Bush Announces $17.4B Auto Bailout

On Friday morning, President George W. Bush - yeah, the lame duck - waddled into the Roosevelt Room of the White House to announce his plans for an emergency bailout of the U.S. automakers, namely General Motors and Chrysler.

Ford Motor Company is a better financial position, so they were not included in this plan.

He intimated that under normal circumstances, he would just let the automakers file for bankruptcy, but in justification of his actions, Bush said:

These are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action. The terms and conditions of the financing provided by the Treasury Department will facilitate restructuring of our domestic auto industry, prevent disorderly bankruptcies during a time of economic difficulty, and protect the taxpayer by ensuring that only financially viable firms receive financing. Additional loans may be available in February based on the availability of TARP funds.

Details of the plan are as follows:

• General Motors and Chrysler will receive loans from the federal government in the amount of $13.4 billion ($9.4 billion to GM and $4 billion to Chrysler) this month
  
  
• Financing will be drawn from the $700 billion Troubled Asset Relief Program (TARP) that was organized for the Wall Street bailout
  
  
• The loans are designed to stabilize the two automakers through March 2009, at which time they must show they are financially viable; If the firms have not attained viability by March 31, 2009, the loan will be called and all funds returned to the Treasury
  
  
• Conditions on the loans requires the companies to quickly reduce their debt by two-thirds, mostly through debt-for-equity swaps, and to reach an agreement with the United Auto Workers union to cut wages and benefits so they are competitive with those of employees of foreign-based automakers working in the United States
  
  
• Other conditions on the loans include placing limits on executive compensation and perks such as corporate jets, and requiring the automakers to adhere to fuel efficiency and emission standards and open books to government scrutiny
  
  
• An additional $4 billion will be made available in February, based on the release of funds from TARP

Bush's announcement comes one week after Senate Republicans blocked legislation to aid the automakers that had been negotiated by the White House and Congressional Democrats, and the loan package announced by the president includes roughly the identical requirements in that bill, which had been approved by the House.

Because the bailout legislation failed in Congress, senior administration officials said that the loan package would essentially take the form of a contract between the government and the automakers. Officials said they expected those contract agreements would be signed by the end of the day.

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A New York Times article about the bailout points out, under the plan, Mr. Bush essentially handed off to President-elect Barack Obama what will become one of the first, most difficult calls of his presidency: a political and economic judgment about whether G.M. and Chrysler are financially viable.

Mr. Obama and his economic team will have to make a convincing, public case that the wage cuts, plant closings and creditor agreements so change the landscape of the industry that the carmakers can turn profitable in short order.

But Mr. Obama will be under tremendous political pressure as well, because if his new team concludes that the automakers have not struck the right deals, it would mean a move to bankruptcy court, and likely widespread layoffs that would ripple far beyond the companies themselves.

Mr. Obama was elected partly with the enthusiastic support of the unions, who liked his talk of protecting jobs by renegotiating trade agreements. Now, in his first months, he will be asking them to give back gains they have negotiated over decades.

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plez sez: as expected, bush squeezed the last two drops of political capital from his faded political career to provide a temporary bailout to the us automakers - his post-presidential revisionist spin team will be at the ready to re-write history to show that "the us auto industry failed under Obama's watch!"

gm and chrysler will limp into the new year with a big box of money from uncle george, with both of their plants idle until late january or mid february. and i'm not convinced that chrysler will ever open its plants under the chrysler brand in 2009.

this loan comes with few strings attached (oh, they have to sell the corporate jet that they can't afford to put back in the air. ooooh, whoopie!) and good luck with getting the UAW to offer much in the area of wage concessions, after they've fought tooth-and-nail to get the compensation and nice pension plans their workers now enjoy.

as the new york times article so deftly stated, this stinking automakers bailout turd will be sitting on BARACK OBAMA's desk when he takes over the oval office on january 20th, since george bush has essentially washed his hands of this matter by giving the automakers enough money to keep them afloat until the inauguration of Obama. bush can now go back to packing boxes for his and laura's move to dallas in a few weeks.

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the federal government can't print enough money to keep the big three afloat until the end of this recession. these companies can restructure all they want, there ain't any credit available for few people who want to buy their cars! the reason for the plant shutdowns is that the inventory on hand isn't selling, so there's no need to make more cars.

okay, a show of hands: does anyone seeing this scenario of having few buyers for the glut of cars changing in the next four, eight, or twelve weeks?

