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<< Previous   of   Next >>   ADVERTISEMENT   Related Stories • Pork packed into $700 billion bailout bill 10/3/08 • Financial bailout package highlights 9/29/08 • Bailout deal reached; House to vote today 9/29/08   CONTACT THE HERALD Do you have a news tip? newstips@heraldnet.com | 425.339.3400   Published: Monday, September 29, 2008 Who wins, loses under bailout proposal By Tom Raum Associated Press WASHINGTON -- The proposal to bail out U.S. financial markets to the tune of up to $700 billion creates a lot of potential short-term winners, as well as some losers. Wall Street and the banking industry are perhaps the biggest winners. Scores of banks and other financial institutions faced with going under stand to gain a lifeline that should allow them to start making loans again. Under the plan that Congress aides and the White House says they hammered out Sunday, the Treasury Department can start buying up troubled mortgage-related securities now held by these institutions. These securities are clogging balance sheets, leaving banks without the required capital to make new loans and putting the banks dangerously close to insolvency. Banks not only have slowed lending to individuals and businesses, they have stopped making loans to each other. The rescue plan should help restore confidence to financial markets. There are other winners, too, if the bailout works as intended: anyone soon trying to borrow money -- for cars, student loans, even to open new credit card accounts. Top executives at troubled financial institutions, on the other hand, are in the losing column because the proposal would limit their compensation and rules out "golden parachutes." Of course, these executives may take solace in knowing their jobs still exist. Investors, including the millions of people who hold stock in their 401(k) and pension plans, should benefit. Failure to reach a deal over the weekend could have sent stock markets around the world tumbling today. Homeowners faced with foreclosure or those who have lost their homes get little help from the agreement. Nor will it help people whose houses are worth less than what they owe. It would do little to halt the slide in home values that are one of the root causes of the current economic slowdown. "It doesn't deal with the fundamental problems that gave rise to the problem -- or alleviate the credit crisis," said Peter Morici, an economist and business professor at the University of Maryland. How the candidates will fare It's hard to tell which presidential candidate benefits the most from an agreement they tentatively endorsed Sunday, a little more than five weeks before the Nov. 4 election. Democratic Sen. Barack Obama and Republican Sen. John McCain each sought to claim some credit for the deal, even though they played active roles only over the past few days. Hard economic times traditionally work against the party that holds the White House, and in recent polls Obama has inched ahead of McCain. Furthermore, there is widespread consumer resentment over being asked to bail out Wall Street and lawmakers have learned the proposal has not been popular with their constituents. That may help Democrats in general. The strongest opposition to the original bailout plan came from House Republicans. Lawmakers and presidential candidates alike are "trying to orchestrate everybody jumping off the cliff together," said Robert Shapiro, a consultant who was an economic adviser to President Clinton. "I think we'd have a different plan if we weren't five weeks out from the election." READER COMMENTS Be the first to comment. You must be a registered user and verify your e-mail address to post comments to blogs or articles on HeraldNet. To register, click here. To read other terms and conditions, click here. Log out

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