Thread: Paulson's powers of persuasion tested

WASHINGTON - Behind closed doors at an early breakfast this summer, Federal Reserve Chairman Ben S. Bernanke shared his concerns with Henry M. Paulson Jr. about the treasury secretary's plans for a massive bailout of a troubled segment of the financial markets: Could he really get a Democratic Congress to grant broad new powers to a lame-duck Republican administration?

Paulson said he was confident. About two weeks later, Congress indeed handed Paulson sweeping authority to rescue ailing mortgage financiers Fannie Mae and Freddie Mac.

Now, as Congress considers a second request from Treasury -- this time for broad discretion to spend $700 billion to buy troubled assets from distressed Wall Street firms -- Paulson again confronts the liability of working for an administration in its twilight. Only this time, he's discovering that it's harder to get what he wants.

Paulson is also finding his credibility questioned after having told lawmakers two months ago that he had no intention of using his new authority to rescue Fannie Mae and Freddie Mac, ultimately putting taxpayer dollars on the line to do so.

After Bernanke heard Paulson's self-assured response at their breakfast, the Fed chairman replied: ''I'll back you up. Do everything you can to get it,'' according to Paulson, who recently recounted the meeting.

This week, Bernanke has again given Paulson his full support as the two men press Congress on their ambitious bailout of the financial system. But so far, even Bernanke's stature has not been enough to persuade Capitol Hill to approve the measure over widespread voter objections.

"We don't deal only with Wall Street. We deal with Wall Street, but we also deal with Main Street," Senate Majority Leader Harry M. Reid (D-Nev.) said at a news conference yesterday. "And Secretary Paulson, fine man that he is, has learned a lot about how we serve our constituents. And so these obstacles can be overcome, but those appointed officials, like Paulson and Bernanke, are going to have to become more realistic.


‘Roller coaster’
This week has been a "roller coaster" for Paulson and rougher for him than he may have expected, said one federal official who knows him well. Last weekend, he pushed lawmakers in the House to have an agreement in place before financial markets opened on Monday, fearing that indecision by Congress would further roil Wall Street.


By Friday, despite a despite a flurry of meetings on Capitol Hill and late-night phone calls, a deal had still escaped him. Meanwhile, conditions in the credit markets continued to worsen, making it difficult for corporations to get money and threatening to pull some down.

Paulson had been worried in the days before announcing the plan about putting such a weighty proposal in the hands of Congress, according to Treasury officials. But they said he saw little choice after the credit markets that provide funding to a wide range of U.S. corporations nearly grinded to a halt.

Some lawmakers have openly wondered whether Paulson, a creature of the financial markets who was shaped by his decades at the investment bank Goldman Sachs, understood the politics of putting so much taxpayer money on the line for Wall Street firms.

"I think that there's been some degree of amazement from the White House, and certainly Secretary Paulson and Chairman Bernanke, that people who run for elective office have constituencies that they have to take care of," Reid said yesterday.


"There's very much understanding that this is hard to do," said Treasury spokeswoman Michele Davis, who also is director of policy planning. "But at the same time, if we are going to do it, we have to make sure it works. We have to absolutely talk about compromises that various people need and lots of other ideas that can improve the program. But for the sake of political compromise, we can't do something that would make the program ineffective."

Davis said that by the week's end most lawmakers understood that more than Wall Street's health was at stake and that the economy would be threatened if the plan failed to pass.
Paulson still faces a challenge primarily from lawmakers in President Bush's own party. Many Republicans have been unswayed by lobbying from the White House, including some of the administration's most powerful figures.

Some of these Republicans had earlier questioned the wisdom of bailing out Fannie Mae and Freddie Mac. Paulson's "success in Fannie and Freddie contributed to his difficulties here," said Edwin Truman, a former assistant secretary of the Treasury during the Clinton administration and now a senior fellow at the Peterson Institute for International Economics. "How often can you go to Congress to get a blank check?"

Pulling the trigger
In pressing Congress to obtain the authority to rescue Fannie Mae and Freddie Mac, Paulson in July told a Senate Banking Committee hearing: "If you've got a bazooka, and people know you've got it, you may not have to take it out." Less than two months later, however, Paulson pulled the trigger, putting the two mortgage firms under government control.

Paulson is also trying to win the trust of lawmakers after his previous ad hoc effort to rescue firms such as Fannie, Freddie and insurance giant American International Group failed to stem the financial crisis.

Paulson himself said it was time to scrap the case-by-case approach in a speech at Treasury a week ago. He said his new comprehensive strategy has a better chance of calming the turmoil in the markets.

