Amid all of the gloom and doom, perhaps a few positive headlines will help to boost the mood of the nation’s sagging economy. If anything, the Bush-Paulson plan to create a $700 billion Wall Street rescue package “sending the biggest government intervention in the financial markets since the Great Depression,” according to The Wall Street Journal, will likely translate into a spike in the already volatile Dow Jones industrial Average. But how do we assess the lasting effect of the bill, and does the legislation actually target the source of Wall Street’s SOS?
The three R’s of the Economic Rescue Plan, are “Reinvest,” “Reimburse,” and “Reform” — a far cry from the basic three-R principles we learned in school, but does take some measures that are purported to have an impact on Main Street, including government action to steer mortgages inching toward foreclosure toward loan workout programs; an expansion of eligibility for mortgage refinancing under HUD’s Hope for Homeowners program; and direct government intervention with loan providers in increasing loan affordability.
The bill passed handily in the House, following the Senate’s nod Wednesday. The Wall Street Journal reports:
The 263-171 vote was a stark reversal from Monday, when House lawmakers shocked investors and their own leaders by voting against a more narrow version of the plan to buy up distressed assets from financial institutions. That vote sent financial markets tumbling and forced the Bush administration and congressional leadership to scramble and salvage the rescue plan.
The result: a $700 billion bailout for financial firms combined with $152 billion in unrelated tax breaks and broader tools for federal regulators to deal with the growing economic crisis. The Senate passed the bill with a strong, bipartisan tally of 74-25 on Wednesday evening.
Of course, the report goes on to note that the upcoming elections had much to do with the bill’s passage:
The vote in the House was closer, in part a reflection that lawmakers are less than five weeks away from federal elections and voters are increasingly focused on the economy. Supporters of the rescue plan in recent days made a concerted effort to draw a line between Wall Street’s woes and the concerns of everyday taxpayers.
But what is solved here? Several of my fellow Rooflines bloggers have significant reservations about the efficacy of the plan.
Occidental College’s Peter Dreier contends that mortgage affordability is not the problem, but rather the fundamental ease of mortgage lending. “Americans don’t have enough money to pay their mortgages,” he says, calling the Bush-Paulson plan of buying troubled, mortgage-backed securities as “the wrong way to fix this problem.”
John Taylor, president of the National Community Reinvestment Coalition, agrees, saying that the legislation lacks basic, meaningful foreclosure mitigation. Taylor opposes the bill, saying that while the Emergency Economic Recovery Act of 2008 “directly and meaningfully addresses financial liquidity,” it fails to seriously address the core problem underlying the current financial crisis: massive home foreclosures.”
Congressional leaders need to act quickly to make sure that the financial rescue package being debated in Congress moves from being a bailout for financial institutions, to a true economic recovery plan that first and foremost assists working families to stay in their homes.
Speaker Pelosi’s talking points provide encouraging data, but will they work? Is this bill simply a gimmick- and goodie-filled act that will weigh down the taxpayer? Or does it lay the groundwork to restore balance to the housing market and stabilize the financial system?