You know who Pete Peterson is, right? He's the wingnut hedge-fund billionaire who's pledged a billion dollars to "reform" (and we know what that word means to the right wing) Social Security and Medicare. Via lambert, from Institutional Risk Analysis:

As we discussed with Josh Rosner and will be writing about same next week, Treasury Secretary Tim Geithner and Fed Chairman Bernanke think they are driving this process, but in fact the markets are setting the agenda. Either we act now to deal with AIG and C and take these names off the table before the other zombies arrive for the dance party, or we risk being overwhelmed. If we have a choice between preserving the credit standing of the US Treasury and flushing AIG, C and every other CDS counterparty on the planet, we'll take the latter every time.

Indeed, yesterday we were slumming at the Four Seasons in New York. Among the dinosaurs we observed grazing in the tall grass of this Midtown Manhattan refuge for the transactional class was former C director Robert Rubin, former New York Fed Chairman Pete Peterson and Treasury Secretary Geithner, who apparently was there to get new instructions from his sponsors.

Before Geithner arrived for lunch, Peterson reportedly asked one NY real estate mogul: "How much of that toxic paper is there?" Now we may know where Geithner gathers his market intelligence -- over a luncheon table in New York with his owners. Next time we are going to bring the flip-cam.

But isn't it nice that the man who wants to take our Medicare and Social Security (so we can see it go down the tubes in the market, I guess) has such good relationships with his employees!

I'm happy to see that despite enthusiastic financial support early on in his campaign from Wall Street, Obama is indeed biting the hand that fed him. This bodes well for his political courage:

WASHINGTON — The Obama administration plans to move quickly to tighten the nation’s financial regulatory system.

Officials say they will make wide-ranging changes, including stricter federal rules for hedge funds, credit rating agencies and mortgage brokers, and greater oversight of the complex financial instruments that contributed to the economic crisis.

Broad new outlines of the administration’s agenda have begun to emerge in recent interviews with officials, in confirmation proceedings of senior appointees and in a recent report by an international committee led by Paul A. Volcker, a senior member of President Obama’s economic team.

A theme of that report, that many major companies and financial instruments now mostly unsupervised must be swept back under a larger regulatory umbrella, has been embraced as a guiding principle by the administration, officials said.

Some of these actions will require legislation, while others should be achievable through regulations adopted by several federal agencies.

Officials said they want rules to eliminate conflicts of interest at credit rating agencies that gave top investment grades to the exotic and ultimately shaky financial instruments that have been a source of market turmoil. The core problem, they said, is that the agencies are paid by companies to help them structure financial instruments, which the agencies then grade.

“Until we deal with the compensation model, we’re not going to deal with the conflict of interest, and people are not going to have confidence that the ratings are worth relying on, worth the paper they’re printed on,” Mary L. Schapiro said in testimony earlier this month before being confirmed by the Senate to head the Securities and Exchange Commission.

Do you ever get the feeling that things are, oh, I don't know, a tad unbalanced in this country?

A majority of America's largest publicly traded companies and the U.S. government's largest federal contractors -- including some receiving millions in federal bailout money -- use multiple subsidiaries in offshore tax havens to conduct business and avoid paying U.S. taxes, a new report finds.

The new Government Accountability Office (GAO) report, released today by Sens. Byron L. Dorgan (D-N.D.) and Carl M. Levin (D-Mich.), lists Citigroup and Morgan Stanley as having set up hundreds of tax haven subsidiaries, along with American International Group and Bank of America. Also in the tax-haven list are well-known companies and such federal contractors as American Express, Pepsi and Caterpillar.

GAO, searching publicly available data filed with the Securities and Exchange Commission, determined that 83 of the 100 largest publicly traded corporations and 63 of the 100 largest federal contractors maintain subsidiaries in countries generally considered havens for avoiding taxes. Dorgan and Levin said they requested the updated report from one several years ago because they are focused on combating offshore tax abuses, which they estimated cause $100 billion in lost U.S. tax revenue each year.

GAO auditors did not review the companies' transactions to independently verify that the subsidiaries helped the companies reduce their tax burden. The GAO said only that the companies had subsidiaries located in jurisdictions considered tax havens and that historically the purpose of those subsidiaries is to cut tax costs.

The practice is legal, but Dorgan and Levin are hoping to gain the support of President-elect Barack Obama for legislation that would outlaw it.

