Rescue Plan released; What does it mean?

[Aeson]

It means both McCain and Obama are dumber than Bush. Cause this will be good for a few months bump on the stock market. Long enough for one of them to take over holding the bag for Bush.

[Darius871]

Just read most of it; oversight, parachutes, mortgage modification, etc. all aside, this will clearly be a direct purchase, without loans and with insurance being only something Paulson "may" do (read: can but won't) for "some" assets. I'll be very surprised if House Republicans back this as written. Or McCain for that matter (his statements have been fairly inconclusive even today).

[Dinner]

I'd really like to know to gritty details.

[Zkribbler]

Originally posted by Aeson
It means both McCain and Obama are dumber than Bush. Cause this will be good for a few months bump on the stock market. Long enough for one of them to take over holding the bag for Bush.

It wasn't designed to give the market a bump. As I understand things, the credit markets are panicking and refusing to lend. This will cause fatal cash flow problems in other banks, and in many businesses. Supposedly, payrolls, etc. won't be able to be met. Credit cards will become invalid. Etc. At least, that the boogieman stories that are being used to justify this.

[Darius871]

Originally posted by Oerdin
I'd really like to know to gritty details.

See for yourself:

The entire bill, line by line

Executive summary

[Imran Siddiqui]

Originally posted by Darius871
Just read most of it; oversight, parachutes, mortgage modification, etc. all aside, this will clearly be a direct purchase, without loans and with insurance being only something Paulson "may" do (read: can't but won't) for "some" assets. I'll be very surprised if House Republicans back this as written. Or McCain for that matter (his statements have been fairly inconclusive even today).

Boehner is saying the House Republicans will back this according to the front page of CNN.com.

One wonders if the reports that the House Republicans were pissed that they weren't listened to at all during the drafting of the original bill were correct.

[Zkribbler]

110 pages...up from--what was it--3?

[Darius871]

Originally posted by Zkribbler
110 pages...up from--what was it--3?

Well, those are ridiculously big margins and font sizes, so much so that it's almost hard to read. If I tried turning in a 110-page paper like that I'd be expelled.

[Zkribbler]

Originally posted by Darius871


Well, those are ridiculously big margins and font sizes, so much so that it's almost hard to read. If I tried turning in a 110-page paper like that I'd be expelled.

...or elected to Congress.

[Timexwatch]

From CQ:

House to Vote Monday on Bailout Deal Despite Cool Reaction
By Benton Ives, Molly K. Hopper, Joseph J. Schatz and Jonathan Allen, CQ Staff

The House was set to vote Monday on a massive financial industry bailout as many lawmakers remained skeptical of the $700 billion deal reached with Treasury Secretary Henry M. Paulson Jr.

After a series of meetings Sunday, lawmakers praised, denounced or expressed uncertainty about the fragile compromise. The White House lobbied conservative House Republicans, who continued to be a vocal source of opposition, while House Democratic leaders worked to keep their members in line amid signs that many would vote ‘no’ as well.

Support in the Senate for the plan appeared to be broader among members of both parties, though opponents in the chamber are likely to slow its progress as long as they can.

House Majority Leader Steny H. Hoyer scheduled a vote on the agreement, which was reached early Sunday after marathon negotiations. The vote would begin the endgame of a tumultuous debate that reached from Capitol Hill to the White House, Wall Street, Main Street America and the presidential campaign trail.

“With these changes, I believe this is a plan a large majority of both parties can and will support. Now that we have broad bipartisan agreement, I intend to bring the final package to the House floor tomorrow for a vote,� Hoyer, D-Md., said.

But after House Democrats and Republicans caucused separately on the plan, many members emerged saying they were leaning against supporting it.

In the Senate, a Democratic leadership aide said Majority Leader Harry Reid, D-Nev., would likely have to move Monday to limit debate on the plan, setting up a Wednesday cloture vote.

Others held out hope a vote could be held sooner.

One of the negotiators, Sen. Judd Gregg, R-N.H., said “the Senate should vote tomorrow. Getting this done soon, promptly, is absolutely critical to the confidence of the markets and you can’t understate that issue.�

Reid later said: “As soon as we get this from the House, we’re going to move forward on it.�

The core of the plan would give the Treasury Department authority to buy up to $700 billion in troubled assets, mostly mortgage-backed securities, from financial institutions. The department would hold them and sell them at a later date, when the market stabilizes. But the program also would include conditions insisted upon by Democratic and Republican lawmakers, including parceling out the money in installments, limits on executive compensation and a government insurance plan, paid for by financial institutions, pushed by House Republicans.
House Opposition Vocal

With several key House lawmakers saying they would oppose the deal, it was unclear how it would fare in that chamber.

