$700 Billion Bailout Busted, Dow Plunges

The $700 billion bailout legislation unveiled Sunday failed in the U.S. House of Representatives Monday after offering vague hope for millions of struggling home owners. The Dow responded with it's own 7's, three of them, in a historic drop of more than 777 points.

Update: "$700 Billion Bailout Overshadows $300 Billion Bailout"

by Broderick Perkins
© 2008 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime.

Deadline Newsroom Washington, D.C. appears broken.

The $700 billion bailout legislation unveiled Sunday failed in the U.S. House of Representatives after offering vague hope for perhaps millions of struggling home owners.

Many argued, with housing as a permanent, but crumbling cornerstone of the economy, the nation's financial system as well as the economy won't recover until the foreclosure flood is effectively dammed.

The failed legislation didn't appear to offer that hope, and instead generated selling fear in the financial markets.

Wall Street reacted with the Dow's greatest plunge in history -- a 777.68 point crash. It was the biggest trading session drop since Sept. 17, 2001, the day the markets reopened after the 9/11 terrorist attacks, when the Dow fell 684 points. Standard & Poor's 500 Index tumbled the most since 1987.

The version of the bill that failed the House 228-205 Sept. 29 would have required federal agencies holding mortgages and mortgage securities to identify loans that could be modified, but the provision was unclear about how that task would have been accomplished.

These agencies would have included the Federal Reserve, Federal Deposit Insurance Corp., and the Federal Housing Finance Agency, which recently took control of mortgage giants Fannie Mae and Freddie Mac.

The failed legislation also would have allowed the Secretary of the Treasury to use loan guarantees and credit enhancement to avoid foreclosures, but again, provisions to were cloudy.

The legislation also called for shoring up the Hope for Homeowners program designed to prevent foreclosures, but it did not fully specify the enhancements. The Hope for Homeowners program, which begins Oct. 1, allows borrowers who can't meet their current mortgage terms to refinance into more affordable, fixed-rate loans backed by the Federal Housing Administration.

Michael Calhoun, president of the Center for Responsible Lending said there was "nothing in the bailout" sufficient to mitigate damage caused by foreclosure fallout.

The center has called for court-supervised loan modifications; foreclosure deferments; more Federal Housing Administration oversight; home loans from the Federal Deposit Insurance Corporation direct to consumers and stiffer regulations for future foreclosure prevention and stronger rules for mortgage lending and servicing.

Consumers Union likewise had recommended that the multi-billion bailout of the financial sector include more provisions and protections for home owners at risk of foreclosure; bankruptcy court power to prevent foreclosures; curbing abusive credit card practices and other provisions including greater oversight on companies receiving bailout assistance.

"We need to ensure that there is vigorous oversight of this bailout process but we also need a more long-term plan that provides strong new rules and enforcement to avoid future mortgage and credit meltdowns," said Jim Guest, Consumers Union president.

See also: $700 Billion Bailout Overshadows $300 Billion 'Hope'

© 2008 DeadlineNews.Com

Advertise on DeadlineNews.Com

Get news that really hits home for your Web site or blog from DeadlineNews.Com.
Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the new Deadline Newsroom, DeadlineNews.Com's news back shop. In both cases, it's news that really hits home!

---

DeadlineNews.Com's Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime