Banks Wrote Their Own Bailout

Posted: Jun 25, 2008 7:37 AM
Excellent story in the Washington Post this morning regarding the housing bailout. Turns out the bill was essentially written by the foreign investment bank Credit Suisse with some extra help from La Raza.


And that bill passed a Senate cloture vote last night 83-9. There's still a few more votes on it, but there's a good chance it will be sent to the President's desk. Bush has issued a veto threat on it, but that doesn't mean he won't sign a slightly altered version eventually.

Bank of America and Countrywide were also circulating their preferred versions of a bailout through Capitol Hill. That's right. The banks were writing their own bailout. This wasn't done for the little guy.

Here are some highlights:

-A key provision of the housing bill now awaiting action in the Senate -- and widely touted as offering a lifeline to distressed homeowners -- was initially suggested to Congress by lobbyists for major banks facing their own huge losses from the subprime mortgage crisis, according to congressional staff members and bank officials.

-During the first week of January, three officials from Credit Suisse -- two from Washington and one from the mortgage-trading desk in New York -- spent a day on Capitol Hill briefing the staffs of the committees that oversee housing. They gave a brief PowerPoint presentation to the House Financial Services Committee in the morning and to the Senate Banking Committee in the afternoon.They remained in close touch afterward, especially with House Democratic aides.

-Congressional staffers said they also consulted with other banks, such as Citigroup,
and industry groups such as the Securities Industry and Financial Markets Association. It also hashed out concepts with La Raza, the NAACP and low-income housing groups.

-"It is ironic that Congress, responding to a crisis that was created in large part by irresponsible lending, would produce a bill, the main beneficiaries of which are likely to be those lenders," said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal research group.