To illustrate the problem, Levin said the report found that Citigroup has set up 427 tax haven subsidiaries to conduct its business, including 91 in Luxembourg, 90 in the Cayman Islands and 35 in the British Virgin Islands. He said other havens include Switzerland, Hong Kong, Panama and Mauritius.

Really, isn't that nice? And here, I thought they might have to give up the beachfront homes in Montauk...

Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year, an Associated Press analysis reveals.

The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue. Some trimmed their executive compensation due to lagging bank performance, but still forked over multimillion-dollar executive pay packages.

Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found.

The total amount given to nearly 600 executives would cover bailout costs for many of the 116 banks that have so far accepted tax dollars to boost their bottom lines.

Rep. Barney Frank, chairman of the House Financial Services committee and a long-standing critic of executive largesse, said the bonuses tallied by the AP review amount to a bribe ''to get them to do the jobs for which they are well paid in the first place.

''Most of us sign on to do jobs and we do them best we can,'' said Frank, a Massachusetts Democrat. ''We're told that some of the most highly paid people in executive positions are different. They need extra money to be motivated!''

Compare and contrast - I'm sure the Senate's southern caucus is as upset about this as they are about auto workers making $28 an hour:

Congress wanted to guarantee that the $700 billion financial bailout would limit the eye-popping pay of Wall Street executives, so lawmakers included a mechanism for reviewing executive compensation and penalizing firms that break the rules.

But at the last minute, the Bush administration insisted on a one-sentence change to the provision, congressional aides said. The change stipulated that the penalty would apply only to firms that received bailout funds by selling troubled assets to the government in an auction, which was the way the Treasury Department had said it planned to use the money.

Now, however, the small change looks more like a giant loophole, according to lawmakers and legal experts. In a reversal, the Bush administration has not used auctions for any of the $335 billion committed so far from the rescue package, nor does it plan to use them in the future. Lawmakers and legal experts say the change has effectively repealed the only enforcement mechanism in the law dealing with lavish pay for top executives.

At least we've laid one myth to rest. It's never been that BushCo is incompetent. Clearly, they're very focused and directed when it comes to the economic privilege of the upper classes.

The original vote was defeated 228-205, meaning a whopping 58 members changed their minds and voted for the bill. I'm sure they got an ear full from constituents over the past week or so. Unsurprisingly, Boehner was still unable to deliver half his caucus. It's pretty funny to see House Republicans run around claiming to be acting on true conservative principles. Where the hell have you all been for the past eight years of George Bush?

The Hill:

The House has approved a massive Wall Street bailout four days after rejecting a similar measure.

The measure was approved in a 263 to 171 vote, with 172 Democrats and 91 Republicans offering support.

The House voted against a similar measure on Monday, which caused the Dow Jones Industrial to plunge by 778 points — the greatest single-day drop in the average’s history.

Wall Street's reaction is tepid, with the Dow gaining about 120 points so far. The other indices both rose a little more than 1% .

The Times (UK):

The House of Representatives had been under severe pressure to pass the $700 billion rescue package for banks and other financial firms after figures showed today that American employers slashed 159,000 jobs last month. September's job losses were much more severe than predicted by Wall Street economists, who had forecast 100,000 jobs would be cut. The unemployment rate is at 6.1 per cent, the highest in five years.

Around the world, calls had come for the US House to pass the bailout bill.

Francois Fillon, the French Prime Minister, said the world stood on the "edge of the abyss".

Mr Fillon, whose country is hosting an emergency summit with Italian, British and German leaders on Saturday, said only collective action could solve the financial crisis. He said he would not rule out any solution to stop any bank failing.

"The world is on the edge of the abyss because of an irresponsible system," he said, alluding to widespread anger over past lax regulation of financial markets and excessive lending.

To make the bill more attractive, the Senate raised the ceiling on federal insurance for bank deposits from $100,000 to $250,000 dollars, and added up to $150 billion in tax break extensions for middle class families and business.

  What a bunch of WATB. The House GOP "Leadership" addressed the media just now after the bailout bill failed and pointed their fingers at Nancy Pelosi for giving a speech that upset them. The speech hurt them so much that it forced them to sink the bill and now the market is down more than 600 points. Why are you so mean, Nancy? Don't you know Boehner is a really sensitive guy?

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"I believe we could have gotten there today if it weren't for Speaker Pelosi's partisan speech."

