Bailing out the bailout
A week ago, European leaders failed to act and their markets crashed.
This weekend they upped the bailout ante with a stunning wave of bank takeovers – and promises to insure loans between terrified, frozen financial institutions.
At the same time, the IMF has offered to help emerging markets cope with a wicked downturn while Hank Paulson and Fed leaders promise do anything to keep the financial system from melting down – including an accelerated Plan B to buy direct equity stakes in healthy institutions.
It seems to be having the desired short-term effect – with Euro zone markets up sharply and U.S. futures pointing to a surge at the open following the worst week in the history of Dow.
The frozen credit markets are thawing – but slightly.
It’s Nationalization Monday and you’re in The Huddle.
NEW NEW DEAL? After being forced to pass a $700 billion rescue for banks at gunpoint, the Democratic majority in Congress is almost certain to call a November lame duck session to throw $100-$150 billion back at taxpayers and strapped localities.
This may be the tip of the deficit-spending iceberg, the first wave of a massive New Deal-ish spending program designed to buttress the demand side of the economy at a time when private consumption is declining, sapping growth.
Our Marty Kady reports: “Democratic leaders are coordinating a potential lame-duck session with the Obama campaign, discussing an economic stimulus package of $100 billion to $150 billion. [House Speaker] Nancy Pelosi and Democratic leaders plan to unveil details at an economic forum [on Monday]. In the stimulus, Democrats are considering expansion of food stamps, extension of unemployment insurance, aid to states facing a budget crunch and billions in infrastructure spending for bridges and roads. The infrastructure spending in particular is designed to create jobs in bridge and road construction.”
Still, things may not go all that smoothly. “There is a fundamental difference, however, between Barack Obama and Democratic leaders on one subject — how to pay for the stimulus. Democrats don't have a "pay-go" proposal, while Obama would pay for the stimulus with a windfall profits tax” on oil companies.
Bailing out the bailout
Of course, those profits are shriveling as crude dives to $80 a barrel.
BLUNT RESPONSE. House Minority Whip Roy Blunt (R-Mo.) told ABC’s George Stephanopoulos on Sunday that he’s open to a second stimulus – but opposed to a “huge public works plan.”
Blunt also expressed skepticism about John McCain’s proposal to buy up and renegotiate around $300 billion in bad mortgages, telling Stephanopoulos: “We need to look at this closely. There's merit to the McCain plan, that's why some of it is already in the FHA reauthorization bill. Some of that flexibility is here. But you have to be sure again that taxpayers are protected...”
SCHUMER, FRANK ON BOARD. DSCC chairman Sen. Charles Schumer (D-NY) and House Financial Services Chairman Barney Frank (D-Mass.) are also pushing for the lame-duck stimulus vote. "Yes, we are going to do a stimulus" after the election, Frank said on Sunday, according to the AP.
MCCAIN PLAN SHELVED. Politico’s Mike Allen reports that the McCain camp was considering rolling out new economic proposals this week – but pulled back after a mysterious Sunday sit down with advisers. “[W]hen the meeting ended, so did plans for a new economy push. The campaign now says no new policy announcements are planned. Participants in the meeting refused to say what happened. “We’re locked down,” said one official,” Allen writes.
Among the plans considered were lowering taxes on dividends and capital gains, according to McCain surrogate Lindsey Graham, who appeared on CBS yesterday.
SCHUMER VS. SPECTER. In a meeting with reporters last week, Chuck Schumer repeatedly denied the existence of an agreement, tacit or otherwise, with the GOP to lay off incumbents who voted for the bipartisan rescue package. Apparently, Pennsylvania Republican Sen. Arlen Specter, appearing on CNN, didn’t get the memo. He accused the DSCC boss of violating a ‘gentleman’s agreement’ by launching television ads against Senate Minority Leader Mitch McConnell that blame the Kentucky Republican for ignoring signs of impending economic calamity.
MRS. STEVENS’ E-MAIL. Politico’s John Bresnahan reports on what seems to be a Hail Mary by federal prosecutors at the end of Ted Stevens’ federal corruption trial. “Attorneys for… Stevens (R-Alaska) are seeking to quash a Justice Dept. subpoena demanding e-mails and other documents from the law firm that employs Catherine Stevens, the senator's wife. Calling the subpoena ‘a last-minute fishing expedition’ by prosecutors… Stevens' attorneys are asking Judge Emmet Sullivan to deny the motion. Prosecutors are asking for e-mails between the senator and Mrs. Stevens, which defense attorneys said are out-of-bounds under spousal privilege,” Bresnahan writes.
CLINTONS JOIN JOE. Bill and Hillary Clinton joined Joe Biden in his hometown of Scranton over the weekend to help Obama – and local Rep. Paul Kanjorski (D-Pa.), who is locked in a tough race against Republican Lou Barletta, an anti-illegal immigration crusader. The former president told a crowd, “Paul Kanjorski's got a tough race. He's got a tough race because some people in his district believe that illegal immigration is a bigger cause of their economic problems than President Bush's economic policies. I got news for them and I've got news for you — you need to help him get reelected,” reports Politico’s Josh Kraushaar.
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Bailing out the bailout
By: GLENN THRUSH on October 13, 2008 @ 7:45 AM
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