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Loads of Pork, Little Accountability in Senate Bailout Bill: Will the House Balk?

Posted Oct 02, 2008 10:11am EDT by Aaron Task in Investing, Recession, Banking
Related: ^DJI, ^GSPC, ^IXIC, FNM, FRE, XLF, SPY

By a healthy margin, the Senate passed the $700 billion bailout package last night, setting the stage for a do-over in the House, which is expected to vote on the bill Friday.

The House rejected the original bill on Monday but the revised bill contains a lot of "sweeteners" designed to garner enough votes, including $100 billion in tax relief, a widening of the FDIC insurance cap to $250,000 and aid to rural schools.

But the Senate bill is also laden with pork, including:

  • $223M for Alaskan fisherman
  • $192M for rum producers in Puerto Rico and the Virgin Islands
  • $128M for auto racing
  • $33M for companies operating in American Samoa
  • $10M for film & TV production
  • $6M for producers of wooden arrows

Those 'earmarks' may not be palatable to many House members, especially those concerned about fiscal spending and/or getting reelected.

Notably, overseas markets were mixed in reaction to the Senate passage and U.S. stocks got off to a very weak start Thursday. At 10:15 a.m. EDT, the Dow was down about 200 points, or 2%, while the S&P and Nasdaq were each down about 2.3%.

Whether the market is telling us the bill won't work or won't pass the House is unclear -- although maybe the answer is both.

Meanwhile, Todd Harrison, CEO of Minyanville.com, says more time should be given to what's not in the legislation. His wish list includes:

  • More protection for savers and penalties for bad actors
  • Regulation of the credit derivatives markets
  • Accountability and culpability for this mess, up and down the food chain
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