So you're willing to kill the bill and let the market plunge 600 points because Nancy gave a mean speech? Wow.

Eric Cantor is particularly hysterical. It looks like he wants to cry. Nancy is so mean!

Barney Frank sums it up best:

"In the sphere of numerology the number of Republicans who ignore what's best for the country because of a speech turns out to be exactly the number of Republicans we need to pass the vote. "

  By almost any accounting, the past few days have been calamitous for John McCain. But not according to Roger Simon of the Politico. While McCain's transparently cynical ploy to play hero in the Wall Street bailout drama was widely derided as a stunt, Simon on Thursday insisted "it isn't as dumb or as desperate as it looks." Then as polls revealed American voters saw Barack Obama as the clear winner of Friday's generally even debate, Simon instead announced "the Mac is back."

Simon's hagiographic treatment of McCain didn't start this week. After the Republican convention earlier this month, Simon regurgitated the talking points emanating from McCain Central:

John McCain is a maverick who has now done what mavericks almost never do: win. And now he must lead a party while maintaining his independence from it.

It's a dilemma, but McCain attempted to resolve it by facing it head on. "I don't work for a party," he said. "I don't work for a special interest. I don't work for myself. I work for you."

Then as the economic crisis threatened to undermine the Republican's campaign, Simon praised McCain for "shooting craps" in trying to appropriate the Wall Street meltdown for his own political purposes:

John McCain is now shooting craps with his presidential campaign. It is high risk. But all he needs is a little luck to pull off his current gamble.

McCain has suspended his campaign to work on a solution for the nation's financial meltdown, and he has threatened to pull out of the first presidential debate scheduled for Friday unless Congress takes action by then.

McCain has been attacked from all sides for doing this, but it isn't as dumb or as desperate as it looks.

Then came Friday's debate.

Continue reading »

  Barney Frank, chairman of the House Financial Services Committee, held an impromptu press conference Thursday night to give a status update on the Wall Street bailout bill. After announcing earlier in the day that a fundamental framework had been agreed upon, it appears House Republicans are trying to gum up the process with proposals Secretary Paulson testified would not work.

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Senator McCain has said he had to interrupt his campaign and couldn't do a debate because he had to come here to help us. God save us from such help. But in any case, there is no sign whatsoever that Senator McCain's got any real role here, so he certainly ought to feel free to go back and debate.

So let's get this straight: A general framework was agreed upon before  Senator McCain decided to "suspend" his campaign, and now that he's in Washington to "help," it appears all those agreements have fallen through. What leadership!

This is all classic Republican political gamesmanship. The bailout is widely unpopular and House Republicans -- being the unserious, petty people that they are -- are trying to link all the fallout to Bush and the Democrats in order to boost their electoral prospects. We ought to call their bluff and refuse to pass a bill until a solid majority of them are on board. The inevitable market hit will then be laid at their doorstep. Let them take responsibility for tomorrow's 200 point hit.

  We knew this was coming.....

Exaggeration and truth-stretching is standard fare in politicking, but McCain spokesman Tucker Bounds took it to a new level today when he told Andrea Mitchell that John McCain's selfless act of leadership in coming back to Washington single-handedly helped push through negotiations on the bailout bill. Nevermind the fact that McCain still hasn't contacted the ranking Republican on the Banking Committee, Richard Shelby, and that his campaign is very much still in effect... John McCain put country first and personally saved the economy from disaster. Give me a break.

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"Before John McCain suspended his campaign yesterday, the situation that we're looking at today looked very different then. After he showed leadership and called for bipartisanship, and called for us to put partisanship aside and tackle this solution, here we are."

Barney Frank said earlier today that 'White House photo-op designed to help McCain.'

“All of a sudden, now that we’re on the verge of making a deal, John McCain drops himself in to make a deal," Frank said. "I really worry about this politicization of it....We're trying to rescue the economy, not the McCain campaign.

McCain was only interfering with the negotiations.

Rep. Barney Frank told a group of reporters outside the House chamber: "It's the longest Hail Mary pass in the history of either football or Marys."

Jack is just as confused as I am as to why John McCain would rather hole himself up in Washington rather than make the case for his economic policy before millions of American voters. Well, when you have no substantive economic policy, it might not be a bad idea to run and hide.

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Barack Obama says the debate should go on as scheduled. It might be helpful, particularly to voters who remain undecided, to hear the two men who want to lead the country for the next four years discuss their ideas for solving what is arguably the worst financial crisis to hit the United States since the Great Depression.

