Senate OKs ban on use of taxpayer funds in bank bailouts

[MathiasOfAthens]

http://www.latimes.com/business/la-f...,1778713.story

The Senate, opening debate Wednesday on amendments to the sweeping overhaul of Wall Street regulation, adopted a bipartisan compromise establishing new procedures for averting another financial meltdown like the 2008 crisis.

On a 96-1 vote, the Senate adopted an amendment by Sen. Barbara Boxer (D-Calif.) declaring that no taxpayer funds would be used to shore up failing financial institutions in the future.

The Senate also adopted, 93 to 5, a bipartisan compromise that dropped a proposed $50-billion fund to cover costs of liquidating failing firms — a fund that would have been financed by banks. Critics said the fund's existence would encourage future bailouts rather than prevent them.

With the adoption of those amendments — the first since the bill arrived on the Senate floor last week — the way was cleared for what is expected to be at least a week of debate on even more contentious issues.

Republicans want to scale back the bill's proposal to establish a bureau within the Federal Reserve to focus on consumer protection in investments and finance. Critics, backed by a ferocious lobbying campaign, also hope to change the bill's strict new rules and transparency requirements for derivatives, the complicated financial contracts that were a big part of the Wall Street meltdown.

But before turning to those issues, both parties wanted to address Republicans' charges that the bill did not do enough to close the door on future government bailouts. Dodd said those complaints were unfounded but said Boxer's amendment would put an "exclamation point" on the bill's intent.

Boxer, who is cutting a populist profile in her reelection campaign this year, said, "If there's one thing we should all be able to agree on, it is this: The American taxpayers should never again have to bail out Wall Street firms that gambled away our savings and wreaked havoc on our economy."

The one senator to oppose Boxer's amendment was Tom Coburn (R-Okla.).

Republicans insisted on further guarantees, which were included in the compromise agreed to by Dodd and Sen. Richard C. Shelby of Alabama, ranking Republican on the banking committee.

The five voting against that amendment were four Republicans — Coburn, John Cornyn of Texas, Jim DeMint of South Carolina and Orrin G. Hatch of Utah — and one Democrat, Byron L. Dorgan of North Dakota.

Everyone can agree it sucks to have to bail out major companies with taxpayer money but where else does the money come from? Now the only option when the next major recession comes is to just let several companies collapse like dominoes. After they fall apart China will be on top. But seriously the fund financed by corporations - Why drop that? Its not even tax payer money - do the republicans just want Companies to fail and millions to go unemployed, either way your paying for something.

[Martin N]

Well thats capitolism for you, if something collapses of its own stupidity then the correct thing to do is to let it die, not use taxpayer money to bail it out then let government take control of it, they are even more inefficient than the bankers that got us in this mess. Besides when one thing dies, something else will always be born in its place.

[Othniel]

Well thats capitolism for you, if something collapses of its own stupidity then the correct thing to do is to let it die, not use taxpayer money to bail it out then let government take control of it, they are even more inefficient than the bankers that got us in this mess. Besides when one thing dies, something else will always be born in its place.

Agreed. I hate the bailouts. And TARP. And the Stimulus.

[MathiasOfAthens]

No nthing is born in its place. If a major bank goes down it will take down anything it is financially connected to. If by some miracle it goes down alone it will only cost people their jobs - but banks dont just do that. After that bank is gone a new bank out of the blue does not just rise to take its place out of some capitalism fairy tale. Another bank already established takes over that banks market share. Thats how it works. The end resort is a monopoly.

When the government takes it over we get what happen with GM and Ford both doing marvelously well right now. People are employed and the world keeps on moving. What do you think would of happen had we let them go bust? A: thousands lose their jobs and we lose a great American car company and industry or B: A foreign company purchases whats left of the company and we lose an American car Company.

[Justice and Mercy]

No nthing is born in its place. If a major bank goes down it will take down anything it is financially connected to.

Good. People will be a bit wiser about how they deal with banks, and vice versa.

It's not the government's place to steal money from it's citizenry to inject it into business.

[Darth Red]

I would be thinking that if those institutions did collapse and people had savings (not investments) the laws already give the Federal Bank the authority to pay each person directly. Secondly, if the bank collapsed because of their own reckless investments and mislead investors they can sue for damages.

I would still believe that just because they collapsed doesn't mean other people with money don't get together and purchace the failed institution on their own. That's how I always assumed this was supposed to work. Sure there may be a waiting period before all this would take place and the government could have used that "bailout" money more wizely rather than handing it back to the same charachters that started the mess in the first place. (Talking about the first bailout)

The price they would pay would be their company goes belly up and their forced to sell off assests for pennies on the dollar.
That's how I generally thought, in pricipal, the "free market" was supposed to work...

EDIT: and Ford didn't take any bailout money and they are a stronger company than both GM and Chrysler

[MathiasOfAthens]

Than it was Chrysler I was thinking of... it was them and GM who took bailout money right red I forget? I miss Boston man... dont you just love living there.

