If anybody actually listened to Bush's statement, Paulson and Bush have already agreed to an oversight body, some kind of mortgage relief for home owners and restrictions on executive windfalls from the bail-out.

25% of the troubles financial institutions are feeling are due to leveraged purchases of mortgage-backed-securities that turned out to be inaccurately graded.  75% is due to a three line change in an obscure accounting rule.

What changed?  In the past, public corporations could value bonds and other securities based on their expected return to maturity.  Now, they must "mark security values to market".  Since mortgage-backed securities are fairly new and nobody really knows what their worth, their market prices (what they can be sold for right now) have ALL declined immensely.  Sinse most of them were bought with leverage, those paper losses are being turned in to very large real losses.

If the President and Congress want to stop the "meltdown" they need to pass a law changing that one accounting rule back to what it was in the past.  If the Congress and the President were from the same party, this would have already been done.  As it is, Congress would never allow such a change.  Politics is politics, after all.

Secondly, Congress passed and the President signed legislation a few months ago that rewrote regulations regarding sub-prime loans.  In order to qualify for a sub-prime loan, borrowers must now show and adequate income history, a postive payment history, and have at least a 3.5% down payment.

If you have all three of those, you are not a sub-prime borrower.  You are a prime borrower.  With non-prime borrowers shut out from home purchase markets across the country, prices cannot remain where they are.  They will continue to decline, significantly.

If the Feds want housing markets to inflate again, they will have to rewrite that law.  Political considerations will not permit them to do so.

But, I think the Democrats should simply take this position, as stated in the 2008 Republican Party Platform - adopted just 3 weeks ago.

Quote:

   With the creation of the so called Mortgage and Financial Institutions Trust (MFI), the unfolding financial crisis, considered by many to be the worst in over 60 years, has become ever-more dangerous.

    While such an institution has not existed in any country, the MFI could prove to be disastrous for US public finance, economic growth, the dollar, relations with major foreign holders of dollars, the global financial system, and could ignite the worst inflation in the economic history of the United States and reverse globalization to levels not seen since the Great Depression.

    The initial cost of the MFI, put at US$700 billion, could easily escalate to trillions of dollars. At the same time, the Congressional Budget Office had previously projected a record fiscal deficit of US$500 billion for 2009. The MFI will further blow up the deficit to an unprecedented level, exceeding US$1.4 trillion. US debt, jumping with the takeover of Fannie Mae and Freddie Mac to 86% of GDP, has moved to an unsustainable level.

    The financing of previous large fiscal deficits under the George W Bush Administration has already caused external deficits (current account) to widen to 5-7% of GDP, turned national savings negative, sent the dollar plummeting, and ignited rapid inflation, particularly in food, energy, and housing prices. Further financing of extraordinary large fiscal deficits, as required by the MFI, can only disrupt economic stability both in the US and world-wide. It will only further undermine the dollar, exacerbate widening external deficits, soaring energy and food prices, and rising unemployment.

Nonetheless, the main architects of the MFI, Messrs Henry Paulson and Ben Bernanke, Treasury Secretary and Federal Reserve chairman respectively, are determined to protect Wall Street. They have decidedly transformed the US budget and the US central bank into vehicles that only care for the welfare of Wall Street and divert public resources to bankers, under the guise of protecting the economy and averting systemic risk.

Albeit evidence of a systemic risk has not been established, vast public resources have so far been devoted to bailouts at the expense of growth-generating spending. The Fed has been pouring billions of dollars into financial institutions, buying worthless paper, and incurring huge losses. To quote Paulson "I am convinced that this bold approach [that is creation of the MFI] will cost American families far less than the alternative - a continuing series of financial-institution failures and frozen credit markets unable to fund economic expansion."

Contrary to Paulson's claim, domestic credit is still expanding at a fast rate, at 9% per year as of July 2008, and the notion of frozen markets cannot be supported by Fed's published monetary data. Banks have excess liquidity and are still extending loans to safe customers. Certainly they are no longer in the mood of reigniting a new speculative euphoria by lending to speculator and impaired credit.

And contrary to Paulson's belief, the MFI will in the end cost American families more than other alternatives.

...

Asia and Persian Gulf oil exporters will no longer continue to trust the United States with their money. Financial trust, a needed but already a rare commodity in finance, will evaporate. Countries will withdraw from participating in the global financial system and autarchy will once again raise its ugly head. Moreover, oil exporters with large financial surpluses, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates, may cut back their oil exports. Why would they want to sell their depleting oil reserves for worthless paper?

--Hossein Askari is professor of international business and international affairs at George Washington University. Noureddine Krichene is an economist at the International Monetary Fund and a former advisor, Islamic Development Bank, Jeddah.  

Now is not the time to panic about anything. There is no impending financial meltdown crisis--that's a figment of the imagination. Corporate America goes into this with cash on hand, knowing full well for over 18 months that the mortgage sector was going to cause this type of a meltdown. The gurus are safe. Those in the know are waiting and watching. The market could lose a lot of inflated, bloated value and America would continue on. This is a sucker's bet, and they're betting we're suckers. And they tried, and failed to run that by the Congress.

People who are smart about money still have their f***ing money, don't they? And the people who were caught on the bubble are the ones who weren't smart, weren't prepared, weren't ready. And they're scrambling to keep a 500 million dollar fortune from turning into a 5 million dollar fortune.