Steps Taken by Federal Government Following the Foreclosure Crisis
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When the Bush administration came out with the $700 billion package after the failure of AIG, he received support for both Obama and McCain, who were both campaigning at the time. The situation was too grave to not have support.
But in the House, Republicans voiced their strong opposition. A theatrical drama played out in the Cabinet Room of the White House when Paulson took to his knees before the speaker of the House, Nancy Pelosi. When referring to the economy, Bush was quite straight-forward. He said, “If money isn’t loosened up, this sucker could go down.”
Despite the move of the bailout, aftershocks continued in the American banking system. On September 25th 2008, Washington Mutual was taken over by the FDIC. It was a record breaking bank failure. Whatever was left of the money funds was quickly swallowed up by JPMorgan and Chase.
Within four days, Citigroup took over the banking functions of Wachovia whom was discovered, like Washington Mutual, to have dealt in ARMs. Ultimately, the offer from Wells Fargo was better than Citigroup’s and they ended up purchasing Wachovia.
On September 29th 2008, the bailout issue entered the voting stage in the House. However, negative votes kept rising higher and higher. Wall Street barons became tense and their jaws began to lock. The bailout was voted out – 228/205. Dow fell by even more points.
Over $1 trillion of market value had vanished in a second. It was a record. The leaders in the Congress tried desperately to find a way out of this mess. Finally, it was passed and was quickly inked into law on October 3rd. The Republicans won on their stance, making it mandatory for more personal bank deposits to be covered by government insurance as well as bank accounting rules to be simplified.
But the bitter taste of the failing banks did not go away, however. From then on, stocks began to slowly but steadily go down.
On October 13th 2008, Treasury Secretary Paulson called for a meeting with the CEO’s from all the biggest banks in the country. He said to them that, rather than purchase their toxic assets, he had decided to pump in $125 billion into their banks.
It was meant to be a sign to the world that the government would not permit the failure of any of these banks. The federal government also put restrictions on pay packets to major executives and dividends, another sign of them taking control of the bad bank situation. Reluctantly, bank officials gave their signatures to the new law. Later, the measure was extended to many other banks but the problem of toxic assets continues to persist.
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