...neither does plezWorld!

one of these companies - more than likely chrysler since it is so close to brink - is going to fail.

to my way of thinking, it's better to let them fail now rather than giving away untold billions of dollars that will never be recouped. this is corporate welfare (giving away money with no foreseeable way to retrieve the assets in the future) of the highest magnitude.

~ ~ Citations ~ ~

Read the New York Times article about Bush's bailout for the auto industry.

Read the Atlanta Journal-Constitution article about the auto bailout.

Read the CNN.com article about Bush's automaker bailout plan.

~ ~ ~ ~ ~ ~

Georgia Jobless Rate Tops 7.5 Percent

According to numbers released by the Department of Labor, the state of Georgia remains above the national average of 6.7 percent to log a 7.5 percent unemployment rate. This is the highest rate in the state since Reagan was in the White House.

Read excerpts of the Atlanta Journal-Constitution article about the latest news:

Georgia’s unemployment rate continued its steady march higher in November, rising to 7.5 percent.

It is the highest rate in more than 25 years, the state Labor Department said Thursday.

The rate has climbed a full 3 percentage points from a year ago, when it was 4.5 percent. It was 6.9 percent in October.

“Job losses are accelerating throughout most of the state’s economic sectors, with the exception of healthcare, education, and the federal government,” State Labor Commissioner Michael Thurmond said in a press release. “Although it may be difficult to find a job in this environment, it is not impossible.”

Georgia’s jobless rate has been running above the national rate, currently 6.7 percent, for the past several months.

The Labor Department said 365,244 Georgians are currently looking for work.

Over the last year, the agency said, the number of payroll jobs decreased 94,400 or 2.3 percent.

That includes 67,400 jobs lost in metro Atlanta, a 2.7 percent decline.

Manufacturing, construction, and trade, along with administrative and support services, including temporary employment agencies, were especially hard hit, the labor department said.

One should note, the jobless rate doesn't include people who are no longer looking for work! So it is probable the the unemployment rate is significantly higher since people tend to stop reporting their jobless status after a few months. Some have said that in some communities, the rate may be over 10 percent.


plez sez: this is tough news to be receiving the week before christmas. plezWorld is really feeling the crunch, as i was downsized six months ago and have only received scant nibbles from organizations that may be looking to hire. very few people are hiring these days.

coming on the heels of the news about the chrysler shutdown next week, the failed big three automakers bailout, the continued credit crunch in spite of the wall street bailout, and news that our economy started grinding to a halt 12 months ago... it appears this recession is going to live up to the expectations that it will be long in duration and cut deep into our economy.

~ ~ Citations ~ ~

Read the Atlanta Journal-Constitution article about the high unemployment rate in Georgia.

Check out the Georgia Department of Labor website.

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Chrysler - One Down. Two To Go.

Is this the harbinger of the Big Two?

Chrysler announced on Wednesday that it will close all 30 of its auto manufacturing plants for at least a month starting at the end of shifts on Friday as it tries to conserve cash and avoid bankruptcy amid plunging demand for its vehicles.

The third-largest U.S. automaker said that it is taking the action to bring its inventories more into line with reduced U.S. demand for new cars and trucks. It blamed its current difficulties largely on customers' inability to obtain financing to purchase new vehicles and said tight credit markets were discouraging would-be buyers.

Chrysler said manufacturing operations would resume at the earliest on Jan. 19. Two factories in Toledo, Ohio, that make the Jeep Liberty, Jeep Wrangler and Dodge Nitro will be closed until Jan. 26. A minivan plant in Canada and a plant in Detroit that makes the Dodge Viper will remain shut until Feb. 2.

A total of 46,000 employees will be affected. The workers will be paid during the time off through a combination of state unemployment benefits and Chrysler contributions, but they will not receive the full amount of their working pay.

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Chrysler (in fact, most automakers) normally shuts down operations between Dec. 24 and Jan. 5. This closure would add roughly two weeks to that shutdown.

On the heels of the Chrysler shutdown announcement, Ford Motor Company said that it would extend the holiday shutdown at most of its plants to a third week.

