U.S. Rep. Jay Inslee (D-Bainbridge Island) was one of just 95 Democrats who broke ranks and voted against Monday’s $700 billion Wall Street bailout.
Inslee was the only member of the Washington State Democratic delegation to vote against the bill. Indeed, one of his Democratic colleagues, Rep. Adam Smith (D-Tacoma), said: “Failure to act by Congress could turn a severe economic slowdown into a panic—a run on banks and all financial institutions that could plunge us into a deep and lasting recession.”
I spoke with Rep. Inslee on Tuesday to ask him about his rebellious vote. For starters, given that he voted ‘No,’ I asked him if he thought Rep. Smith was wrong? Did Inslee think it wasn’t really 1929? (His aide jumped in to let me know the stock market was up 485 points.)
Inslee said, “There is a risk that is real. We could have a substantial reduction in availability of credit. I think that risk exists. But that doesn’t mean any bill will do.”
So, what was wrong with the bill, and did he have an alternative plan?
More important: If the Democrats couldn’t even pass a tempered Democratic rewrite of Bush’s original bailout, did Inslee really think they’d be able to pass something that a diehard liberal like himself could eventually support?
Inslee laid out three problems with the bill.
1. He said it was “based on deficit spending,” and he could not support any more of Bush’s “exploding” deficit.
“It’s strike three,” Inslee said, adding it to a list that included Bush’s war in Iraq ($600 billion) and the Bush tax cuts.
2. He said the bill was missing any “hard provisions” to guarantee that the public would get a return on the $700 billion loan. “We’re increasing the value of these corporations,” he said. “When we do that we should have defined shares, a defined X number of dollars in equity. This bill does not do that. And knowing the history of the Bush administration, they’re not going to be aggressive about ensuring [we get a return].”
3. Finally, he said the bill didn’t address the real losers in 2008, not Wall Street , but middle class homeowners who were facing foreclosures. “The only way to do that is through bankruptcy courts,” Inslee said. “We have to change the rules,” so borrowers, in concert with lenders, are able to rearrange the terms of loans.
And is there the will or the votes on the Democratic side to do any of this?
Inslee said: “We get more Democratic votes if we do that.”
Monday’s vote was 228 to 205. 133 out of 198 Republicans voted against the bill. 95 out of 235 Democrats voted against it. One Republican didn’t vote. So, technically Inslee is right: The Democrats have numbers.
Chastising Democratic leadership, Inslee said: “A decision was made to get 100 or 80 Republicans to vote for it [65 Republicans voted for the bill]. That eliminates the necessity to do a good bill.” Inslee asks rhetorically: “And did we have a good bill?”
Inslee went on to say, in fact, that the Democrats had the leverage at the moment because “the President has to sign” a bill. “We have the power to negotiate with the White House.”
Asked to distinguish his ‘No’ vote from the 133 Republicans who voted against the bill, including all three Washington State Republicans—Reps. Dave Reichert (R-Auburn), Doc Hastings (R-Pasco), and Cathy McMorris-Rodgers (R-Spokane), Inslee said he couldn’t speak for his GOP counterparts.
However, a consistent theme on the GOP side was an aversion to big government. In a statement to the press, Doc Hastings, for example, said: “On the question of increased government intervention in the marketplace, I am just plain opposed to such a massive intrusion into the economy and the marketplace.”
Inslee wants more regulation, not less.
Later in the day, I asked Inslee if the idea being pushed by presidential candidates Barack Obama and John McCain—higher limits for insured bank deposits—an idea that’s breathed life into a Senate version (and that’s intended to make the House reconsider)—would win him over.
His aide gave me this response: “That would be a step in the right direction, but he says he will make final decisions on his vote only after he sees the whole package. Higher FDIC credits could be an element of the new deal, but the Congressman and his colleagues are wrestling with a lot of other promising suggestions out there right now, too. His vote will depend on what the final package includes.”
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Rep. Inslee’s webcasting bill (a bill that clears the deck so Internet radio sites can re-negotiate royalty rates with the recording industry) passed the Senate today. It passed the House last Saturday. It’s off to President Bush’s desk for a signature.
This bill does nothing to address the crux of what is really happening with the economy; the shortage of credit. This is due to the reluctance of banks to lend to each other or to anyone else, because they, as well as many homeowners, are on the hook for bad loans. They don’t and in spite of a cash injection, will not trust each other. The rescue is merely a back door way for banks to buy hedge funds and turn them over for a profit where uncle sam buys them at above market rates. There is only one way to restore the confidence that makes borrowing and lending between banks happen.