Rep. Mike Pence of Indiana, a member of the influential Republican Study Committee, said in a statement: “Republicans improved this bill but it remains the largest corporate bailout in American history, forever changes the relationship between government and the financial sector, and passes the cost along to the American people. I cannot support it.�

After a meeting with Minority Leader John A. Boehner, R-Ohio, and other GOP lawmakers, Rep. Todd Tiahrt, R-Kan., said it would be difficult to deliver a majority of the party’s House members for the deal as Speaker Nancy Pelosi, D-Calif., had demanded.

But later, as GOP lawmakers were caucusing, aides say Eric Cantor, R-Va., the chief deputy whip, and Paul D. Ryan, R-Wis., ranking Republican on the Budget Committee, pushed hard for “yes� votes. “This sucks that we are in this position. But we have to do this to save the free enterprise system,� Ryan told members, according to a participant.

The White House joined the lobbying campaign with a letter from Budget Director Jim Nussle to Boehner downplaying the plan’s cost. Boehner’s office released a similar letter from the non-partisan Congressional Budget Office.

“No one knows just how much these assets will sell for, but since 90 percent of mortgages are currently being paid on time and in full, we can expect a substantial payback on our investment,� Nussle wrote. “In some cases, if a mortgage asset is purchased at a deep discount from its face value, the taxpayer may even see a positive return on that investment.�

CBO echoed that view.

“Although it is not currently possible to quantify the net budget impact given the lack of details about how the program would be implemented, CBO has concluded that enacting the bill would likely entail some net budget cost—which would, however, be substantially smaller than $700 billion,� reads the letter from CBO to leaders of the House Budget and Financial Services committees.

More than 80 of the 199 House Republicans attended an unusually long closed-door meeting — a rare number because only half of the conference normally shows up at the weekly private meetings.

The leaders spoke for almost an hour. According to attendees, Boehner kicked off the program by recounting the fractious White House meeting on the issue Sept. 25, when House Republican leaders, backed by GOP presidential candidate Sen. John McCain, demanded that negotiators consider alternatives to the bailout plan if Congress was going to fork over $700 billion to stave off a financial crisis.

One participant described the tone of the conference as “respectful, but negative.�

A leading Democratic skeptic also suggested problems for the plan.

“If this is called for a vote on Monday, it’s very hard to predict,� said Rep. Brad Sherman, D-Calif., who drew some 35 Democrats to a meeting of what he dubbed the “Skeptics Caucus.�

But lawmakers belonging to the 49-member Blue Dog Coalition of conservative Democrats said they were pleased the draft legislation included a provision intended to raise money from companies that participate in the program if its full cost is not recouped within five years.

Rep. Jim Cooper, D-Tenn., said he plans to vote for the bill, warning that if Congress does not act the consequences for the economy will be dire.

“It’s not everyday you get a chance to save your country,� he said. “This may be one of those chances, nobody knows for sure.�

After a House Democratic Caucus meeting, Rep. Joe Baca said members were evenly split for and against the plan.

“Right now, I’m leaning towards ‘no,’� said Baca, D-Calif., pointing out that his constituents were pressing him to oppose it.

Majority Whip James E. Clyburn, D-S.C., said he was not sure how the bill would fare, but was not overly concerned about Democratic defections.

“It’s good to be skeptical about this. If anybody was sure about what we were doing, we wouldn’t be having all these discussions,� he said.
Senate Support

Senate Republicans appeared to be more firmly on board with the deal than their House counterparts. Republican Conference Chairman Lamar Alexander, R-Tenn., urged its quick passage.

“Congress should approve the amended plan without delay on Monday,� Alexander said in a statement. “Otherwise, there is a real risk that credit will freeze and Americans will not be able to get car, student, auto and mortgage loans or even to cash their paychecks.�

President Bush also urged lawmakers to drop their opposition.

“This is a difficult vote, but with the improvements made to the bill, I am confident Congress will do what is best for our economy by approving this legislation promptly,� he said in a statement.

Both presidential candidates cautiously welcomed the deal. Their views could influence many lawmakers as they weigh how to vote on the plan.

Sen. Barack Obama of Illinois, the Democratic candidate, said in a statement, “While I look forward to reviewing the language of the legislation, it appears that the tentative deal embraces� conditions on executive pay and other additions that Obama supported.

