I usually don't share my emails in my blog, but I had to this time. But this client is spot on here..

It is disturbing that this rescue plan has become a partisan issue and that it was pushed in this direction by the House Speaker prior to the vote. She should be muzzled since she seems to talk out of both sides of her mouth.

Some members of Congress were influenced at the last minute by their constituents who wanted them to vote against the bill. Trouble is, they didn't even know the provisions of the bill or what it contained.

Typical emotion over logic.

I don't know how typical this is but 2 of our democrat congressional representatives voted against the bill because it didn't include provisions covering many social issues such as "unemployment provisions, food stamps, foreclosures" and many of the problems we face today.

Aren't they missing the point of the bill and the vote? If the boat is leaking do we argue about whether to use the right or left hand to plug the holes?

Jeeze . . .This election campaign is lasting much too long.

I'm through - for now. 

Here is what the House leadership and other prominent members "who get it" said about the bill before the vote on Monday. Plus the exerpt of the Pelosi Speech that really mess things up. Now if we can just have 12 more congressman "get it" on their next go-around of voting.

Rep. John A. Boehner, Republican of Ohio House minority leader:

"Each and every one of us has to act. These are the votes that separate the men from the boys and the girls from the women. These are the votes. These are the votes that your constituents sent you here to decide on their behalf. They didn't tell you it was going to be easy. They didn't tell you, no, it's going to be black and white and you won't have any shades of gray. These are the kind of votes that we have to look into our soul and understand and ask ourselves the question, what is in the best interest of our country. I believe what's in the best interest of our country, as i stand here today, is to vote for this bill. While imperfect, while not having everything everybody wants, i believe that we have to vote for this bill and do our very best to keep ourselves from the brink of an economic disaster that will harm all of our constituents. So i ask all of you, both sides of the aisle, what's in the best interest of our country? Not what's in the best interest of our party, not what's in the best interest of our own re-election, what's in the best interest of our country? Vote yes."

Rep. Roy Blunt, Republican of Missouri House minority whip

"None of us want to be here today. All of us would rather not be dealing with this situation. None of us want to see the worldwide economic news over the weekend, but it all happened and we see things happening in our country today that have to be dealt with. And this body has the opportunity to deal with those things. We've reached out to try to compromise on both sides of the aisle on a solution. Now, frankly, I think every speech here today on either side that gets into wanting to allocate blame is not helpful. ... The economy doesn't begin to reflect the true strength this economy has. This bill helps re-establish the floor for that strength. This bill helps us ensure that taxpayers don't pay any cost. This bill ensures that everybody can watch all the time to see what's going on. I urge my colleagues to vote for it. I thank my colleagues who have worked hard to get it to this point. I encourage my colleagues that this is no time to seek partisan advantage. This is the time to try to seek a bipartisan solution."

Rep. Spencer Bachus, Republican of Alabama Ranking member of the House Financial Services Committee

"Our time has run out. We're going to make a decision. There are no more alternatives. There are no other choices. Just this one choice. And I don't know about you, I believe every member of this body feels as if there's an awesome responsibility on our shoulders. This will be the most difficult decision I make in my 16 years in this body. And I have decided that the cost of not acting outweighs the cost of acting. ... None of us in this body have any really good judgment or insight into what happens if we fail to pass this bill. It could mean companies going out of business. We've been told it would. It could mean more bank failures. Probably will. It will mean impairment of our parents and grandparents' pensions. I'm not willing to put that bullet in the revolver and spin it. I'm not willing to take that gamble. I'm not willing to pull that trigger. Because I am not willing to subject the American people to the worst-case scenario. I don't have a crystal ball. And that is one reason that I'll be voting yes. Because I am unwilling, I will take the political risk, but I will not take a risk on the American people and their future."