  In response to McCain's statement today about his intention to suspend his campaign to work on the bailout bill, Senator Obama held a news conference to reiterate what he would like to see in the bill, as well as his view that the debate should go on as scheduled. Although he wouldn't answer direct questions about whether he thought McCain's decision was politically-motivated, he went out of his way to make clear that he approached McCain first and that he thinks this is an ideal time for a debate because the American people deserve to know how the next President will solve these problems.

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"This is exactly the time when the American people need to hear from their leaders.

"With respect to the debates, it’s my belief that this is exactly the time when the American people need to hear from the person who, in approximately 40 days, will be responsible for dealing with this mess. And I think that it is going to be part of the president’s job to deal with more than one thing at once. I think there’s no reason why we can’t be constructive in helping to solve this problem and also tell the American people what we believe and where we stand and where we want to take the country."

Pelosi and Reid are calling McCain's bluff:

"The debate should take place as scheduled," Speaker Nancy Pelosi said in an interview with NPR to be broadcast this afternoon. "We have to be able to do a couple of things at once. That's what leadership requires."

"I understand that the candidates are putting together a joint statement at Senator Obama's suggestion," said Sen. Harry Reid. "But it would not be helpful at this time to have them come back during these negotiations and risk injecting presidential politics into this process or distract important talks about the future of our nation's economy. If that changes, we will call upon them. We need leadership; not a campaign photo op."

UPDATE: Chris Matthews just reported that the Debate Commission and Ole Miss have announced that the debate will continue as scheduled. SuveryUSA conducted a lightning-quick poll and found that 90% of Americans believe the debate should go on as scheduled.

The first debate between John McCain and Barack Obama is scheduled to take place in two days. Should the debate be held as scheduled? Should the debate be held, but the format changed to focus on the economy? Or, should the debate be postponed?

Hold as scheduled: 50
Hold with focus on economy: 36
Postpone: 10

  McCain just announced that he will suspend his campaign tomorrow and return to Washington to work on the Wall Street bailout bill. He also proposed delaying Friday's foreign policy debate until a consensus is reached. Senator Obama reached out to McCain early this morning to see if he wanted to release a joint statement on their shared priorities. Apparently McCain returned his call at 2:30, then almost immediately came out and made the announcement.

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If I were the Obama campaign, I would agree to suspend campaign activities for the rest of the week, but demand that the debate continue as scheduled, with the topic switched to economic matters. The American people deserve to hear the candidates lay out their visions for America.

Ben Smith gets it:

Both candidates have been marginal players; McCain, though, seems to have the potential to make himself a major one, and his move is a mark, most of all, that he doesn't like the way this campaign is going.

But in terms of the timing of this move: The only thing that's changed in the last 48 hours is the public polling.

Nicole adds:

This must be a VERY important crisis if it requires the full, undivided attention of a Senator who has missed 230 out of 286 votes since Q4-2007. That's 80% of those votes he's missed.

And he doesn't even sit on any committees that matter. 

  OK... I know asking for only $150 billion is kind of ridiculous but why should Congress commit a whopping $700 billion to the Treasury without knowing how that money will be spent? Sen. Chuck Schumer asked Secretary Paulson at today's hearing how he arrived at the $700 figure and asked for an explanation as to why Congress shouldn't give them only a fraction of that, with the rest contingent upon the situation we find ourselves in in January. Seems reasonable enough, no?

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"One of you mentioned that you will use about $50 billion dollars a month. If that's the case, and you're certainly not going to use all $700 billion immediately, and as you can see there are a lot of questions about whether this will work, we understand you've done your best and you think this will work best, but it's clear we're in uncharted waters. But what about doing this in tranches? Why couldn't you ask us for $150 billion, and on January 15th or January 20th we would come back, we would assess how this worked and grant some more money if it's really working?"

The proposed bailout is undoubtedly an intensely complex matter that's way above my pay grade, but giving Paulson a blank check for a minimum of 3/4 of a TRILLION dollars (and quite likely more) just doesn't make sense. It seems to me that the Bush administration is trying to rip off the taxpayers one last time, hoping this market "shock" can provide them enough cover to actually make it happen. Although it's far from perfect, Schumer's idea of investing a smaller amount (if any) to get us to January -- when a new President and a new Congress take office -- seems much more reasonable.