''I am convinced that this bold approach will cost American families far less than the alternative -- a continuing series of financial institution failures and frozen credit markets,'' Paulson said.

http://www.msnbc.msn.com/id/26913664/page/2/

LETS CALL FAX AND EMAIL!!!! WE ARE A PAULSON AND WE ARE NOT GOING AWAY!!! NO BAIL OUT!!!!

TOGETHER WE CAN DO THIS!!!

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Lawmakers Get Down to Details of Drafting Bill

Washington Post Staff Writers
Saturday, September 27, 2008; Page A01

Talks over the Bush administration's plan to stabilize the U.S. financial system lurched forward yesterday, as rebellious Republicans returned to the negotiating table and congressional aides began the tortuous work of drafting a bill to execute one of the biggest interventions into the private market in modern history.

One day after they nearly derailed the plan, House Republicans agreed to send their second-ranking leader to negotiate with Democrats and Senate Republicans.

Lawmakers canceled plans to adjourn yesterday for the November election and instead prepared to work through the weekend on the proposal, which would authorize the Treasury Department to spend up to $700 billion to take bad assets off the books of faltering financial institutions. Democrats said they hoped to announce an agreement late Sunday before Asian financial markets open, with a House vote on the measure possible by Monday. A Senate vote would follow later in the week.

"Great progress is being made. We will not leave until legislation is passed that will be signed by the president," said House Speaker Nancy Pelosi (D-Calif.).

Added Rep. Barney Frank (D-Mass.), an architect of the legislation: "I am convinced that by Sunday we will have an agreement people will understand."

With global markets hanging on every twist of the debate in Washington, White House officials swarmed Capitol Hill in an attempt to salvage a deal, while President Bush issued another call for action during a brief appearance outside the Oval Office.

"There are disagreements over aspects of the rescue plan, but there is no disagreement that something substantial must be done," Bush said yesterday morning. "The legislative process is sometimes not very pretty, but we are going to get a package passed. We will rise to the occasion."

Bush followed his remarks with calls to House Republican leaders, who have balked at approving a massive bailout for Wall Street dealmakers and are pushing an alternative plan to create a government insurance program for home mortgages. Republicans say that plan would blunt the impact of record foreclosures, which have paralyzed institutions that hold mortgage-related assets. But critics say it would do nothing to inject needed cash into banks and other institutions.

Treasury Secretary Henry M. Paulson Jr. presented lawmakers with a three-page plan for salvaging the country's financial system one week ago. By yesterday, following discussions with Democratic leaders, the draft proposal had grown to more than 100 pages, with hours of negotiation to come.


Under a tentative agreement among lawmakers and administration officials, the measure would grant the Treasury sweeping power to buy up bad mortgage-related assets through Dec. 31, 2009, but it also would create an independent inspector general to oversee that program. As the new owner of billions of dollars worth of mortgage-backed assets, Treasury would be required to reduce the number of foreclosures by modifying the terms of the loans that underlie those assets.

Frank said Treasury also has agreed to accept other changes to its original plan, though aides were still haggling over details. Among the changes:
A proposal to dole out the money in segments, with Paulson getting $250 billion immediately, another $100 billion later and the final $350 billion after giving Congress 30 days to object.

· A plan to help taxpayers recover their investment by granting them equity in companies that participate in the bailout and return to profitability.


· A provision that would require the Treasury to ban "excessive and inappropriate" compensation for top executives at participating firms. Democrats are also seeking to eliminate a tax deduction companies take for executive compensation if a senior manager is paid more than $400,000 a year.

Republican negotiators, meanwhile, appeared to be most concerned yesterday about a Democratic proposal to dedicate a portion of any profits from the eventual sale of the assets to an affordable housing fund. Republicans argue that the fund would benefit social service organizations with strong ties to the Democratic party.

Lawmakers from both parties reached an agreement in principle on the bailout plan around lunchtime Thursday. But that deal was imperiled hours later, after a White House summit that included Bush and both presidential candidates turned into a shouting match. House Minority Leader John A. Boehner (R-Ohio) angered Democrats by floating the insurance idea, then refusing to participate in a late-night negotiating session with Paulson.

Yesterday got off to a much better start, as House Minority Whip Roy Blunt (R-Mo.) announced that he would join the negotiations. A member of GOP leadership for six years, Blunt enjoys a comfortable relationship with some Democrats and played the lead role in several recent bipartisan negotiations, including a compromise on foreign intelligence surveillance legislation.