What would address this fundamental problem is the diversion of a bailout toward homeowners. The money should be spent refinancing homeowners into long term mortgages they can afford. The Federal Reserve it seems could have a hand in this, although, it looks as though the mechanisms to make that happen have broken down (Freddie and Fannie); one would have to be created. This would allow early payoff of the bad mortgages, via refinancing, and reduce the risk of having all of the securities shit the bed under foreclosure of the loans they are based upon. This would restore consumption patterns what will ease pressure for layoffs in the retail and what’s left of our manufacturing sector.
If equity is negative then the bailout should be used to refinance the value of the home up to what the person can afford, and the rest of the previous loan should be purchased/paid off by the Feds and the note held as a first position lien on the property, until the house is sold, or until the owner has enough equity to refinance and buy the government out (if he/she wishes to sell down the line). The Feds should be in first position should the home go to foreclosure for other reasons, once equity accrues, and thus the taxpayers would not be on the hook if the homeowner went south. While this would create a write down for the lending institution, it would be a small fraction of what we are seeing now, and there would be assurance that the taxpayers would have something to show for it–they would have a lien on those properties.
Worse case scenario is that if the homeowner goes into foreclosure, they still have to pay the difference that the Feds picked up, much like a student loan, at a low rate, very long term, in order to make the payments small.
Now the shortcut of course is to just give 800b to the bankers and investors. But even if one agrees with this in principle, it simply will not work, if home owner borrowers are not at the root of a rescue plan.
My fear is that things have already deteriorated so bad, the only thing left to do is triage, in the face of total collapse and infection of the manufacturing sectors, but it’s too bad that only wall streeters will get emergency surgery while the rest of us will be left to bleed. Because if one doesn’t have a job, any of the above does no good.
I can’t blame Inslee for his reasoning, I agree it was a rotten bill. But we do need to do something which actually gets to the root of the matter, especially the mortgage crisis (which didn’t just start last week, despite the apparant belief within the White House).
In the meantime:
Ford auto sales dropped 34% in September.
Sourc: Company’s worst sales month of 2008 as credit crisis hits autos sector
And while these CEO’s were fiddling while Rome burned, they also managed to make a few bucks in the process:
Stanley O’Neal, Merrill Lynch – $160 million in stock options and retirement perks (received when he left in late 2007). The previous year he had received $46.4 million.
Angelo R. Mozilla, Countrywide Financial – received $121.5 million in 2007, even while Countrywide took a $704 million loss and 80% drop in stock value.
Richard Fuld, Lehman Bros. – Took home more than $40 million in 2007, or “rougly $17,000 an hour to obliterate a firm” according to one commentator.
James Cayne, Bear Sterns – received more than $160 million last year. He was reportedly at a bridge tournament and “unreachable” as the firm collapsed. After the collapse, his net worth declined to a “mere” $61 million.
Richard Syron, Freddie Mac – $14 million golden parachute package, although it’s currently in dispute.
Daniel Mudd, Fannie Mae – Received a 7% raise in 2007 to more than $13 million before the government takeover. His promised additional $10 million golden parachute is in dispute.
Kennedy Thompson, Wachovia – $21 million in 2007, plus a severence package worth $8.7 million.
Kerry Killinger, Washington Mutual – $14.4 million in 2007. His successor, Alan Fischman, might get $18 million in salary and severence pay, although he was only on the job a few weeks.
Martin Sullivan, AIG – $14 million in 2007 salary & bonuses, plus an additional severence package of nearly $50 million this year.
Source:
They got paid what?
I like what #1 had to say.
Hey, not another blank check to the Shrubya Mis-Administration.
We gave it to them on Iraq. We gave it to them on tax cuts.
We told them to go to hell on Social Security.
Here’s Stirling Newberry’s ideas on a shot of adrenaline till next January when we swear in President Obama (it’s short and to the point):
http://agonist.org/stirling_ne.....renaline_0
Screw the blank check crowd.
@1 The debt problem isn’t easy to solve because the entire population — not just the Bush administration or Wall Street — is addicted to debt.
It won’t be solved at all unless we address the underlying problem — wage earners living on debt because wages have been flat since 1970.
The economy has grown since 1970, so why aren’t workers doing better, especially given that they’re working longer hours and worker productivity has soared? Where has the increased wealth gone?
Labor used to get over 60% of national output. Today, all of America’s workers put together receive less than half of the GDP. Thus, America’s underlying economic problem — the one that must be addressed to save the economy — is that the distribution of economic output has gotten too skewed toward the owning class.
The debt problem won’t be solved and average Americans’ living standards won’t be preserved without stronger unions, higher wages, an end to globalization, and changes to a tax code that stacks the deck against wage earners.
If that doesn’t happen, then the average American’s only option is to live like a rabbit! I don’t work! I don’t consume! And I buy cheap stocks from overleveraged capitalists when they get overextended and must sell at any price to meet their margin calls. Then, after the economy recovers, I’ll sell those stocks back to the Owning Class at a markup.
