Sunday, September 28, 2008

Bailout Deal Details

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It's now a $350 billion bailout, at least up front. I'm not seeing anything that prevents home foreclosures or that helps those who underwent foreclosures in the past year. The government can use its power as the owner of mortgages and mortgage backed securities to facilitate loan modifications (such as, reduced principal or interest rate, lengthened time to pay back the mortgage) to help reduce the 2 million projected foreclosures in the next year There's tax relief -- for banks. [More...] Helps save small businesses that need credit by aiding small community banks hurt by the mortgage crisis—allowing these banks to deduct losses from investments in Fannie Mae and Freddie Mac stocks Is there tax relief for consumers? Can they deduct the interest they paid on the credit card debt they accumulated trying to stay afloat? The non-economist in me wonders if they considered funding all $700 billion now but using $350 billion to bailout banks and mortgage companies and the other $350 to help consumers get out of debt? Seems to me that would be money consumers could put back into the economy. I'm not saying this isn't a good proposal or an improvement, I have no idea. I'm just passing on the information as more details come out. I'll need to wait for the actual text of the bill, if indeed Pelosi keeps her promise to put it up on the Internet, but I'm betting that after Obama signalled mortage relief wasn't important to him ("probably something that we shouldn't try to do in this piece of legislation") whatever is in there is just a sop. Note that Obama wasn't even talking about a real solution, but HOLC, which isn't even near the table, let alone on it, but about a proposal to allow bankruptcy judges to rewrite mortgage terms, which is an ineffective onesies and twosies solution to begin with, that doesn't even help the bank clean up their balance sheets. The text of thr bill willbe available at noon Keeping the community banks out of trouble is a good thing. At the rate the big banks are merging - we could end up with one mega bank and community banks - or no community banks and one mega bank - for the most part the community banks have played much more conservatively than the others have - if I understoon Barney Frank correctly during the hearings this week, the problem that the community banks face has to do with their dealings with Fannie Mae and Freddie Mac and that is why they are getting a break. But what few people have talked about in this economy are anti-trust principles that might have at least helped to limit to some degree the massive failure that people claim is looming. So, I'd rather try to keep the community banks reasonably healthy for the time being. Is there tax relief for consumers? Can they deduct the interest they paid on the credit card debt they accumulated trying to stay afloat? In my view, from watching this play out over the last 20 or so years since those deductions were eliminated in the Reagan admin, people turned to HELOCs instead, putting their homes at risk. I've been wondering if that was an intended consequence of the removal of those deductions.

WaMu deal may wait for details of mortgage bailout
Washington Mutual reportedly went up for sale earlier this week. If regulators at the Federal Deposit Insurance Corp. are pushing it to sell, a deal could be announced as early as ...
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Bush Team, Congress Hammer Out Bailout Deal
Bush Team, Congress Hammer Out Bailout Deal. Required fields are ... are working through the weekend to fill in the details of the proposal. The White House hoped for a deal with ...
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NewsDaily: Bailout deal near as Bush to meet lawmakers
... to reaching a deal to approve a $700 billion plan to bail out the U.S. financial system and President George W. Bush called an emergency meeting for Thursday to hammer out details.
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Paulson, Senate Dems reach tentative bailout deal
Paulson, Senate Dems reach tentative bailout deal ... fragile framework could very easily fall apart as more specific definitions and details ...
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Futures Fall as Bailout Details Emerge - Market Overview * US * News ...
Real Economy In Real Trouble, Too; Poll: When Will ... Futures Fall as Bailout Details Emerge ... Dow Jumps 200 Points as Bailout Deal Nears
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Deal reached on financial markets bailout
WASHINGTON - After a breakthrough on a $700 billion Wall Street bailout, lawmakers and Bush administration now must settle the final details on a rescue intended to keep credit flowing and avert a crippling recession.
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Source: MSNBC
NewsDateTime: 48 minutes ago

New US bailout deal to fix global credit crisis
WORLD financial markets are on tenterhooks awaiting the details of a $848 billion plan to bail out Wall St and ease the world credit crisis, after a negotiations breakthrough. US lawmakers were close to finalising the unprecedented taxpayer-funded ...
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Source: News.com.au
NewsDateTime: 1 hour ago