Rep. Barney Frank, Democrat of Massachusetts Chairman of the House Financial Services Committee

"This is a tough vote. This is a vote where many of us feel that the national interest requires us to do something which is in many ways unpopular. ... No matter what you thought about the crisis 10 days ago, when these two internationally respected, highest officials of the Bush administration, of the greatest economic power in the world, come up and say if you don't do this we will have a crisis, then even if that wasn't true before, they are making it more true. That is the reality. If we repudiated George Bush's Treasury secretary and chairman of the Federal Reserve, joined as they were by previous secretaries of the Treasury, if we repudiate them and say -- no, calm down, we'll get over it -- I believe the consequences will be severe. So I hope that this bill is passed."

In case you were wondering, Here is the Speech that Lost the Yes Votes...

Rep. Nancy Pelosi, Democrat of California Speaker of the House

"When was the last time someone asked you for $700 billion? It is a number that is staggering, but tells us only the costs of the Bush Administration's failed economic policies -- policies built on budgetary recklessness, on an anything goes mentality, with no regulation, no supervision, and no discipline in the system. Democrats believe in the free market, which can and does create jobs, wealth, and capital, but left to its own devices it has created chaos. That chaos is the dismal picture painted by Treasury Secretary Paulson and Federal Reserve Chairman Bernanke a week and a half ago in the Capitol. As they pointed out, we confront a crisis of historic magnitude that has the ability to do serious injury not simply to our economy, but to the American people: not just to Wall Street, but to everyday Americans on Main Street. It is our responsibility today, to help avert that catastrophic outcome. Let us be clear: This is a crisis caused on Wall Street. But it is a crisis that reaches to Main Street in every city and town of the United States."

The political tides in Washington over the past week have been as turbulent as the stock market. Expect the bumpy ride to continue for the foreseeable future.

The House vote has been halted while leaders who shepherded the bill attempt to sway about a dozen of their nay-saying counterparts to switch sides. A Senate vote is scheduled for Wednesday but it is unclear how things will proceed until a House resolution -- which may involve some legislative tweaking -- is reached.

"Think about the big run-ups and sharp declines over the past 10 days as this story has unfolded," says Michael Branham, a financial planner at Cornerstone Wealth Advisors. "There really have not been any fundamental shifts in the status of the economy or underlying companies and their profits, based on any given news cycle. Instead investors are buying and selling on hope, or lack thereof."

The plan voted down in the House on Monday was the product of several compromises between Congress and the Bush administration, which first proposed it Sept. 18. Lawmakers structured a bill that would provide up to $700 billion in installments -- $250 billion initially and another $100 billion if the president deems it necessary, with another $350 billion available with Congressional approval. The measure included additional protections for taxpayers, as well as restrictions on executive compensation for firms that participate in the program.

Lawmakers are hamstrung by two unpalatable options in a crucial election year: Approve an unpopular and costly bill or risk a swift deterioration in the U.S. markets and economy that could hurt consumers even more. Partisan bickering has bogged down the process, with conservative House Republicans teaming up against an unlikely coalition of Democrats and the Bush administration.

Several Republicans blamed House Speaker Nancy Pelosi's (D., Calif.) speech ahead of the vote, during which she blamed the Bush administration's economic policies for the current crisis and, unsurprisingly, painted Democrats as the heroes. House leaders -- including John Boehner (R., Ohio), Adam Putnam (R., Fla.), Roy Blunt (R., Mo.) and Eric Cantor (R., Va.) -- responded by criticizing her speech after the bill failed to pass muster, saying Pelosi had undermined their efforts for a bipartisan solution.

There is plenty of blame to go around for the current crisis on both sides of the aisle. But because legislators did a poor job of explaining the plan and its benefits to the public, it has been hard to gain support. It would have really helped if they didn't call this a "bailout".

They screwed up the vote on Monday. Let's see how they do the second time around later this week.

There's panic on the streets. The failure on Monday of the U.S. House of Representatives to pass the bailout plan makes the "Great Depression" words seem possible for the first time. But I don't think another depression is likely, for two reasons.

