Asset Sales May Lead to Write-Downs, Insolvencies, Orszag Tells Congress
The director of the Congressional Budget Office said yesterday that the proposed Wall Street bailout could actually worsen the current financial crisis. During testimony before the House Budget Committee, Peter R. Orszag -- Congress's top bookkeeper -- said the bailout could expose the way companies are stowing toxic assets on their books, leading to greater problems.
"Ironically, the intervention could even trigger additional failures of large institutions, because some institutions may be carrying troubled assets on their books at inflated values," Orszag said in his testimony. "Establishing clearer prices might reveal those institutions to be insolvent."
In an interview later yesterday, Orszag explained using the following example: Suppose a company has Asset X, whose value is recorded on the books as $100. Because of the current economic decline, Asset X's real value has dropped to $50. If the company takes part in the government bailout and sells Asset X for $50, the company has to report a $50 loss on its books. On a scale of millions of dollars, such write-downs could ruin a company. Such companies "look solvent today only because it's kind of hidden," Orszag said. "They actually are insolvent" already, he said.
In hearings on Capitol Hill so far this week, criticism of the bailout plan put forward by Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Chairman Ben S. Bernanke has largely been restricted to the shape of the $700 billion proposal, how the money will be spent and what sort of oversight Treasury should have.
But Orszag yesterday questioned the wisdom of the plan itself, testifying that "it therefore remains uncertain whether the program will be sufficient to restore trust." In yesterday's interview, Orszag said, "The key question is: What are we buying and what are we paying for it?"
Bill Clinton Defends John McCain's Debate Decision-- Blames Dems For Meltdown!
ABC News' Nitya Venkataraman Reports: Former President Bill Clinton defended Sen. John McCain's request to delay the first presidential debate, saying McCain did it in "good faith" and pushed organizers to reserve time for economy talk during the debate if the Friday plans move forward.
Appearing on Good Morning America Thursday, Clinton told ABC News' Chris Cuomo that McCain's push to postpone the debate would only be a good political move if both candidates agreed. McCain announced on Wednesday that he would "suspend" his presidential campaign to come to Washington to help negotiate a financial bailout bill.
"We know he didn't do it because he's afraid because Sen. McCain wanted more debates," Clinton said, adding that he was "encouraged" by the joint statement from McCain and Sen. Barack Obama. "You can put it off a few days the problem is it's hard to reschedule those things," Clinton said, "I presume he did that in good faith since I know he wanted -- I remember he asked for more debates to go all around the country and so I don't think we ought to overly parse that."
Also... During the interview Bill Clinton blamed the Democrats for blocking reform of the mortgage giants, via Patriot Room:
Going very much against the media meme that the current financial crisis is all George W. Bush and the Republicans' fault, Bill Clinton on Thursday told ABC's Chris Cuomo that Democrats for years have been "resisting any efforts by Republicans in the Congress or by me when I was President to put some standards and tighten up a little on Fannie Mae and Freddie Mac"
True. President Bush warned about reforming Freddie Mac and Fannie Mae 17 times this year alone. John McCain's reform bill was blocked by dems in 2005. Thank you, Bill Clinton!
And they accuse Republicans of being the party of big business!: "The House of Representatives on Wednesday approved a $25bn package of low-cost loans to help hard-pressed carmakers and their suppliers finance plant modernisation at a time of restricted access to public capital -markets. The automotive loans are separate from the proposed $700bn bail-out for the banking sector, which is still being debated in Congress. The House approved the measure 370-58, setting the stage for Senate approval within days".
MURTHA SUED!... Innocent Haditha Marine Files Slander Charges Against Dem Leader: "A Marine Corps lance corporal from Pennsylvania has sued U.S. Rep. John Murtha, saying the Democrat lawmaker slandered him by saying he and other marines killed 24 Iraqis in Haditha in "cold blood." Justin Sharratt has filed the suit in federal court in Pittsburgh. In the lawsuit, Sharratt claims the comments Murtha made in 2006 about the Haditha killings also violated the Marine's constitutional rights to due process and presumption of innocence."
Another Grim Milestone For Democrats In Iraq- Election Law Passes Parliament: "Iraq's parliament overwhelmingly approved a provincial elections law Wednesday, overcoming months of deadlock and giving a boost to U.S.-backed national reconciliation efforts... U.S. officials have complained privately that Iraqi politicians have failed to take advantage of the sharp drop in violence - down 80 percent since last year, according to the U.S. military - to forge lasting power-sharing agreements. The legislation had been bogged down in a complex dispute between Arabs and Kurds over power sharing in the oil-rich city of Kirkuk, which Kurds seek to incorporate into their semiautonomous region. Lawmakers acknowledged the delay in passing the measure would make it difficult for the electoral commission to organize the vote and pushed back the deadline for it to be held until Jan. 31, 2009."
McCain campaign on the financial crisis: "At today's cabinet meeting, John McCain did not attack any proposal or endorse any plan. John McCain simply urged that for any proposal to enjoy the confidence of the American people, stressing that all sides would have to cooperate and build a bipartisan consensus for a solution that protects taxpayers. However, the Democrats allowed Senator Obama to run their side of the meeting. That did not work as the meeting quickly devolved into a contentious shouting match that did not seek to craft a bipartisan solution. At this moment, the plan that has been put forth by the Administration does not enjoy the confidence of the American people as it will not protect that taxpayers and will sacrifice Main Street in favor of Wall Street. The bottom line is that as of tonight, there are not enough Republican or Democrat votes for the current plan. However, we are still optimistic that a bipartisan solution will be found. Republicans and Democrats want a deal that will protect the taxpayers."
For more postings from me, see OBAMA WATCH (2), TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCH, POLITICAL CORRECTNESS WATCH, GUN WATCH, SOCIALIZED MEDICINE, FOOD & HEALTH SKEPTIC, AUSTRALIAN POLITICS, IMMIGRATION WATCH INTERNATIONAL, EYE ON BRITAIN and Paralipomena
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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)