Congress prepares for auto industry bailout vote

House Majority Leader Steny Hoyer (D-Md.) announced that Congress would be prepared to vote on the bailout for the Big 3 automakers today, pending discussion with those in the Senate.

During a pen and pad session, Hoyer elaborated on the details of the legislation, “Any tax payer assistance will be covered with vigorous oversight, and it’s included in the bill.”

While the Majority Leader stated that they will be prepared today, the Senate may vote first if success seems more likely through that avenue.

Hoyer also discussed prospects for an economic stimulus package, “President-elect Obama has made it very clear that he wants to see a very substantial economic stimulus package passed. He wants to sign such a package in January,” said Hoyer.

“After eight years of economic policies that have lead us to arguably the worst economic performance, the greatest loss of jobs, the most difficulty confronting our people since the great depression it’s critically important that we have legislation that will assist in getting this economy going. We plan on doing this very early next year before President-elect Obama is sworn.”

The Majority Leader also said that he and ten other representatives, including ranking member of the Foreign Affairs Committee Rep. Illeana Ros-Lehtinen (R-Fla.), will be presenting Obama with a series of suggestions to help end the genocide in Darfur.

Automakers will have second chance to request bailout

The Democratic leadership from the House and Senate held a press conference to announce that since the auto industry has failed to convince Congress that their suggested rescue plan will not be their last request, there will be no agreement on a bailout this week. However, the CEOs from the Big 3 automakers will have another opportunity to make their case to Congress

"We're requesting that they submit a plan to Congress through Chairman Frank and Chairman Dodd no later than December 2nd. These two very able men will review the plan if necessary hold hearings during the week of December 2nd to fully vet the auto industry's proposal," said Senate Majority Leader Harry Reid (D-Nev.).

Reid stated that Congress was prepared to come back in session the week of December 8th, but only if the Big 3 auto makers submitted a plan that will provide accountability.

"Until we see a plan where the auto industry is held accountable and a plan for viability on how they go into the future...we cannot show them the money," said House Speaker Nancy Pelosi (D-Calif.).

Pelosi went on to reject the calls that have been made for the automakers to declare bankruptcy.

"This is our response to those who would say 'let them go, let them go and deal with it after that'. This is an important industry in our country and we intend to save it. We can only do this if we work together and the auto industry has to come up with a plan for innovation, accountability, and viability," said Pelosi.

Treasury Secretary Paulson: recovery and repair remains primary focus

At a press conference today, Secretary of the Treasury Henry Paulson said that although the financial situation is still fragile, the steps taken have helped America's system. He stated that the Treasury had acted quickly and in coordination with other systems around the world, but that the market turmoil is not likely to end until the housing crisis is over.

Paulson said that the primary focus must be on recovery and repair, as he stressed the importance of banks continuing to lend. He stated that by the time Congress approved the bailout money, the Treasury realized it was too late and would take too long to invest the money as it had originally intended. Instead, they decided the money would best be used to strengthen liquidity in banks, not housing.

In conclusion, Paulson described the stability of the financial system as their highest priority, He emphasized three steps to accomplishing this goal. First they will seek to reinforce the stability of the financial system; second, seek to support important non-bank financial institutions; third, continue to o explore ways to reduce foreclosures.

Financial crisis is 'like a Tsunami'

"The list of regulatory mistakes and misjudgments is long, and the cost to taxpayers and our economy is staggering," Chairman Henry Waxman said at the Committee on Oversight and Government Reform hearing on the financial crisis and the role of federal regulators.

Testifying was Alan Greenspan, former Chairman of the Federal Reserve System, Christopher Cox, Chairman of the Securities and Exchange Commission, and John Snow, former Secretary of the Treasury under President George W. Bush.

Greenspan highlighted that in 2005 he had raised concerns that the protracted period of underpricing of risk would have dire consequences. Greenspan went on to say that even though he raised concerns about possible financial problems, he could not have imagined it to be as broad as it was. "The financial landscape that will greet the end of the crisis will be far different from the one that entered it little more than a year ago. Investors will be exceptionally cautious. Structured investment vehicles and other exotic financial instruments are not now, and are unlikely to ever find willing investors. Subprime mortgages will also be on that list, this market for which has virtually disappeared," Greenspan said.

Greenspan flip-flopped on issues surrounding regulations in banking institutions and what he had previously stated. In previous interviews, Greenspan had stated that he believed it should be left up to the banks to regulate and not the government. Waxman asked Greenspan if he still thought it was a good idea to let the banks regulate instead of having the government step in. "I was partially wrong with saying that banks should regulate themselves. The problem I'm having is that I still don't understand fully how this crisis happened and why it happened. When the facts change, I will begin to change my view," Greenspan said, commenting on Rep. Waxman's questioning.

Cox said that he thinks one of the reasons why the crisis happened was because a lot had changed since 1999 and the time of the Clinton Administration. "Credit default swaps were just emerging in 1999, but now they are between 10 to 15 percent of the financial institutions, and one of the main issues surrounding the financial crisis," Cox said.

Snow believes that if Congress would have done more in 2005, the financial crisis may be completely different. He said that with a "stronger regulatory set in place back then, and if our Government would have gotten more involved with the issues surrounding credit default swaps, taxpayers would be looking at the economy differently today."

One statement all three panelists and Chairman Waxman agreed on was that the crisis will pass and America will reemerge with a far sounder financial system. Chairman Waxman concluded with the statement that he hopes to further these investigations, and find a "clear cut reason why all of this happened."

Rep. Waxman: The story of the credit rating agencies is a story of colossal failure

“The leading credit rating agencies, Standard and Poor’s, Moody’s, and Fitch are the financial gatekeepers to the economy,” Representative Henry Waxman (D-Calif) Chairman of the Committee on Oversight and Government Reform, said during the hearing on credit rating agencies and the financial crisis.

Jerome Fons, former Executive of Moody’s Corporation, stated that the major rating agencies had missed the impact on subprime mortgages of falling house prices and declining underwriting standards. “A large part of the blame can be placed on the inherent conflicts of interest found in the issuer-pays business model and rating shopping by issuers of structured securities,” Fons said.

Raymond McDaniel, Chairman and Chief Executive Officer of the Moody’s Corporation, said that Moody’s published warnings about the increased risks and took action to adjust their assumptions for the portions of the residential mortgage banked securities market that were asked to rate. McDaniel went on to say that they did not anticipate the magnitude and speed of the deterioration in mortgage quality and quickness of restrictive lending.

Waxman concluded with “The credit rating agencies occupy a special place in our financial markets. Millions of investors rely on them for independent, objective assessments. The rating agencies broke this bond of trust, and federal regulators ignored the warning signs and did nothing t protect the public.”

Continuing the hearing process on the financial crisis,the members will hear from federal regulators, including SEC Chairman Christopher Cox, followed by a hearing with Fannie Mae and Freddie Mac on November 20th.