First, when you spend time studying the Crash of 1929 and the depression that followed, what stands out the most is the dearth of doomsayers. Even Roger Babson, the economist known to posterity as "the man who called the crash," did no such thing; he forecast only a 15% to 20% drop, not the apocalypse that actually occurred. Depressions start not when lots of people are worried about them, as we have today, but when no one is worried about them, as in 1929.

Corbis

Not again? Bewildered investors milled about New York's financial district after the stock-market crash in October 1929.

Second, the Great Depression and the Panic of 1873 (which triggered what arguably was the worst depression in U.S. history) both occurred before the Federal Reserve Bank had aggressively grown into its role as "lender of last resort." In the wake of 1873, after a railroad-building boom had swept the nation and then gone bust, companies and consumers alike were left gasping for capital. Nothing but the passage of time could supply it; the Fed would not be established until 1913. After the crash of 1929, when the Fed was still weak, years passed before the federal government could flood the economy with cash.

Today, however, the resolve of the Fed is not in question; nor is there any doubt that the Treasury Department is willing to provide the financing it takes to get the economy moving again. Furthermore, U.S. nonfinancial companies have just under $1 trillion in cash on their books. Even though Wall Street is dead, innovation is not: In the months to come, clever new financial go-betweens will spring up and find a way to get that cash flowing again. It's hard to see how a depression could get under way when so much capital is waiting in the wings.

"Investors hate uncertainty." Well, that's just tough. Uncertainty is all investors ever have gotten, or ever will get, from the moment barley and sesame first began trading in ancient Mesopotamia to the last trade that will ever take place on Planet Earth.

The financial future is no more uncertain now than it used to be; in fact, it's far less uncertain than it was in the summer of 2007, when the Dow shot above 14000, the future seemed bright, and utterly no one foresaw the disaster that would befall the financial system. The absolute certainty of blue skies ahead was an illusion then, and the notion that we all know that worse misery lies in store is an illusion now.

The only true certainty is surprise.

You've probably spent a lot more time worrying about negative than positive surprises lately. But we could get surprised on the upside by a further fall in oil prices, a kick from a big drop in interest rates -- and, of course, untold other possibilities that no one can foresee.

Whatever happens with the bailout, don't bail out.

As a Republican I am throughly dissappointed. As I wrote yesterday The Paulson-Cantor Bill is a win-win-win-win. (More Here.) But my peers in the House blew it today. Update just in from Forbes:

In a suspenseful vote of 205-228, the House of Representatives squashed a bill granting the Treasury $700 billion to shore up the U.S. financial system. Clearing the House was seen as the bill's biggest hurdle, and now the proposed bailout is thrown into disarray.

The bill had majority support from House Democrats, at around 140-95. It was killed by staunch opposition from House Republicans, 65-133. The voting was left open for several minutes, while congressional leaders tried to get members to change nay votes, and the tallies shifted slightly but not enough to pass.

On Wall Street, market response was swift and terrible. The Dow Jones Industrial Average, which had been trending down throughout the morning, plunged almost 7% in minutes before recovering somewhat. Prices for Treasury bonds soared into the stratosphere, pushing the yields down. The three-month Treasury yield sank to 0.68%, while the London interbank offer rate rose to 3.88%.

Though support for the bill was strong at the start of voting, it tapered off at the end, and the nays carried the day. A motion was made to reconsider the bill at an unspecified later time.

"I don\'t know that we know the path forward at this point," said House Minority Leader John Boehner, R-Ohio, "We need everyone to calm down and relax and get back to work."

Rep. Roy Blunt, R-Mo., said "we did think we had a dozen more votes going to the floor than we had." Blunt and Rep. Eric Cantor, R-Va., blamed the collapse of support on a speech given by House Speaker Nancy Pelosi, D-Calif., shortly before voting, which they said stirred partisan tensions. (Ugh!)