Meanwhile, Rep. Eric Cantor (R-Va.), a key figure in a band of Republicans that had adamantly opposed the bailout plan, softened his opposition. Cantor acknowledged that, in dealing with the most troubled mortgage securities, the insurance model preferred by many Republicans would not be sufficient because the securities already had minimal value. "So you've got to go with Paulson's model," Cantor said.

Including an option for mortgage insurance might persuade more Republicans to support the bailout plan, Cantor said. Boehner concurred, saying the entire deal could collapse unless the idea were given serious consideration.

Without it, "a large majority of Republicans cannot -- and will not -- support Secretary Paulson's plan," Boehner wrote in a letter to Pelosi yesterday.


Democrats said they don't think insuring mortgages would solve the credit crisis, because the Republican plan proposes to charge premiums to the very banks that are struggling to stay afloat. They sad the idea also would make the government the insurer of last resort, exposing it to losses that could exceed the price of the Bush proposal.


But Frank said he was willing to add an insurance option if it secured Republican votes. With less than six weeks until the November election, Pelosi, Frank and other Democrats have demanded that a large number of Republicans join them in approving the controversial legislation.


"It's no problem to add something that's not going to do much," Frank said.

Democrats have accused the GOP presidential candidate, Sen. John McCain (R-Ariz.), of engineering Thursday's breakdown in hopes of garnering attention for his campaign. Republicans yesterday defended McCain but acknowledged that his intervention had created a stir that threatened the bailout.

With McCain and his Democratic opponent, Sen. Barack Obama (D-Ill.), both back on the campaign trail, the talks are "back on track," said Sen. Lamar Alexander (R-Tenn.). Alexander said he expects more than 40 Republicans in the Senate to support the final legislation if it is endorsed by their lead negotiator, Sen. Judd Gregg (R-N.H.).

"He'll have overwhelming support for it," Alexander said.

Staff writers Dan Eggen and Michael Abramowitz contributed to this report.



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SOSADFORUS
ALIPAC Moderator



Joined: Jan 16, 2007
Posts: 14699
Location: IDAHO
Posted: Sat Sep 27, 2008 3:38 am Post subject:

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Did anyone see Tancredo on Cavuto this morning....finally someone brought out how illegal immigrants, Acorn, LaRaza etc. had everything to do with these bad loans, how they fixed their credit records, gave them loans and didn't even know if they who where they said they were...then when things got bad they just walked away.

Tancredo and Malken are the only two who have been willing to bring this out IN THE OPEN, and the Rats in DC are wanting more funding for these Radical unAmerican groups in this Bail out...

Tancredo as usual was fantastic.

KEEP THE HEAT ON, WE HAVE THEM SWEATING!!!!

THE reason they are rushing this is because they do not want us to know ALL THE FACTS NOT BECAUSE THE SKY IS FALLING!!!

KEEP THE PRESSURE ON!!!!

This bailout will cause hyperinflation and destroy the dollar, which is exactly their goal. We were told for years that the economy was sound. They were lying purposefully. Their goal is to have all banks in the country controlled by the government, making their goal of world domination of all capital an easier task.

The scare tactics and "deer in the headlights" look on GW's face when he gave his "scare the daylights, the sky is falling" speech was sickening. It was the exact persona he used to start a criminal invasion of a sovereign nation.

Their "cure" or should I say plan, will equal total collapse of our dollar. This is being done to calm the nerves of China and the Saudies who own us. They think by printing out fake money these countries are stupid enough to fall for it and keep lending us more? I don't think so. They know the true result of this will be our final economical collapse.

The hybrid deal they're talking about is a lie. They are allowing the federal reserve to be the "decider" in this matter and to control our country. Our country needs a resession in order to clean out the mess we're in, imo.

I'm sick and tired of the buzzword of how all of this is "complicated" and unable to be explained. There are esteemed economists throughout the country that are calling their bluff, saying the scare tactics are unfounded. Yes, there will be trouble ahead but not at all to the extent that they're presenting to the American people.

If any of you saw Byron Dorgan on the floor yesterday at about 3 p.m., he explained this whole process and how we have gotten to this point.

NO TAXPAYER BAILOUT.
EMAIL, FAX, CALL, AND DON'T STOP!

~ANQ

Their "cure" or should I say plan, will equal total collapse of our dollar. This is being done to calm the nerves of China and the Saudies who own us. They think by printing out fake money these countries are stupid enough to fall for it and keep lending us more? I don't think so. They know the true result of this will be our final economical collapse.

Very true!

WE CANNOT GIVE UP AND WE CANNOT GIVE IN!!! NO BAIL OUT!!!!