Biggest Economic Decision in a century in the next hour.

I can hear people laughing in the stream so that must be good :pac:

Fantastic! (I think?). But my portfolio is crying.

House leaders scramble for support for controversial Wall Street plan.

The fate of a controversial $700 billion financial bailout plan was in doubt Monday as a House vote turned against it.The next steps were not immediately clear but supporters were scrambling to put it up for another vote.
What was supposed to be a 15-minute vote stretched past the half-hour mark as leadership scrambled for support. Investors who had been counting on the rescue plan sent the Dow Jones industrial average down as much as 700 points while watching the measure come up short of the necessary support, before rebounding slightly. The key stock reading was down more than 500 points.
The measure needs 218 votes for passage. Democrats voted 141 to 94 in favor of the plan, while Republicans voted 65 to 133 against. That left the measure with 206 votes for and 227 against.
A four-hour debate included impassioned pleas for and against the measure from Democrats and Republicans alike. Even some of those arguing the legislation must be approved were quick to point out problems with it.
But in the end, the vote began with both Democratic and Republican leadership telling their members the only way to protect the economy from a spreading credit crunch was to vote for the difficult to swallow measure.
"Our time has run out," said Rep. Spencer Bachus, the ranking Republican on the House Financial Services Committee. "We're going make a decision. There are no other choices, no other alternatives."
The vote comes after lawmakers and the Bush administration finalized legislation following a weekend of high-stakes negotiations over the controversial measure, which is designed to get battered U.S. credit markets working normally again.
"Today is the decision day," said Barney Frank, D-Mass., on the House floor. "If we defeat this bill today, it will be a very bad day for the financial sector of the American economy and the people who will feel the pain are not the top bankers and top corporate executives but average Americans."
House Minority Leader John Boehner told his members, many of whom objected the measure, that the had accept something he and many of them found distasteful.
"If I didn't think we were on the brink of an economic disaster it would be the easiest thing to say no to this," Boehner said. But he said lawmakers needed to do what was in the best interest of the country.
Leading House Republicans signed on to the proposal on Sunday after expressing earlier reservations. Senate Majority Leader Harry Reid said Sunday he hoped for a vote in that chamber by Wednesday at the latest.
Earlier on Monday, President Bush and Federal Reserve Chairman Ben Bernanke hailed the measure and urged Congress to move quickly to pass it.
Bush, speaking at the White House, called the proposed measure "an extraordinary agreement to deal with an extraordinary problem." He said he is confident the measure will win bipartisan support.
"With this strong and decisive legislation, we will help restart the flow of credit so American families can meet their daily needs and American businesses can make purchases, ship goods and meet their payrolls," Bush said.
Bush acknowledged that many voters were opposed to helping out Wall Street with tax dollars, but said there is little choice to move forward with the plan. He said most if not all of the tax money spent to buy distressed mortgage-backed securities should be recouped when the Treasury sells them in the coming years.
"Every member of Congress and every American should keep in mind - a vote for this bill is a vote to prevent economic damage to you and your community," Bush said.
Bernanke, who had spent hours before Congress last week testifying in favor of the measure, issued a brief statement promising that it would restore the flow of credit to households and businesses. "I look forward to swift passage of the legislation," he said.
Buying troubled assets
The core of the bill is based on Treasury Secretary Henry Paulson's request for authority to purchase troubled assets from financial institutions so banks can resume lending and so the credit markets, now virtually frozen, can begin to operate more normally.
But Democrats and Republicans - concerned about the potential cost - have added several conditions and restrictions to protect taxpayers on the down side and give them a chance at some of the potential upside if the companies benefit from the plan.
Key negotiators for the financial rescue plan were e busy trying to line up votes on Capitol Hill on Sunday. House Majority Leader Steny Hoyer, D-Md., told CNN he believes a majority of representatives on both sides of the aisle can and will support the bill.
On Sunday evening, the House Republican working group, which stringently opposed earlier drafts of the plan and offered a counterproposal, indicated it would support the bill, and its members are encouraging other Republicans in the House to do the same.
"Nobody wants to have to support this bill, but it's a bill that we believe will avert the crisis that's out there," House Minority Leader John Boehner, R-Ohio, told reporters.
But the bill did draw some opposition during the morning debate.
Rep. John Culberson, R-Texas, said the measure would leave a huge burden on taxpayers. "This legislation is giving us a choice between bankrupting our children and bankrupting a few of these big financial institutions on Wall Street that made bad decisions," he said.
Other conservative Republicans argued the bill would be a blow against economic freedom.
Thaddeus McCotter, R-Mich., said the bill posed a choice between the loss of prosperity in the short term or economic freedom in the long term. He said once the federal government enters the financial market place, it will not leave. "The choice is stark," he said.
But there were also Democrats who opposed the bill for not doing enough to help those who taxpayers facing foreclosure or needing unemployment benefits extended, or taxing Wall Street to pay for the rescue package.
"Like the Iraq war and patriot act, this bill is fueled by fear and haste," said Lloyd Doggett, D-Texas.
The crisis and a proposed fix
Banks and Wall Street firms, worried about both their own needs for cash and the condition of other institutions, essentially stopped loaning money to one another in recent weeks. That choked off the money being made available on Main Street in the form of mortgage loans, business loans and other consumer borrowing.
The crisis stems from problems in mortgage-backed securities, which saw their value plunge as home prices have gone into their worst slide since the Great Depression and foreclosures have soared to record levels. In turn, the market for trillion of dollars worth of those securities held by major firms evaporated, sending them down to fire sale prices and raising the risk of widespread failures among the nation's major financial firms.
Under the plan, Treasury will buy the mortgage backed securities, either directly from the firms or through an auction process. It may also arrange to provide guarantees for the securities up to their original values in return for premiums they would charge current holders of the securities.
To make the legislation more politically palatable, the bill calls for the government, as an owner of a large number of mortgage securities, to exert influence on loan servicers to modify more troubled loans to help prevent additional foreclosures. It also provides that the government will take equity in the firms that sell the securities to the government, and limits pay packages for top executives.
The legislation comes amid great upheaval in the nation's financial system. On Monday morning, the Federal Deposit Insurance Corp., which insures deposits at failed banks, arranged for the sale of the banking assets of Wachovia (WB, Fortune 500), the nation's No. 4 bank holding company, to Citigroup (C, Fortune 500) for $2.2 billion in stock.
That follows three weeks of other shocks: the Treasury Department's seizure of mortgage finance firms Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500); Wall Street firm Lehman Brothers' bankruptcy filing; rival Merrill Lynch (MER, Fortune 500) purchase by Bank of America (BAC, Fortune 500).
In addition, the Fed bailed out insurance giant American International Group (AIG, Fortune 500), loaning it $85 billion in return for a nearly 80% stake. while Washington Mutual (WM, Fortune 500), the nation's largest savings and loan, became the largest bank failure in history.

