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The credit markets first locked up in August 2007 when two hedge funds run by New York-based Bear Stearns Cos., then the fifth-largest U.S. securities firm, collapsed after the values of their mortgage-related holdings deteriorated. Since then, waves of foreclosures on high-interest subprime home loans have produced almost $600 billion in losses on mortgage-backed securities held by banks and Wall Street firms.
Two Weeks of Talks
The crisis prompted the resignations of chief executive officers at Merrill Lynch & Co., Citigroup Inc. and UBS AG and the government takeovers of Fannie Mae and Freddie Mac, the mortgage giants, and American International Group Inc., the world’s biggest insurer. It forced the sale of Bear Stearns, New York-based Merrill and Charlotte, North Carolina-based Wachovia Corp. and the bankruptcy of New York-based Lehman Brothers Holdings Inc. President George W. Bush has record low approval ratings, and lawmakers are calling for new regulation of Wall Street.
The Oct. 3 bailout vote culminated two weeks of backroom negotiations, arm-twisting and begging in Washington as the Bush administration tried to convince reluctant members of Congress that they should use taxpayer money to buy toxic assets. The 450- page bill, laden with tax breaks and other measures unrelated to the crisis, grew out of a two-and-a-half page proposal that Paulson sent to Capitol Hill early on Saturday, Sept. 20.
Two days earlier, Paulson and Federal Reserve Chairman Ben Bernanke had warned congressional leaders in a closed-door meeting that numerous banks and other companies might fail if Congress didn’t approve a bailout.
Many Members Opposed
To counter the threat, Paulson was seeking unprecedented power to buy and hold as much as $700 billion in mortgage-related assets without judicial review. On Sunday, Sept. 21, Paulson went on morning talk shows including NBC’s Meet the Press to sell the proposal to the public.
As ‘Biggest Crisis’ Hit, Congress Held Nose and Backed Bailout
By Alison Fitzgerald
Oct. 6 (Bloomberg)
To contact the reporter on this story: Alison Fitzgerald in Washington at Aiftzgerald2@bloomberg.net
Last Updated: October 6, 2008 00:01 EDT
* In 2007, the family poverty rate and the number of families in poverty were 9.8 percent and 7.6 million, respectively, both statistically unchanged from 2006. Furthermore, the poverty rate and the number in poverty showed no statistical change between 2006 and 2007 for the different types of families. Married-couple families had a poverty rate of 4.9 percent (2.8 million), compared with 28.3 percent (4.1 million) for female-householder, no-husband-present families and 13.6 percent (696,000) for those with a male householder and no wife present.
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