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Auto sales have been bludgeoned by tight credit and the struggling economy. Overall auto sales in the United States were down 37% last month compared with November 2007. Chrysler's situation was especially bad: its sales dropped a whopping 47%.

Chrysler's financing arm, Chrysler Financial, has tightened lending terms for buyers and earlier this year, it announced it would no longer offer leases.

Chrysler said the decision to add more down time was largely based upon reports from its dealers that they have many willing buyers, but that they are unable to close deals because of a lack of financing.

“People have to get credit to purchase vehicles,” Chrysler spokesperson Shawn Morgan said. “We have dealers telling us that they have customers who want to buy, but they can’t get financing. When they can get credit. Sales will improve... [but] we shouldn’t be producing vehicles without orders.”

Chrysler dealers report a loss of about 20% to 25% of their volume because of the credit situation.

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plez sez: is this the harbinger of the Big Two?!?

no less than one week ago in this space, plezWorld predicted the demise of one of the big three us automakers. in light of the recession and continued credit crunch, will chrysler open any of its plants in january? in february? in march?

i find no joy in the news. this slowdown will undoubtedly affect over 100,000 workers (automakers, dealers, and suppliers) over the next month. i grew up in shouting distance of a large GM plant in north tarrytown, new york, so i know what an economic engine an automaker has in the community where it operates.

i'm afraid any bailout at this point will do little to keep chrysler afloat. the recession is cutting deep and there is no reason to believe that in one month that the credit crunch or job loss numbers will be better to allow people to once again roam the glistening dealerships of chrysler autos. seven or eight billion dollars will allow them to make payroll, make insurance payments, bolster the pension, purchase raw materials, and make more autos that NO ONE will be able to purchase in february or march.

with those facts in mind, i can foresee chrysler continually pushing back the factory startup date until they finally have to admit to themselves and the public that those plants will remain idle... and chrysler will be a us automaker no more.

this has to be worst news about the us economy since the word of the wall street collapse in september. on monday, we will talk of chrysler in the past tense. and our nomenclature will change, as we now have the Big Two.

~ ~ Citations ~ ~

Read the Detroit Free Press article about Chrysler monthlong shutdown.

Read the CNNMoney.com article about Chrysler factory shutdown.

Read the New York Times article about monthlong furlough for Chrysler workers.

Read the Washington Post article about Chrysler shutdown.

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Auto Company Bailout Dies in Senate

On Thursday night, the US Senate abandoned all efforts to fashion the passed House bill that would rescue General Motors (GM) and Chrysler (Ford claims it has enough cash to stay afloat). Senate Republicans refused to play ball and support a bill endorsed by the White House and Senate Democrats.

The failure to reach agreement on Capitol Hill may spell doom General Motors to a bankruptcy and closure in the coming weeks, with Chrysler potentially following close behind. While Ford Motor has more cash on hand to avoid an immediate crisis, its production could be disrupted by problems in the supplier base, as could the production of overseas automakers with U.S. plants such as Toyota Motor and Honda Motor.

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After Senate Republicans balked at supporting a $14 billion auto rescue plan approved by the House on Wednesday, negotiators worked late into Thursday evening to broker a deal, but deadlocked over Republican demands for steep cuts in pay and benefits by the United Automobile Workers union in 2009. The failure in Congress to provide a financial lifeline for G.M. and Chrysler was a bruising defeat for President Bush in the waning weeks of his term, and also for President-elect Barack Obama, who earlier on Thursday urged Congress to act to avoid a further loss of jobs in an already deeply debilitated economy.

Senate Majority Leader Harry Reid (D-NV) is quoted as saying, "We have worked and worked and we can spend all night tonight, tomorrow, Saturday, and Sunday, and we're not going to get to the finish line. It’s over with. I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight. This is going to be a very, very bad Christmas for a lot of people as a result of what takes place here tonight."

Speaking for the Senate Republicans, Sen. Mitch McConnell (R-KY) said, "We have had before us this whole question of the viability of the American automobile manufacturers. None of us want to see them go down, but very few of us had anything to do with the dilemma that they have created for themselves. The administration negotiated in good faith with the Democratic majority a proposal that was simply unacceptable to the vast majority of our side because we thought it frankly wouldn’t work."

Moments later, the Senate failed to win the 60 votes need to bring up the auto rescue plan for consideration. The Senate voted 52 to 35 with 10 Republicans joining 40 Democrats and 2 independents in favor.