Oh dear lord. It just won't stop falling! Nasdaq and S&P down 8%!

So is it a good time to buy stuff from US retailers online? Is the EURO going to get much more dollars by tomorrow?

Clytus wrote: »

I think we're in uncharted waters right now...Even though the DJ is currently about 6.6% down.

I think the primary concern for irish business is the availability of credit.
We're doing OK...in fact Iv had the busiest month all year...but thats not to say I dont need certain lines of credit available. some of my customers have 60 days...yet I have 30 days with my creditors so an overdraft for example is pretty important.

Although there has not even been a mention of it...im looking to the possibility that any lines of credit in the future might not be what I once had available....and theres lies the problem.

many many companies in Ireland will find themselevs in a position of solvency...yet have liquidty issues.

Anyone notice the companies that forward credit on unpaid invoices raising their ugly preditory mugs??

Do closes down 777.7 or 6.9%

There are 2 definitions of insolvency

Cash flow insolvency - unable to pay debts as they fall due;
Balance sheet insolvency - having negative net assets: liabilities exceed assets.

A business can be profitable etc but if it can;t pay debts as they fall due for whatever reason then it is insolvent.

What are the odds on both business and personal lines of credit being curtailed (ie overdraft facilities being reduced)?

Dave! wrote: »

Anyone able to give us some info on what the effect of this will be on (a) America, (b) Ireland, and (c) the world...? I'm a lowly pleb and don't have a clue about economics!

Inflation? Unemployment? Could our American companies pull out of here?

I'd take a punt on house prices continuing to fall, due to higher cost and greater difficulty in getting mortgages combined with excess supply.

Job losses due to recession in the global economy, big US multis shedding jobs across the world, so some rising unemployment.

Media stoked panic about this crisis, and the fact we are in mild recession will probably cause consumer confidence to continue to fall meaning less spending etc which has a knockon in jobs etc.

In my opinion feckwits like McWilliams etc have talked us into this current recession, these sorts of prophecies can easilt be self fulfilling.

Aye a deal will be done in the next week I would imagine to echo DMcW above, but we may see more banks in trouble before then.

Inquitus wrote: »

In my opinion feckwits like McWilliams etc have talked us into this current recession, these sorts of prophecies can easilt be self fulfilling.

Bollix tbh. If it wasn't for people like McWilliams/George Lee/Morgan Kelly warning about the impending burst of the property bubble it would have inflated further and have further to fall. Eighty-, ninety-thousand houses per year isn't sustainable.

And they certainly didn't cause the sub-prime mess!

Inquitus wrote: »

feckwits tbh, even a stopped clock gives the right time twice a day etc.....

Whatever about McWilliams, John FitzGerald and Morgan Kelly were spot on. Not a case of a stopped clock.

Of course few people listened to the ESRI in 2006 and 2007. Let's all listen to Dan McLoughlin. And people who predict a bursting bubble are unpatriotic, or whatever it was Bertie said.