We need to boost labor’s share of GDP up to 60% where it was before 1970 so average Americans can get out of debt, stay out of debt, and still afford to live.
The fundamental cause of this crisis is that the Owning Class takes too much of GDP for themselves and doesn’t leave enough for workers, which forces wage earners into debt.
Also, we should execute medical creditors who foreclose on people’s homes to collect medical debts.*
* Just kidding! Wingnut humor. Just throw ’em in creditors’ prisons. The Constitution doesn’t allow debtors’ prisons, but doesn’t say we can’t have creditors’ prisons!
#5: I agree, but that isn’t going to happen in three weeks. Most of the unions organize based on the expansion of capitalism model (or by acquisition of other unions by the threat of raiding), as opposed to bringing in organized non-union workers into the fold. We can’t blame the anti-labor NLRB exclusively, because people have formed unions at a higher rate under worse conditions in the past. An influx of new members does change the configuration of power at the top of union leadership, hence the reluctance of some of the bigger unions to embrace organizing models that actually empower people to do anything other then sign a authorization card. I don’t see union leaders embracing a rank and file organizing program like they did in the 30s or in the teens. Until that happens we will continue to slide downhill.
I hate to say it, but our boomer generation didn’t have to struggle for the material wealth and security, as in, wrestling it from the Owning Class; their parents did. Why in most cases many chose to suck up the gravy while voting for people who would take it all away for their kids is still a mystery to me.
Second, I don’t agree with the characterization of Americans being addicted to debt. Certainly the creditors are, but people are in debt because of medical bills or housing rising faster then income, not because they want to. Lets not blame the victim here. We barely teach our kids civics but we teach them nothing of finances and economics; we expect people to make good financial decisions yet we won’t educate them? Where are they supposed to learn, the business and real estate section of the Seattle Times?
It was a combination of Clinton’s NAFTA and other trade agreements, coupled with Republicans’ deregulation of the 80s and 90s that created this mess and took away the means to deal with it effectively. Some of these same people who are still in power (McCain) are going to “solve the problem”. Yeah, right.
I doubt that many of the homebuyers facing foreclosure are concerned about having FDIC insurance of bank deposits greater than $100,000.
The real problem here isn’t credit. Credit’s been the band-aid that’s been slapped on our economy to cover the fact that most people don’t earn enough to maintain the comfortable lifestyle that citizens of the supposed “greatest country in the world” should be able to enjoy. I’m not talking about everybody living in a mini-mansion, driving a new Escalade and taking vacations in the Bahamas, folks–more like the “average” family (whatever the hell that means) being able to earn enough to provide themselves with comfortable shelter, wholesome food, education for their kids, the occasional day off and night out and dignity in their old age. That has become impossible due to the gutting of American industry. Most of our “gross domestic product” now consists of money being shuffled from one place to another and back again–“creation of wealth” instead of doing anything of real value.
We’re not going to accomplish this by handing more government dollars to rich people in hope that they may be kind enough to loan some of it to the common folk. We need to re-engineer our society back into one in which Joe Six-Pack America can work to earn a decent living.
@1 The debt problem isn’t easy to solve because the entire population — not just the Bush administration or Wall Street — is addicted to debt.
I agree with this statement. However I believe that unlike generations before, Americans today are too entitled.
Entitled to a house – multiple cars – flat screen tv’s – etc etc etc…….
There was a day where 20% was the MINIMUM downpayment. There was also a day where non entitled persons understood that a mortgage payment that was more than 30% of their income was too high…. ditto car loan, ditto loans for electronics, credit cards etc.
I don’t have any pity for entitled folks getting a good dose of reality.
We should not bail out individual homeowners who are now defaulting on properties they had no business getting into in the first place…
Rep. Inslee’s assertion that “we could have a substantial reduction in the availability of credit”, is naive. We already have a substantial reduction in the availability of credit. Right here in the Seattle area we are already hearing of construction loans being called due to an inability of small banks to borrow from larger banks to fund disbursement of construction loans. Some projects will grind to a stop and workers will join the ranks of the unemployed. For loans that haven’t been called the interest rate doubled overnight yesterday. If the credit markets are not unfrozen within the next week we will begin to see massive layoffs around the area, which will further fuel the downward spiral of the economy. It’s all fine and good to stand around and point fingers at speculators and bad banks, etc. But the simple fact is without the ability to borrow our economy will quickly grind to a halt. This is absolutely no time to grandstand. This is time for those in charge to get to work and figure out how to get the credit markets functioning again, even if the solution is less than perfect. Doing nothing is really not an option.