Appearing on the ABC news program “This Week,� McCain, R-Ariz., was asked whether he could support the plan. “Again, I’d like to see the details, but hopefully yes,� he said. “And the outlines that I have read of it, that this is something that all of us will swallow hard and go forward with. The option of doing nothing is simply not an acceptable option.�

McCain was at the center of drama and controversy last week, when he broke off campaigning and came to Washington as talks on the financial rescue plan were getting into high gear. He did not appear at the Capitol Saturday or early Sunday and did not have any direct role in the weekend negotiations over the final language.

Many Republicans say McCain earlier provided critical political impetus for House GOP lawmakers to become engaged in the process at a time when the vast majority of them were not inclined to support any of the bailout proposals.

But Democrats say he did more harm than good, complicating efforts to find a bipartisan resolution.
Exhausting Talks

Earlier, negotiators appeared exhausted but relieved at having reached a deal. Reid said a breakthrough came at about 11:40 p.m. Saturday, when Pelosi proposed an idea that moved negotiators closer to resolution. It was not immediately clear what Pelosi proposed.

“We’ve made great progress. We have to get it committed to paper so we can formally agree,� Pelosi said.

“We’ve made great progress toward a deal which will work and will be effective in the marketplace and effective for all Americans,� Paulson said at a hastily convened news conference on the House side of the Capitol just after midnight. “I think we’re there. . . . So far, so good.�

Reid had arrived at Pelosi’s office just before 10 p.m. Saturday as top Democrats conducted “shuttle diplomacy� back and forth with top Republicans and Paulson, who were working out of House leadership offices.

Senate Budget Chairman Kent Conrad, D-N.D., said negotiators had consulted with investment maven Warren Buffett by phone to gauge market reactions to the potential deal, though several key points remained under discussion.

Reid said staff had worked until 3 a.m. Saturday on the outlines of an agreement. By early afternoon, he said, “only a handful of issues — maybe a handful and a half� — remained to be settled by the bipartisan team of negotiators from the Senate and House.

David Clarke, Kathleen Hunter, Erin McNeill, Alan K. Ota, Liriel Higa and Catharine Richert contributed to this story.

First posted Sept. 28, 2008 11:54 a.m.

[Timexwatch]

CQ TODAY PRINT EDITION
Sept. 28, 2008 – 8:49 p.m.
Summary of Financial Legislation
By CQ Staff

According to one early summary, the financial bailout includes:

• Purchases of Troubled Assets. Authorizes the Treasury Secretary to establish a Troubled Asset Relief Program (“TARP�) to purchase troubled assets from financial institutions. Establishes an Office of Financial Stability within the Treasury Department to implement the TARP in consultation with the Board of Governors of the Federal Reserve System, the FDIC, the Comptroller of the Currency, the Director of the Office of Thrift Supervision and the Secretary of Housing and Urban Development.

• Insurance of Troubled Assets. If the Secretary establishes the TARP program, the Secretary is required to establish a program to guarantee troubled assets of financial institutions. The Secretary is required to establish risk-based premiums for such guarantees sufficient to cover anticipated claims. The Secretary must report to Congress on the establishment of the guarantee program.

• Considerations. The Treasury Secretary is required to take a number of considerations into account, including the interests of taxpayers, minimizing the impact on the national debt, providing stability to the financial markets, preserving home ownership, the needs of all financial institutions regardless of size or other characteristics, and the needs of local communities. Requires the Secretary to examine the long-term viability of an institution in determining whether to directly purchase assets under the TARP.

• Oversight. Establishes the Financial Stability Oversight Board to review and make recommendations regarding the exercise of authority under the legislation. In addition, the Board must ensure that the policies implemented by the Secretary protect taxpayers, are in the economic interests of the United States, and are in accordance with this Act. The Board is comprised of the Chairman of the Board of Governors of the Federal Reserve System, the Secretary of the Treasury, the Director of the Federal Home Finance Agency, the Chairman of the Securities and Exchange Commission and the Secretary of the Department of Housing and Urban Development.

• Reports. The Secretary is required to report monthly to Congress its activities under TARP, including detailed financial statements. For every $50 billion in assets purchased, the Secretary is required to report to Congress a detailed description of all transactions including justifications for the financial terms.

• Management, sale of assets, and proceeds. Provides the Secretary with the authority to manage troubled assets, including the ability to determine the terms and conditions associated with the disposition of troubled assets. Requires profits from the sale of troubled assets to be used to pay down the national debt.