[Darth Red]

Yeah, GM got a good bit of help, but Chrysler did sort of get a shaft. The Government essentially forced them to sell off pieces of their company and file bankruptcy but didn't let them create a new company like GM did. I'm not too hip on my backruptcy laws, but I think that the "New GM" company isn't quite responsibe for the old GM?

Before I start sounding too bias (too late) I really don't like the government dictating what a company has to do or what it has to sell off. Their either bankrupt or their not. It seems these two have some sort of quasi-bankruptcy going on. I can understand why the government would do this because those were probably the conditions of the bailout money, but I don't care for the precident it is setting.

Boston is fantastic Mathias. Actually you would fit right in, I am usually seen as an enemy the moment politics come up in conversation.

[MathiasOfAthens]

Yeah but thats what we have in common, boston, so I can hate you even if you join the Tea Party and bowed down to Palin.


Still I think the risks to the economy are worse if we let such huge institutions that affect so much of the economy to simply collapse if we could have helped them in the first place.

[Hattushilish]

Still I think the risks to the economy are worse if we let such huge institutions that affect so much of the economy to simply collapse if we could have helped them in the first place.

Death, or Unga Bunga?

[torongill]

I've argued that it might be better for that 50 billion safety net to exist, but if there's a way to enforce stricter measures to prevent similar crisis and wholesale gambling, I'm all for it. There should be some restraint, otherwise the situation would look like a carriage with horses galloping at break-neck speed and no driver. Sure, the travel to the next town would be faster and the ride is exhilarating, but that's until the carriage passes through a stone and is sent wheels up in the dirt and the passengers all break their necks or heads(or some punk loosened a wheel before the carriage departured and betted by the bookie that the cart won't reach town B).

P.S. Most healthy men may bow over Palin

Spoiler Alert, click show to read: 

if she kneels before them

[MathiasOfAthens]

True we might get those stricter restrictions but I highly doubt we can prevent another recession but maybe we can prevent one caused by major corporations. I just dont understand the 50 billion safety net though. It is financed by the corporations as a form of insurance... seriously are the Republicans getting everything they ing want off the table and everything they do want on. ing babies they are.

Not you Red.

[Admiral Piett]

Well if this was such a one sided approval from the senate it means that they are having to draw a line in the sand of how much funds are going into these banks. A good deal of it is likely from constituent frustration from both the left and right. We cannot just give everyone an endless supply of funds just because they're future is in jeopardy.

[MathiasOfAthens]

I agree with that bit but what about the safety fund idea that was dropped.

[Snoopy]

Let them drop. The point of capitalism is for companies that make bad decisions to die. The resources are then allocated to other sectors, and wasteful projects are dropped.

GM is NOT doing good, it is abusing it's huge bailout to pay off the debts (In other words, they took free money from the government to pay off debts to the government) and it is really not efficient enough. Yes, they are hiring, no, that does not mean everything is dandy. Chrysler, meanwhile, was effectively nationalized (in the Fascist sense, that is).

[PoleCat]

Yeah, GM got a good bit of help, but Chrysler did sort of get a shaft. The Government essentially forced them to sell off pieces of their company and file bankruptcy but didn't let them create a new company like GM did. I'm not too hip on my backruptcy laws, but I think that the "New GM" company isn't quite responsibe for the old GM?....

Actually there is a new Chrysler group - essentially most of the old company was "sold" to the "new" company and allowed to continue from there. Chrysler did get a bit of a raw deal because they were actually owned by a private-equity group (IIRC Cerberus I think...) that came hat-in-hand for a bailout from the government.

The private equity group was forced to sell some of the new Chrysler to Fiat - something like 30% - so the new Chrysler is a hodge-podge of different ownership groups at the moment. Daimler might have a stake in it as well - I can't member right now.

...Chrysler, meanwhile, was effectively nationalized (in the Fascist sense, that is).

Nope, Chrysler is still a private company with large debt obligations to the government. True though that they're likely to avoid paying it all off though....

[jman47]

whats worse is the the Saturn brand of cars couldnt find a buyer and was discontinued.

I own a Saturn and they are great cars, probably one of the best that was under GM.

id rather them get rid of lincoln, buick, or some other brand, cause thats what they are compared to Saturns.

[xcorps]

whats worse is the the Saturn brand of cars couldnt find a buyer and was discontinued.

I own a Saturn and they are great cars, probably one of the best that was under GM.

id rather them get rid of lincoln, buick, or some other brand, cause thats what they are compared to Saturns.

Lincoln isn't a GM product.

[xcorps]

Let them drop. The point of capitalism is for companies that make bad decisions to die. The resources are then allocated to other sectors, and wasteful projects are dropped.

GM is NOT doing good, it is abusing it's huge bailout to pay off the debts (In other words, they took free money from the government to pay off debts to the government) and it is really not efficient enough. Yes, they are hiring, no, that does not mean everything is dandy. Chrysler, meanwhile, was effectively nationalized (in the Fascist sense, that is).

I'd much rather have tax dollars used to subsidize success rather than the failures our government has supported since the 60's.

[Hattushilish]

Tom Coburn is a friggin' low-life scoundrel if there ever was such a thing...