There was already a sense that the plan would not be enough to break the log jam in the credit markets, where banks are even refusing to lend to each other. Earlier Monday the Federal Reserve raised the amount of swap lines it has with foreign central banks to $650 billion from $290 billion. It also announced bigger and longer-term auctions totalling more than $400 billion, but the credit markets remained stuck.

Expectations are now for the Fed to cut interest rates by as much as 50 points before the next meeting at the end of October.

The vote came after more than three hours of floor debate and 10 days of intense negotiation since Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke warned that the economy was in crisis and urgent action was needed.

The House Republicans were the last block of Congress with reservations about the deal. And although on Sunday evening, the House Republican leadership threw their support behind a compromise draft of the bailout proposal, the support was not enough. "The risk in not acting is much greater than the risk in acting," said House Minority Leader John Boehner, R-Ohio, in a passionate plea on the House floor before the vote. "These are the votes that separate the men from the boys and the girls from the women," Boehner said.

Thinking they had enough support from both Democrats and Republicans in the House of Representatives, House leaders brought the bill to a vote.

In an address Monday morning, President George W. Bush acknowledged how tenuous the situation was. "Now I fully understand that this will be a difficult vote," Bush said before markets opened in the U.S. But he tried to sound reassuring. "With the improvements made in this bill I\\'m confident that members of both parties will support it," he said.

They were not enough.

The legislation was voted unchanged from the draft released on Sunday. But the modifications made to the bill since it was first proposed by Paulson were not great enough to overcome the reservations of House members.

Now it is back to the drawing board for the bailout, as congressional leaders must scramble to salvage the failed piece of legislation hammered out after 10 days of drama in the halls of Congress, including two lengthy congressional hearings on the matter, three nationally televised pitches by Bush in favor of the plan, a volatile and controversial meeting at the White House that included both presidential candidates, a full-fledged defection by a core block of Congress, and days of "deal or no deal?"

The result: no deal. And this stinks. I hope they pull it together QUICKLY...

The Deal is Done. Now the question lies- is this a good thing or a bad thing? Polls show Americans do not like it. The problem is, folks really don't know enough to make a decision either way. On the surface it sounds terrible to have our government bail out Wall Street. But the truth is the Paulson-Cantor Plan Is a Win-Win-Win-Win.

Here's more from Larry Kudlow, National Review.com Economics Editor and host of CNBC's Kudlow & Company...

The single-biggest mistake in the Paulson bank-rescue-plan marketing effort has been the failure to explain clearly how taxpayers are going to recoup $700 billion used to buy toxic assets at auction in order to unfreeze the banking system. In other words, folks don’t understand how taxpayers will be paid back, and may actually make profits, which will enable the new government debt to be erased after the Treasury bank-rescue is completed.

Here’s the key point: Any loan package bought by the Treasury will be 100 percent taxpayer owned. Period.

Let’s walk through this hypothetical for a moment. Through a market-driven auction, the Treasury will purchase some dollar amount — say $100 billion — of loans that banks will sell. The Treasury will then buy those loans at the prices that fill the auction, starting with the lowest prices and working up. Now, the Treasury will hold those bonds either to maturity or for a sale in the open market if rising prices in the market make that sale attractive. In other words, suppose the Treasury buys a bond package at 20 cents on the dollar. They hold it for a while, and if market conditions improve, they sell it for 50 cents on the dollar to some buyer (e.g., an investment fund, a private-equity fund, a hedgie). The Treasury will make the sale at the higher price in order to gain a profit for taxpayers.

In the meantime, as the Treasury holds the loans, the government will get monthly cash-flows coming in on the mortgages, or on any other loans that it owns. So it is win-win for taxpayers. First, taxpayers get the cash flow generated by the assets. (Something like a 10 percent interest rate.) Second, if the loan is sold for profit, the taxpayers will own that profit. And the new law must of course stipulate that all the cash flows and/or profits go for debt-reduction to protect taxpayers.