~ ~ ~

There is still hope and the struggling automakers may get some money anyway.

CNN.com reports as part of their effort to urge skeptical Republicans to back the deal, Bush officials made clear that if Congress didn't act, the White House would have to step in to save Detroit from collapse with funds from the Troubled Asset Relief Program (TARP), according to the sources familiar with the conversations. One of the sources said that a White House official made it clear to a GOP senator that would be the worst option, because the loan could go to the auto companies with few or no requirements along with it.

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Foreign automakers have been silent on the entire bailout plan. Toyota, Honda, Nissan and nearly all the other foreign companies that build vehicles in the United States have said little publicly concerning whether their American rivals should get the billions of dollars in emergency aid they have requested in recent weeks. To be sure, the companies themselves have little to gain by commenting on the bailout beyond expressing concern about the general health of the industry.

~ ~ ~

Asian stocks sank deep into negative territory and the dollar fell to a 13-year low against the Japanese yen on Friday following the collapse of a $14 billion bailout plan for the flailing U.S. auto industry. In Japan, the Nikkei 225 share average ended 5.6 percent lower during morning trading after it became clear that the negotiations to bailout Detroit automakers had failed in the Senate.

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plez sez: much ado about nothing! the last act of the lame duck bush will be to bail out gm and chrysler... there is no way bush is going to let these guys falter before he hands over the reins to PRESIDENT-ELECT BARACK OBAMA on january 20th.

if necessary, the treasury will claw back some of the $700 billion wall street bailout money to keep detroit afloat for at least a few more months. and the bad thing is that this money will come with NO STRINGS ATTACHED! you can bet the gm ceo (wagoner) will hang around long enough to spend the windfall!

without a wholesale overhaul of their business practices, the detroit automakers are only prolonging the agony of their demise. plezWorld is convinced that at least one of the big three will fail within the next 12 months.

~ ~ Citations ~ ~

Read the New York Times article about how Asian markets sunk on news of bailout failure.

Read the New York Times article about the auto bailout failure in the Senate.

Read the New York Times article on the silence of the foreign automakers.

Read the CNN.com article about how Senate Republicans sunk the auto bailout.

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Auto Company Bailout Passes House

CNN.com report on Auto Bailout:

What follows are excerpts from a CNNMoney.com article on the House bill:

The House passed a stopgap $14 billion bailout to U.S. automakers Wednesday evening, but Republican opposition cast doubts about its fate as it moves on to the Senate.

The House vote came in the wake of an agreement on the measure earlier in the day between Democratic Congressional leaders and the Bush administration.

The bill is designed to keep General Motors and Chrysler out of bankruptcy through at least March to give the new Congress and Obama administration a chance to craft a more long-term solution.

The measure passed by a count of 237 to 170 thanks to overwhelming Democratic support. But only 32 Republicans joined Democrats in voting for the bill.

During the House debate, Democrats and Republicans from Michigan both expressed heavy support for the bailout. But virtually all other Republicans who spoke during the debate argued that it would not solve the problems dogging the industry. The White House so far has failed to generate support among Senate Republicans, who have the power to kill the bill when it shows up in the Senate.

The $14 billion is $1 billion less than what was being discussed earlier in the week, and less than half the $34 billion requested by automakers last week. Still it may well be enough to stave off the immediate threat of bankruptcy.

GM has said it needs $4 billion by the end of the month to continue operations, and believes it'll need an additional $6 billion in the first three months of 2009. Chrysler has said it needs $4 billion by the end of the first quarter.

Ford Motor, which has more cash on hand than its U.S. rivals, is not expected to tap into this bailout in the coming months.

~ ~ ~

The stopgap measure is designed to let the new Congress and incoming administration of President-elect Barack Obama to craft a longer-term solution. It would also give the companies time to negotiate with creditors and the United Auto Workers union on additional concessions needed to stem their ongoing losses.

But the bill also sets strict oversight of the companies. There would be limits on executive pay, prohibitions for so-called golden parachutes and requirements that the automakers get rid of their corporate aircraft and not pay dividends while loans are outstanding.

The bill also provides for a presidential appointee, popularly referred to as a "car czar," to oversee the company's efforts to restructure their operations. If the car czar determines that the companies have not made progress on cutting costs, the loans would be recalled within 30 days.