• Foreclosure mitigation. For mortgages and mortgage-backed securities acquired through TARP, the Secretary must implement a plan to mitigate foreclosures and to encourage servicers of mortgages to modify loans through Hope for Homeowners and other programs. Allows the Secretary to use loan guarantees and credit enhancement to avoid foreclosures. Requires the Secretary to coordinate with other federal entities that hold troubled assets in order to identify opportunities to modify loans, considering net present value to the taxpayer.

• Homeowner Assistance. Requires federal entities that hold mortgages and mortgage-backed securities, including the Federal Housing Finance Agency, the FDIC, and the Federal Reserve to develop plans to minimize foreclosures. Requires federal entities to work with servicers to encourage loan modifications.

• Executive Compensation and Corporate Governance. Provides that Treasury will promulgate executive compensation rules governing financial institutions that sell it troubled assets. Where Treasury buys assets directly, the institution must observe standards limiting incentives, allowing clawback and prohibiting golden parachutes. When Treasury buys assets at auction, an institution that has sold more than $300 million in assets is subject to additional taxes, including a 20% excise tax on golden parachute payments triggered by events other than retirement, and tax deduction limits for compensation limits above $500,000.

• Minimization of Long-Term Costs and Maximization of Benefits for Taxpayers. Requires that the Treasury receive non-voting warrants from participating financial institutions.

• Market Transparency. The Secretary is required, within 2 business days of exercising authority under this Act, to publicly disclose the details of any transaction.

• Graduated Authorization to Purchase.

Authorizes $700 billion as requested by the Treasury Secretary for implementation of TARP. Allows the Secretary to immediately use up to $250 billion in authority. Upon a Presidential certification of need, the Secretary may access an additional $100 billion. The final $350 billion may be accessed if the President transmits a written request to Congress. The Secretary may use this additional authority unless within 15 days Congress passes a joint resolution of disapproval.

• Oversight and Audits. Requires the Comptroller General of the United States to conduct ongoing oversight of the activities and performance of TARP, and conduct an annual audit of TARP.

• Termination of Authority. Provides that the authorities to purchase and guarantee assets terminate on December 31, 2009. The Secretary may it one year.

• Special Inspector General. Establishes the Office of the Special Inspector General for the TARP to conduct, supervise, and coordinate audits and investigations.

• Public Debt. Raises the debt ceiling from $10 trillion to $11.3 trillion.

• Congressional Oversight Panel. Establishes a Congressional Oversight Panel to review the state of the financial markets, the regulatory system, and the use of authority under TARP. The panel is required to report to Congress every 30 days and to submit a special report on regulatory reform prior to January 20, 2009. The panel will consist of 5 outside experts.

• Tax Treatment of Executive Compensation.

Applies limits on executive compensation and golden parachutes for certain executives of employers who participate.
Source: CQ Today Print Edition

[Aeson]

Originally posted by Darius871
Just read most of it; oversight, parachutes, mortgage modification, etc. all aside, this will clearly be a direct purchase, without loans and with insurance being only something Paulson "may" do (read: can but won't) for "some" assets. I'll be very surprised if House Republicans back this as written. Or McCain for that matter (his statements have been fairly inconclusive even today).

It looks like if any direct purchasing is done (TARP) then the Secretary Treasury has to set up an insurance program too. (Though it's mostly left up to the Secretary what it will be, and how it functions.)

1 (1) IN GENERAL.—If the Secretary establishes
2 the program authorized under section 101 [TARP], then the
3 Secretary shall establish a program to guarantee
4 troubled assets originated or issued prior to March
5 14, 2008, including such mortgage-backed securities.

[Darius871]

Oh I know he has to "create" one, but how many loans (if any) it would cover is entirely in his discretion. In other words that provision's a dead letter if he wants it to be.

[Aeson]

Originally posted by Zkribbler
It wasn't designed to give the market a bump.

It should give a bump. It won't last long though. There's >$55 trillion in derivatives, and the problems with that (who has what, what it's worth... questions that have to be answered before trust is regained) aren't addressed in this bill.

$700bn superficial bandaid for the patient in the emergency room.

(Reading that bill makes me sick. I lost track of how many times I read, "The Secretary will determine how/if/what..." They may as well have just said, "The Secretary will figure this all out for us. Nevermind that he's been wrong about the economy every step of the way. Give him his $700bn!" 1 page and done.)

[Aeson]

Originally posted by Darius871
Oh I know he has to "create" one, but how many loans (if any) it would cover is entirely in his discretion. In other words that provision's a dead letter if he wants it to be.

Virtually everything in that bill is left to his discretion...