I don’t think a lot of folks understand this win-win scenario. Let me repeat: The taxpayers own the bonds the Treasury buys; the taxpayers own the cash flows generated by the bonds; the taxpayers own the profits when the bonds are sold; and the taxpayers benefit when the profits and cash flows are used to pay-down government debt.

Actually, for taxpayers, it’s a win-win-win-win. 

Think about this. The troubled assets purchased by the Treasury right now are likely to be very under-priced because of the chaotic and frozen market conditions. But over time, through monthly cash-flow payments or through loan sales, taxpayers will get all their money back and in great likelihood a handsome profit.

I have been in conversation with leading House Republicans all day. And they understand these key points. Unfortunately, this understanding did not materialize in their original meeting with Mr. Paulson a few days ago. But now the actual reality is sinking in.

Another point: Republican leader Eric Cantor has an excellent idea for a federal bond insurance guarantee for straight mortgage-backed paper, financed by private-sector insurance premiums. That will improve investor confidence in mortgage bonds and will make those bonds highly marketable. Importantly, senior Treasury officials have told me that Mr. Paulson will accept the insurance idea as an option in the final bill, alongside the ability of the Treasury to purchase distressed assets.

Sources also tell me that other conditions will be necessary to bring the House GOP along. First, the ACORN slush fund must be removed. Second, the so-called union proxy to run a slate of corporate directors is a big problem. Third, all profits from the Treasury rescue mission must be used to reduce the national debt — 100 percent. Fourth, Republican members are opposed to bankruptcy judges setting mortgage terms and interest rates (Sen. Obama also is opposed). Fifth, the so-called government equity ownership of banks is distasteful because it effectively creates a corporate tax increase on banks at a time when they are struggling. And last, the Treasury secretary’s request for $700 billion is regarded as way too high.

Essentially, House Republican leaders want a slimmer, cleaner Paulson plan supplemented by Mr. Cantor’s mortgage-bond insurance program. I think it’s a good package that would be great news for stock and bond markets that are now ailing badly. It would set the stage for a gradual return to normalcy on the part of bank lenders, including loans to small businesses, consumers, and homeowners. It would be a pro-growth package at a time when the economy desperately needs a prosperity tonic.

The details of the plan are now coming in. Read the latest from the Wall Street Journal "Shape of Massive Bailout Bill Starts to Develop Definition".

With the first round of Presidental Debates behind us, I felt it was important that you hear "the rest of the story" about our  credit markets and who's to blame from a recent Wall Street Journal article "Blame Fannie Mae and Congress for the Credit Mess". 

Here are the 10 key points...

1. Many monumental errors and misjudgments contributed to the acute financial turmoil in which we now find ourselves. Nevertheless, the vast accumulation of toxic mortgage debt that poisoned the global financial system was driven by the aggressive buying of subprime and Alt-A mortgages, and mortgage-backed securities, by Fannie Mae and Freddie Mac. The poor choices of these two government-sponsored enterprises (GSEs) -- and their sponsors in Washington -- are largely to blame for our current mess.

2. How did we get here? Let's review: In order to curry congressional support after their accounting scandals in 2003 and 2004, Fannie Mae and Freddie Mac committed to increased financing of "affordable housing." They became the largest buyers of subprime and Alt-A mortgages between 2004 and 2007, with total GSE exposure eventually exceeding $1 trillion. In doing so, they stimulated the growth of the subpar mortgage market and substantially magnified the costs of its collapse.

3. Rep. Barney Frank (D., Mass), for example, now the chair of the House Financial Services Committee, openly described the "arrangement" with the GSEs at a committee hearing on GSE reform in 2003: "Fannie Mae and Freddie Mac have played a very useful role in helping to make housing more affordable . . . a mission that this Congress has given them in return for some of the arrangements which are of some benefit to them to focus on affordable housing."

4. In light of the collapse of Fannie and Freddie, both John McCain and Barack Obama now criticize the risk-tolerant regulatory regime that produced the current crisis. But Sen. McCain's criticisms are at least credible, since he has been pointing to systemic risks in the mortgage market and trying to do something about them for years.