In addition, the government would receive warrants - the right to buy a stake in the companies at a certain price - equal to 20% of the loan's value.

plez sez: horse whoo-ee! the house democrats have lost their collective minds.

fourteen billion dollars is not going to save detroit... not even for a couple of weeks! this is putting the proverbial band-aid on a cancer. one of the big three is going down and they'll be taking $7-10 billion of our dollars with them.

this is a market correction exacerbated by this recession. one of the big three is not supposed to survive and a lifeline is not going to save them. and because of this act, the house democrats may be looking at BARACK OBAMA presiding over the demise of the US auto industry as we know it, instead of them failing on george bush's watch!

the mortgage companies that got fat and then got skinny with those sub-prime loans... got a bailout!

the wall street brokerage houses that got fat and then got skinny propping up those sub-prime loans for the mortgage companies... got a bailout!

the US auto manufacturers got real fat and are now looking really skinny after foisting their "less than stellar" wares on a US public that now has numerous alternatives to their shitty products... is halfway there to getting a bailout!

the 1.7 million people - like plezWorld - who worked hard but watched their jobs blow away like sand on a hurricane ravaged beach since the recession began in December 2007 (there were 533,000 job losses in November 2008 alone)... get no relief, get no sympathy, and damn sure get NO BAILOUT!

who's next? what is the next industry with a powerful lobby in washington, dc that is going to belly up to the goodwill trough in congress. we're staring at over one trillion dollars in bailout cash heading to special interest groups without ONE PENNY of relief to the people who pay their taxes. there is something wrong with this picture... something is eerily wrong here!

i will be contacting my senators to urge them to vote against ANY bill that bails out the auto industry! i'll be checking tonight to ensure that my congressman (rep. hank johnson) voted against this bill.

~ ~ Citations ~ ~

Read and download a draft version of the auto industry bailout bill here.

Read the New York Times article about House passage of the bill.

Read the CNNMoney.com article about the bailout legislation.

Read the November 2008 Bureau of Labor Statics report and then see if you support floating GM and Chrysler for another two or three months before they come back to washington looking for another handout.

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McCain vs. Obama - Economic Plans

Over the past 24 hours, Sen. John McCain finally released his plan, called "the pension and family security plan," which builds on the senator's "American home ownership resurgence plan," which he introduced during last week's debate. His announcement comes on the heels of an Obama announcement on Monday and speculation by his campaign surrogates that something was in the offing.

McCain's "Pension and Family Security Plan":

That home owner proposal that McCain released last week called for using $300 billion of the $700 billion financial bailout package to keep Americans in their homes, stop declining housing values, and stabilize the financial markets. The proposal has the federal government buying all of the mortgages of houses whose property values have declined and then refinance them for the homeowner... projected cost: $300 million.

McCain's new plan includes specific proposals to help seniors, those saving money and homeowners.

The plan will help seniors by lowering taxes on withdrawals from their retirement accounts and suspending tax rules that force them to sell their stocks during the financial crisis, the campaign said.

The plan will help those saving money by accelerating the tax write-offs for those forced to sell stocks at a loss in the current market and reducing capital gains taxes for 2009 and 2010 to raise the incentive to save and invest, according to the campaign.

To provide relief for homeowners, the plan includes a proposal to purchase mortgages directly from the homeowners and mortgage servicers and replace them with manageable, fixed-rate mortgages.

To assist workers, the plan would eliminate taxes on unemployment benefits, according to the campaign.

Sen. Barack Obama has called McCain's plan "a day late and 101 million middle-class families short."

On Monday, Obama released his four-part "economic rescue plan" for the middle class.

Obama's "Economic Rescue Plan":

Obama's plan proposes a temporary tax credit of $3,000 for firms that create new jobs in the United States over the next two years, and penalty-free withdrawals from IRAs and 401(k)s in 2008 and 2009.

The Democratic candidate called for new legislation that would give families the option of withdrawing as much as 15 percent of their retirement savings --- up to a maximum of $10,000 --- without facing a tax penalty this year or next. He also called for a temporary lifting of taxes on unemployment insurance benefits.

The Illinois senator also proposed a 90-day foreclosure moratorium for homeowners acting in good faith, and a new effort to address the growing credit crisis at the state and local level.

