Word: paulsons
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...remained unclear, however, how rebellious House Republicans would receive the deal. GOP Presidential candidate John McCain said Sunday morning that he hoped to support the package once he saw the details, and he consulted by telephone with Paulson throughout the Saturday evening negotiations, as did Democrat Barack Obama. Obama released a statement early Sunday calling the deal necessary, but also, "the culmination of a sorry period in our history...
...week - John McCain's theatrical but ultimately unhelpful return to Washington, the anti-Socialist rants of House Republicans, the political maneuvering by Nancy Pelosi - the deal comes as something of an anticlimax. The market had already priced in the deal all last week, ignoring the Hill's histrionics, and Paulson and Bush were always adamant they were going to get a deal. So what did all the drama actually produce...
Looked at from a distance, it was clear the bullet-headed dealmaker Paulson was going to squeeze what he wanted out of Congress. Over the last six months, with the help of Tim Geithner at the New York Federal Reserve Bank and Ben Bernanke at the Federal Reserve, he has driven Bear Stearns into the arms of J. P. Morgan at a fire sale price; he has forced the board of Fannie Mae to enable a government takeover even though it meant devastation for shareholders; he has stared down Richard Fuld at Lehman Brothers, who thought he could bluff Paulson...
That said, judging from details provided by staffers and reports in the media, Congress did make a difference. To the three-page outline Paulson delivered over a week ago, the Hill added provisions to help American homeowners avoid foreclosure by reducing principals or interest rates and giving people more time to pay back their mortgage. Congress also got a guarantee that taxpayers will get their $700 billion back, and ensured Congressional oversight and transparency of Paulson's transactions. Politically, Congress covered itself somewhat by mandating a limit on executive pay for firms that tap the government's $700 billion...
That is only one element of the tricky undertaking that begins now for Paulson. For all the equity markets' sanguine response to the Hill, the credit markets are still seizing up. The process by which Paulson will actually use the $700 billion to buy the bad loans remains more than opaque. Sources familiar with his plans say he intends to structure some kind of reverse auction, where holders of the loans compete for the pool of money, pricing their loans as low as they can to still survive. But a slew of academic experts in auction theory have...