specific question right now is not worth reading. No one has seen the form of the final bill to be voted on as it is being written as we speak, or so I understand.

To speak in some general concepts is something worthwhile. I would make the following points.

First, it is not the banks who we are bailing out. The banks made these loans with little underwriting being done. This is because Congress mandated that Fannie and Freddie would trade in these loans to unqualified borrowers. So the banks could take their fees and get the bad loans to be off of their books. So let's understand what has happened here.

Congress, specifically Barney Frank, Chuck Shumer and Chris Dodd, tried to do a good thing, encourage homeownership by less advantaged and qualified folks. In this country owning your own home is a key, perhaps THE key component of the American Dream so obviously this was a good thing. Forget for now that they abused the "doing a good thing" by creating an ATM out of Fannie, Freddie and ACORN to fill the coffers of key senators campaign war chests. So first Congress created the CRA, Community Reinvestment Act which literally mandated that banks must make loans to less advantaged folks in the neighborhoods in which they did business and then they mandated that Fannie and Freddie would buy/ guarantee those loans. This mean the banks could earn CRA credit and book the fees without taking on the risk of the loans which were sure to go bad. This became such a profitable and predictable and low risk income producer, the banks found ways to pass these lowered underwriting standards on to as many different groups as they could. The fact that Fannie and Freddie were mandated by the govt to buy these loans meant that private hedge funds, insurance companies, union pension funds and other huge institutional investors saw a govt endorsement of these products. This artificial support caused a bubble just as surely as "irrational exuberance" did in the equity markets ten years ago.

So what popped the bubble? The bubble saw folks buying houses for second homes or for investments which they could not afford if things were less than perfect. Just like the stock bubble people bought betting that prices could keep going up forever. Unlike your primary residence, there is less resistance to letting these properties go so foreclosure rates went up and the investors, who had a set formula for how many loans out of 100 would go bad, suddenly found that their formulas were worthless. They had no idea how to price the packages of mortgages so they stopped buying them. Without these investors, the banks and mortgage companies were stuck with their mortgages which meant two things. No liquidity so they didn't have the money to make new loans, and they were stuck with these bad loans on their OWN books. However unlike private investors, banks are subject to govt regulation. So when a loan goes bad, a bank has to increase capital reserves, which mean they have even LESS money to conduct normal business.

Now let's make sure a couple things are clear. When the government mandates that Fannie and Freddie buy up these loans, it is telling the banks it wants these loans made. So while the banks and mortgage companies might have been greedy and opportunistic and turned the loans into uses never intentioned, they were reacting to the government mandate to push sub prime loans.

OK, now that we know what happened, what needs to be fixed? First, we need the bad loans removed from the packages of mortgage backed securities so that investors can price these vehicles and restore liquidity to the market. Next we need to make sure that the entity doing the underwriting keeps some of the risk so that they will seriously underwrite their loans. My personal choice for doing both of these in one fell swoop is to remove Freddie and Fannie from the equation and replace them with covered bonds. A covered bond stays on the banks books and if a mortgage in the portfolio underlying the bond goes bad, the originator has to replace it with a good loan. So liquidity is restored because the investor knows what he is getting. The bank has a hammer over it to seriously underwrite loans because their bad decisions stay on their books. Fannie and Freddie are removed from the equation because they have been abused. Money funneled to them was used to enrich not only shareholders and execs which is fine for a private company but not for a government sponsored entity but also to fill the coffers of Senators who protected Fannie and Freddie when Green span, the administration and a few brave congressmen actually tried to impose some restraint on the system over the last 5 years.

So, I do not think the bill should pass as I understand it to be formed. I do NOT think that executive compensation is the issue here. It is mere pandering by the very senators who caused this mess in the first place. I absolutely would go wild if any money were put into the slush fund existing for years at Fannie, Freddie or ACORN. Any profits, and frankly I don't believe there will be any profits but any money generated should either be used to pay down the social security deficit or pay off debt. Nothing else is acceptable and you just KNOW that it will get diverted in the future. Fannie and Freddie have to either be dismantled by a covered bond structure or at the very least they cannot pay lobbyists or in any way influence the congress which has treated them like an ATM. There should be NO add ons, earmarks, unrelated riders, pet projects or anything muddying up this bill. If you want to target exec pay, fine. But don't do it here; it has nothing to do with this issue. It is merely pandering. Oversight cannot be by the same people who caused this problem. Namely the pertinent committee chairmen (Barney, Chucky and Chrissy). They should be forced to admit that they screwed up and fall on their swords. Allow them to claim they had the best of intentions but they must admit they screwed up and were primarily responsible for this mess. First for putting the government stamp of approval on these loans and then by fighting and stymieing the efforts over the last few years to address the Fannie/Freddie mess before it got to this stage. Last, no recess for Congress.