5. In contrast, Sen. Obama's conversion as a financial reformer marks a reversal from his actions in previous years, when he did nothing to disturb the status quo. The first head of Mr. Obama's vice-presidential search committee, Jim Johnson, a former chairman of Fannie Mae, was the one who announced Fannie's original affordable-housing program in 1991 -- just as Congress was taking up the first GSE regulatory legislation.

6. In 2005, the Senate Banking Committee, then under Republican control, adopted a strong reform bill, introduced by Republican Sens. Elizabeth Dole, John Sununu and Chuck Hagel, and supported by then chairman Richard Shelby. The bill prohibited the GSEs from holding portfolios, and gave their regulator prudential authority (such as setting capital requirements) roughly equivalent to a bank regulator.

7. In light of the current financial crisis, this bill was probably the most important piece of financial regulation before Congress in 2005 and 2006. All the Republicans on the Committee supported the bill, and all the Democrats voted against it. Mr. McCain endorsed the legislation in a speech on the Senate floor. Mr. Obama, like all other Democrats, remained silent.

8. Now the Democrats are blaming the financial crisis on "deregulation." This is a canard. There has indeed been deregulation in our economy -- in long-distance telephone rates, airline fares, securities brokerage and trucking, to name just a few -- and this has produced much innovation and lower consumer prices. But the primary "deregulation" in the financial world in the last 30 years permitted banks to diversify their risks geographically and across different products, which is one of the things that has kept banks relatively stable in this storm.

9. As a result, U.S. commercial banks have been able to attract more than $100 billion of new capital in the past year to replace most of their subprime-related write-downs. Deregulation of branching restrictions and limitations on bank product offerings also made possible bank acquisition of Bear Stearns and Merrill Lynch, saving billions in likely resolution costs for taxpayers.

10. If the Democrats had let the 2005 legislation come to a vote, the huge growth in the subprime and Alt-A loan portfolios of Fannie and Freddie could not have occurred, and the scale of the financial meltdown would have been substantially less. The same politicians who today decry the lack of intervention to stop excess risk taking in 2005-2006 were the ones who blocked the only legislative effort that could have stopped it.

Boy have I been flooded with folks worrying about the Bernacke's bail out plan. I am not worried. And either is Billionaire Warren Buffett. He called the turmoil in the markets an "economic Pearl Harbor," said his $5 billion investment in Goldman Sachs Group is an endorsement of the Treasury's $700 billion bank rescue plan.

"I am betting on the Congress doing the right thing for the American public and passing this bill," Buffett said on cable channel CNBC Wednesday. "I certainly have a vote of confidence in Goldman and vote of confidence in Congress."

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke are pushing Congress to quickly approve the proposal to remove illiquid assets from the banking system. Buffett is buying a stake in New York-based Goldman after three of the investment bank's biggest competitors collapsed or were forced into emergency sales.

"I think the Treasury will pay back the $700 billion and make a considerable amount of money," Buffett said, adding that if he had $700 billion on the government's terms to buy distressed assets, he would. "Unfortunately, I'm tapped out."

Buffett, 78, has frequently scolded Wall Street for shoddy accounting and risky investments.

He invested in the most profitable U.S. investment bank a week after Lehman Brothers Holdings went bankrupt and Merrill Lynch & Co. sold itself to Bank of America Corp. Bear Stearns Cos. in March was absorbed by JPMorgan Chase & Co.

"It's not like Pearl Harbor where you could look at what happened with your own eyes and decide you had to do something that day," Buffett said on the cable channel. "This is sort of an economic Pearl Harbor we're going through."

The Goldman investment puts Berkshire back in an industry Buffett has mostly shunned since 1997, when Salomon Bros. was sold to Travelers Group. Buffett helped the firm fend off an unwanted takeover in 1987, only to see the New York securities firm trail every U.S. stock index for the next decade.