Sep
30
Congress makes financial markets sweat
Filed Under Sunrise on KGMB9 | 1 Comment
After months of working almost around the clock, and pressed by my bosses to take a day off for goodness sake, I took a day off. And look what happened!
Not having ridden Hawaii Superferry before, I decided to take a trip to Maui on the big catamaran and experience it for myself. More on that in another post. But because of the trip, I took Monday off and got home around 3:30 p.m. Monday to discover that Wall Street had developed a case of the vapors after the surprise rejection of the revised Wall Street bailout package.
Rebel Republicans in the House killed the first version of the deal, insisting that some way be found to make Wall Street financial firms pay, even if only eventually, the cost of the rescue. A mechanism for that was devised and the Monday vote was supposed to close the deal. Instead, the House rejected it.
There was some entertaining posturing over whose fault it was. House Speaker Nancy Pelosi gave a speech blaming the crisis on lax regulatory oversight by the Bush administration. Not altogether accurate — it was caused by lax regulatory oversight by the last four or five administrations, Republican and Democrat. But that’s what she said, and afterwards the Republican leadership in the House said it lost about a dozen votes on her partisan remarks. To which House Banking Chairman Barney Frank, a Democrat who sounds like Elmer Fudd, replied that anyone who would vote against the national interest because his feelings were hurt should get out of Congress because he isn’t tough enough.
Sideshow aside, Wall Street lost roughly 7% of its entire value in one day because of the failure of the bailout to pass. Airline and oil stocks fell that much or more. Hotel stocks fell almost that much. Other Hawaii stocks did a little better.
The really funny thing about the sideshow is that both Democrats and Republicans seem to think Republicans killed the bailout, but Hawaii’s two members of the House, Neil Abercrombie and Mazie Hirono, both Democrats, also voted against it.
The fact is that congressmen who are up for re-election are getting a lot of mail from people who want Wall Street to pay and don’t realize that a series of additional Wall Street failures will probably result in a deeper global economic slowdown and the loss of hundreds of thousands of American jobs.
If you want someone to pay, dig this: Fannie Mae and Freddie Mac executives have been served with grand jury subpeonas. I think the Bush administration could redeem itself very nicely if it put a few of these boys in jail for misrepresenting the risk of the investments they sold until investors tumbled to the truth, stopped buying them, and precipitated the credit crisis.
Sep
26
The failure of the bailout
Filed Under Sunrise on KGMB9 | 8 Comments
A lot of interesting detail is coming out about what happened Thursday to kill the Wall Street bailout package. Part of what makes it interesting is how the divide opened up, not between Republicans and Democrats, but between two factions of the Republicans.
Treasury Secretary Henry Paulsen, who comes from Wall Street and is regarded by all sides as being a financial executive who is not especially political, pushed for the plan. He evangelized the belief that Wall Street needed to be stabilized before its spasms messed up the entire economy.
Federal Reserve Chairman Ben Bernanke backed him up and said a global recession could result from not bailing out the financial services industry, by purchasing securities that no one else wants to buy at the moment.
Most of the key players bought into this. President Bush, who has an MBA, signed off on the idea. Key Democrats, including Senate Banking Chairman Chris Dodd and the House Banking Committee’s Barney Frank, agreed to push a bipartisan deal after the president accepted some features they wanted, including oversight for all the money Treasury would be spending.
On the House side, Republican leaders seemed to buy into the plan, but, we now know, some of them were getting a lot of heat from rural district representatives whose constituents wanted Wall Streeters to feel some pain.
Congressional aides worked through the night from Wednesday into Thursday morning, produced a package, and Congressional leaders signed off on it, heading for a meeting at the White House that was supposed to culminate in President Bush leading everybody out to a photo opp.
John McCain made headlines with the announcement that the financial crisis was so important he would suspend his campaign and fly to Washington to take part in solving it. Barack Obama kept campaigning, and objected when McCain wanted to postpone a Friday debate.
(I thought the announcement would have made more sense — assuming it was heartfelt and McCain really wanted to play a role — had it been made a couple days earlier before Congressional negotiators hammered out a plan.)
President Bush welcomed McCain into the final meeting and even extended an invitation to Obama, who decided he would come, too, so he and McCain could stand together and support the plan in the bipartisan spirit President Bush sought.
Treasury Secretary Paulsen was blindsided by what happened. We infer that from the fact that he spent time trying to make sure Democrats would kill the deal. In one of the few lighthearted moments in the talks, Paulsen reportedly went down on bended knee to plead with House Speaker Nancy Pelosi not to say anything in the White House meeting jeopardize the deal.
Instead, rebel Republicans, defying their president, said they had “an alternate plan” in which Wall Street firms would be required to pay for their own bailout by purchasing insurance. Voices were raised, one senator stormed out early (he recovered his composure by the time he faced the stakeout of reporters on the grass) and suddenly the deal was off.
Some back-bench Democrats accused McCain of messing up the deal with his decision to insert himself into the process. Indirectly they might be right, but it looks to me like he didn’t deliberately sabotage the agreement. The rebels briefed him on what they were up to, according to some reports, and solicited his support. But participants in the White House meeting said McCain spoke neither for nor against the president’s plan.
Friday morning it was announced that the rebel view would be represented by House Minority Whip Roy Blunt, father of the governor of Missouri, husband of a tobacco lobbyist, and congressman to a rural Ozarks district. Barney Frank, who complained earlier in the morning that he no longer knew who he was negotiating with, now knew.
But it was unclear how such delicate talks would proceed with negotiators named Frank and Blunt.
Sep
26
The bearded cat
Filed Under Sunrise on KGMB9 | Leave a Comment
I’ve been getting a lot of requests for information about the Howard cat that appears behind me on “Sunrise.”
Grant Kagimoto handpainted it in May 2004 and sent it to me. I thought it was witty and kept it on my cluttered desk at Pacific Business News, but when I joined KGMB9 and we decided to choose just two or three items a day to display, I decided to promote the cat and make it a regular fixture.
Google for more information on Grant, who does a number of different kinds of arts and crafts, and co-owns the art company Cane Haul Road.
Grant Kagimoto, owner of Cane Haul Road, sells his goods now at Native Books and Beautiful Things, as well as from a storefront in Moiliili
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