As soon as this bill in a form acceptable passes, they need to address the underlying, potentially bigger problem of the dollar crisis. Investors liked to say that the "ROW", rest of world, could thrive while we floundered and so they either invested in foreign countries (BRIC, Brazil, Russia, India and China) or in commodities that these countries needed like hard metals and energy. But recent events have proven that if we get a cold, the rest of the world sneezes. There are underlying dollar issues that Congress needs to address. And if they have any energy after they are done with all that, there are the good ole mundane things that Congress has refused to address for decades, social security, welfare, health care and the deficit/debt load.

Side: No
2 points

Hard to believe as long as that post was that I forgot something but . . . Has anyone heard whether we will be buying up these bad loans at face value? A percentage of face value? A percentage of new appraised value? Will Mark to Market and BPOs be continued or disposed of? Too much that we don't know about this deal.

Side: No

Here's another take on the reasons we should not bail them out. I know you guys are gonna yell, but it comes from a guy at Huffington named Dean Baker. It makes sense to me as well! Again, bear in mind I am no financial guru but I do try and weigh what I have read from both sides. Perhaps because of my inexperience in such matters I'm taking a more simplistic view but I do know that sometimes, the simplest way out happens to be the best way out...and I do not believe in my heart and mind we should bail these thieves out! I'm thinking they really are trying to scare us to death so we'll shut-up and go with it!

Supporting Evidence: Why Bail? (www.huffingtonpost.com)
Side: No

Again, Dean Baker on the Bailout and the "Great Depression" that would never ensue if they were not bailed out. It is said that the bill was passed tonight. I'm going to have to see the language of the bill and how it helps taxpayers and metes out justice for those who stole our money and retired to Egypt with it!

Supporting Evidence: More From Baker on the Bailout (www.huffingtonpost.com)
Side: No
2 points

Anyone who's read my arguements knows this isn't that easy for me but...

Good job republicans shooting down this bill.

Here's a much better plan

The numbers may not be exactly right yet on this, but I like the idea of "fixing it from the bottom up" as opposed to the top down. Hopefully Kucinich isn't ignored (which he usually is) by both sides. I'd have to think that at face value at least this is a plan dems and republicans can get behind.

Side: No
1 point

Welcome to the Dark Side lolol

This plan is not too far off from the reference I have made a couple times to privatizing a portion of social security with the warrants and preferred stock and real estate assets the govt is accumulating. Instinctually I like it but I am sure there is a ton of mess behind it I haven't thought of yet. I really, REALLY hate the idea of the govt being a player in the equities market with a presence bigger than every hedge fund and union pension and mutual fund as this fund increases over the years. But I like privatization and am not sure how else you accomplish it.

I think both sides would do well to listen more to both Kucinich AND Ron Paul even though I think they are both dangerous with too much power, they are both valuable sounding boards and smart independent thinkers.

Side: No
2 points

it is a very stupid plan. our country is trillions of dolllars in debt,yet we are spending billions more which is just digging a big burden for our kids and grandkids.

Side: No
Cdelvalle(196) Disputed
1 point

all of this money should come back as the assets mature. Plus, it looks like companies will be on the hook to pay for some of the losses, if they even occur.

Side: yes
1 point

Still see conflicting details. One article says there are limits on exec compensation in companies dealing with this new program but another doesn't say limits, but says companies will be taxed on golden parachutes. so no idea what the facts are there. Also still have no idea how govt is going to legally rewrite employment contracts already in place. It looks like there will be a reverse auction so that the investor who bids the lowest price on their toxic loans will be bought out. No idea yet what that means in terms of likelihood that deal turns a profit or how much room is created to deal with homeowner. Modifications to the "Hope for Homeowner" program are referred to but aren't detailed. My understanding is that only BAC/Countrywide has shown any interest in this program. None of the unholy three are included on any oversight capacity except as part of the whole congress and in choosing members of outside oversight chosen by Congressional leadership. New concern is how much the various levels of admin are going to cost over and above the 700B. Also no details on how the warrants are handled. Seems to me these could be put into Social Security as a part of a partial privatization that is eventually going to have to be part of any plan to save Soc Sec. They are studying a rejection of mark to market accounting. Lots of meat in here but still just looking at summaries. I don't trust the details until i see what pet projects are in here.

Side: No
1 point
Side: No
1 point

No. I want to believe that what we're being served isn't a "cowpie with a marshmallow in it"

Side: No
1 point

no! its thaire mistake so let them bail em selfs out

Side: No
0 points

No....

Though they already did...

It's not right...

It's a BAILOUT...

Is that what we need?

ANOTHER BAILOUT...

It is just not a good idea...

Side: No