Woah woah woah woah woah!

The House is taking comments/debating this bailout right now starting at Midnight Monday 28 September 2008. Rep. Marcy Kaptur (D-OH) is calling the bailout "printing money for Wall Street" right now on C-SPAN 1.

Nobody entirely knows what the rules are but this is some commentary on the most recent draft available at the time. Initial reports are poor. I'm alarmed at reducing bank reserve requirements to zero. (Now Rep. Shelia Jackson Lee (D-TX) is saying no, that there is no reform in this bill.) Calculated Risk says they'll be voting Monday, which is no doubt why they're getting to debate from Midnight to 3AM. Jesus.

Bloomberg has noted that the $700B is a limit on bailout funds at any given time, not total, and that it could easily balloon to $5T.

Mr. Bush is supposedly making a statement at 7:35AM EDT.

Rep. David Dreier (R-CA) defends "supervision and oversight" and says the bailout will not place the burdon onto the taxpayers, which is just orthogonal to reality.

Rep. Dennis Kucinich (D-OH) uses the "cash for trash" rhetoric, says US treasury turned into a "toxic landfill" for bad paper. "We'll be right back here in a few months with the same kinds of problems because we're not solving the underlying matter here..."

McCain is reportedly onboard. House Republican leadership reportedly onboard. Sorry, no links right now.

Brad Sherman (D-CA) "This bill does not really limited executive compensation... it doesn't have any limits on regular salaries; million dollar a month salaries will continue, and they can be raised... if they feel that can be that generous to their executives. Foreign banks are going to get hundreds of billions of dollars from this bill..." Notes the U. Chicago protesting economist bloc is up to 400, including three nobel laureates.

David Dreier (R-CA) "guarantee in this legislation that the taxpayers will not be shouldering the responsibility" which is bullshit.

Brad Sherman (D-CA) fights the idea of adding any additional taxation of banking?

David Dreier (R-CA) says benefiting institutions must pay for bailouts later(?). A previous Representative noted that most of these will be temporary shell corporations which will go away before any bills come due. "There is a crisis of confidence, and I want to make sure that thoughout the upcoming weeks, months, and years, that when people who have deposits in financial institutions go to their automatic teller machines and seek to withdraw that those dollars are there." We have that now, clown. Now talking about lending availability, which is back on topic. Talks about constituent outrage. Talks about a whole bunch of diversionary stuff unrelated to actual outrage. Says judges will no longer be able to change existing mortgage agreements? Talks about limits on "golden parachutes" but see previous comments above about salaries being unlimited. (Also am told that the limits that are present will be only for top five executives.) Dreier talks about amendment to be offered tomorrow for some form of regulatory package later today. (Seven hours from now, where now is 22:01 PDT Sunday/1:01 EDT Monday, so, 8AM Eastern.

Reportedly, the bill is now called "Emergency Economic Stabilization Act of 2008."

eta: Bess at DealBreaker liveblogged a Treasury call to banks and other financial institutions. Stock futures are currently down about 1% overnight. The Fed continued not to be able to defend its overnight rate, look for a quick rate-cut to follow the market shortly after this goes through, assuming it does. Mish is not impressed, to put it mildly. Dr. Roubini is livid, saying that "the claim by the Fed and Treasury that spending $700 billion of public money is the best way to recapitalize banks has absolutely no factual basis or justification" and calling the bailout "a total rip-off that will mostly benefit – at a huge expense for the US taxpayer - the common and preferred shareholders and even unsecured creditors of the banks." He also calls it - again- a "disgrace:"

Thus, the Treasury plan is a disgrace: a bailout of reckless bankers, lenders and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the US taxpayer. And the plan does nothing to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown. It is pathetic that Congress did not consult any of the many professional economists that have presented - many on the RGE Monitor Finance blog forum - alternative plans that were more fair and efficient and less costly ways to resolve this crisis. This is again a case of privatizing the gains and socializing the losses; a bailout and socialism for the rich, the well-connected and Wall Street. And it is a scandal that even Congressional Democrats have fallen for this Treasury scam that does little to resolve the debt burden of millions of distressed home owners.

Tasty.

More

Brad Setzer at the CFR notes that the bailout's window of operations is roughly equal in size to the US current accounts deficit. Hmmmmmmm.

Business Week was asking late last week whether this would hammer the dollar (again). Not in the overnights - not right now, anyway - but over time. Tim Dye is the only economist I've see outside the White House who likes any part of this plan, but even in his view, it won't do anything beyond kick the banking system past the current crisis. Still, he's the one. From his commentary:

My hope is that a bailout is coming. But it will not change the path the economy is already on, it will only prevent activity from shifting to a new, less desirable path. I don’t quite see how the billions of dollars plowed into this program will be funneled to households. I see instead it will only cushion the process of deleveraging, and thus minimize the quantity of resources stripped from the economy. This is important and necessary, but will not provide a miracle cure for the economy’s travails.

Supported the Bailout is a placeholder page set up for political retribution to bailout supporters. The placeholder image is amusing.

Naked Capitalism has more notes about the non-public Treasury conference call, which has of course leaked, describing it as Mussolini-style corporatism in action:

This is simply scandalous. To have a group of interested parties get a privileged briefing by government officials on a matter of keen public interest flies in the face of what a democracy is supposed to be about... But why should I be surprised? Favoritism has been a staple of the Bush Administration. ...

1. The tranching is a mere formality, and the Treasury boys as much as said so. They could take the $700 billion max as soon as the bill has passed,

2. However, they do not plan any action immediately, will wait a couple of weeks. They want to focus their efforts on stronger companies but also made noise about protecting the financial system. This, by the way, is the Japanese convoy system all over.

3. There seemed to be a lot of tap dancing about what price they will pay for assets and no straight answer about their policy on warrants. They did say that if the amount sold was greater than $100 million, they would take warrants. FYI, the current draft allows them to pay up to the price at which the assets were initially booked (yikes).

... Update ...

2) Waiting a couple of weeks because no one has any idea when or where the next bomb will blow up. In other words, all their doomsday scenarios about Black Monday were B.S. They screamed the check had to be written by Monday, but now they're saying they actually have a few weeks before they need to cash it. Plus, this will allow them to "seek guidance" from GS, JPM, and other selfless public servants about where the money should be funneled.

3. The tap dancing is because they don't want it to get out that they'll be giving a sweetheart deal. The public won't be following each individual transaction to see exactly what price is being paid. So ridiculously overpriced asset sales can be hidden in the details, and by the time some reporter (or blogger :-) combs through and analyzes the transactions, the deed will have been done. But if Paulson makes a statement that assets will be bought at par before the bailout's even begun, that will be reported and might kill the deal.

...

Clawback of taxpayer losses:
1. it's a long way out, "a lot can happen in that time"
2. it's targeted at all financial institutions, not just participants! (that means it will never happen)
3. would need more congressional and presidential action to implement this.

There's lots more, go read.