Lawmakers Reach Tentative Deal on Bailout
Full details of the plan were not immediately available. Lawmakers said their staffs would be working through the night to ... Firms participating in the bailout would be required to grant the government warrants to obtain nonvoting shares of stock, so ...
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Source: Washington Post
NewsDateTime: 1 hour ago

Tentative bailout deal
WASHINGTON — After a breakthrough on a $700-billion Wall Street bailout, lawmakers and Bush administration now must settle the final details on a rescue intended to keep credit flowing and avert a crippling recession. “We've made great progress ...
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Source: Globe and Mail
NewsDateTime: 2 hours ago

Paulson on bailout deal: 'I think we're there'
WASHINGTON — After a breakthrough on a $700-billion Wall Street bailout, lawmakers and the Bush administration now must settle the final details on a rescue intended to keep credit flowing and avert a crippling recession. "We've made great progress ...
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Source: Detroit Free Press
NewsDateTime: 26 minutes ago



The details of the bailout deal


From Office of Speaker Nancy Pelosi -- Sept. 28, 2008
REINVEST,
REIMBURSE,
REFORM
IMPROVING THE FINANCIAL RESCUE LEGISLATION


Significant bipartisan work has built consensus around dramatic improvements to the original Bush-Paulson plan to stabilize American financial markets -- including cutting in half the Administration's initial request for $700 billion and requiring Congressional review for any future commitment of taxpayers' funds. If the government loses money, the financial industry will pay back the taxpayers.
3 Phases of a Financial Rescue with Strong Taxpayer Protections
# Reinvest in the troubled financial markets … to stabilize our economy and insulate Main Street from Wall Street
# Reimburse the taxpayer … through ownership of shares and appreciation in the value of purchased assets
# Reform business-as-usual on Wall Street … strong Congressional oversight and no golden parachutes
CRITICAL IMPROVEMENTS TO THE RESCUE PLAN
Democrats have insisted from day one on substantial changes to make the Bush-Paulson plan acceptable -- protecting American taxpayers and Main Street -- and these elements will be included in the legislation
Protection for taxpayers, ensuring THEY share IN ANY profits
# Cuts the payment of $700 billion in half and conditions future payments on Congressional review
# Gives taxpayers an ownership stake and profit-making opportunities with participating companies
# Puts taxpayers first in line to recover assets if participating company fails
# Guarantees taxpayers are repaid in full -- if other protections have not actually produced a profit
# Allows the government to purchase troubled assets from pension plans, local governments, and small banks that serve low- and middle-income families
Limits on excessive compensation for CEOs and executives
New restrictions on CEO and executive compensation for participating companies:
# No multi-million dollar golden parachutes
# Limits CEO compensation that encourages unnecessary risk-taking
# Recovers bonuses paid based on promised gains that later turn out to be false or inaccurate
Strong independent oversight and transparency
Four separate independent oversight entities or processes to protect the taxpayer
# A strong oversight board appointed by bipartisan leaders of Congress
# A GAO presence at Treasury to oversee the program and conduct audits to ensure strong internal controls, and to prevent waste, fraud, and abuse
# An independent Inspector General to monitor the Treasury Secretary's decisions
Transparency -- requiring posting of transactions online -- to help jumpstart private sector demand
# Meaningful judicial review of the Treasury Secretary's actions
Help to prevent home foreclosures crippling the American economy
# The government can use its power as the owner of mortgages and mortgage backed securities to facilitate loan modifications (such as, reduced principal or interest rate, lengthened time to pay back the mortgage) to help reduce the 2 million projected foreclosures in the next year
# Extends provision (passed earlier in this Congress) to stop tax liability on mortgage foreclosures
# Helps save small businesses that need credit by aiding small community banks hurt by the mortgage crisis—allowing these banks to deduct losses from investments in Fannie Mae and Freddie Mac stocks


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Published on: 9/22/2008 8:03:52 PM


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