Under the Obama plan, the Federal Reserve and the Treasury would provide much the same kind of backing to state and municipal governments as the recent federal bailout did to the commercial credit market.

"We can't wait to help workers and families and communities who are struggling right now -- who don't know if their job or their retirement will be there tomorrow; who don't know if next week's paycheck will cover this month's bills," Obama said. "We need to pass an economic rescue plan for the middle-class ... and we need to do it right now."

Calculate your household savings with the Obama Plan vs. the McCain Plan:

Read the CNN.com article about McCain's economic plan here.

Read the CNN.com article about Obama's economic plan here.

Read the New York Times article that compares the two plans here.

Read and download the Obama campaign PDF that does a side-by-side comparison of the two plans here.


plez sez: using Obama's calculator, my family will save about $1300 in taxes under the Obama plan and around $220 in taxes under the McCain plan.

later tonight, both candidates will get the opportunity to speak to their plans in more detail in the final presidential debate... where mccain promised to beat Obama's "you-know-what"!

i'm debated out! i doubt i'll be tuning in...

House Passes Bloated Emergency Economic Rescue Bill

Do-overs are usually reserved for kids on the playground and a rare mulligan is often offered to a novice golfer, but they are rarely seen at the top tier of American politics. Only 2 days after the Senate passed an updated and bloated version of the Wall Street Bailout Bill, the House of Representatives took up the measure again on Friday afternoon and delivered the "bacon" that President George Bush had sought.

If you recall, this whole mess began last week when Treasury Secretary Paulson presented congressional leaders with a 3-page treatment that Bush wanted enacted with the utmost urgency. That 3 pager turned into a 100-page House version, which was soundly rejected. That 100-page House version was pumped up with earmarks and "sweeteners" to enhance the taste and easily passed the Senate at 451 pages! The Senate version is what passed on Friday.

The "sweeteners" in the updated bill include:

• An increase in the amount that the Federal Deposit Insurance Corporation will insure in bank accounts: to $250,000, up from $100,000
  
  
• A fix that would prevent middle-class taxpayers from paying the alternative minimum tax
  
  
• A number of tax extensions favored by either Republicans or Democrats
  
  
• Tax exemptions for renewable energy
  
  
• A measure that would require health insurers to treat mental health issues the same way they treat physical illnesses

Even though, Sen. Barack Obama (D-IL) was on board for the bill from the start, House Democrats in the Congressional Black Caucus (CBC) did not follow his lead and voted "no" on Monday. He did make calls to a number of CBC members, which prompted them to change their vote to "aye." Those included Georgia CBC members John Lewis, David Scott, and Sanford Bishop. In a surprising act of gumption, my congressman, Hank Johnson, voted "no" on Monday and on Friday!

The bill passed by a vote of 263-171, with the Republicans (and Hank Johnson) of the Georgia delegation voting "no." President Bush wasted no time - it was about two hours after the vote in the House - in signing the bill into law.

The Georgia Delegation vote:

• John Barrow, Democrat, of Savannah: No
  
  
• Sanford Bishop, Democrat of Albany: Yes
  
  
• Paul Broun, Republican of Athens: No
  
  
• Nathan Deal, Republican of Gainesville: No
  
  
• Phil Gingrey, Republican of Marietta: No
  
  
• Hank Johnson, Democrat of Lithonia: No
  (plezWorld's congressman)
  
  
• Jack Kingston, Republican of Savannah: No
  
  
• John Lewis, Democrat of Atlanta: Yes
  
  
• John Linder, Republican of Duluth: No
  
  
• Jim Marshall, Democrat of Macon: Yes
  
  
• Tom Price, Republican of Roswell: No
  
  
• David Scott, Democrat of Atlanta: Yes
  
  
• Lynn Westmoreland, Republican of Grantville: No

Read and download a summary of the final version of the "Emergency Economic Stabilization Act of 2008" PDF LINK

Read and download a section-by-section analysis of the final version of the "Emergency Economic Stabilization Act of 2008" PDF LINK

Read and download all 451 pages of the final version of the "Emergency Economic Stabilization Act of 2008" PDF LINK

~ ~ ~ ~ ~ ~

Read the AJC.com article about how the Georgia Delegation voted here.

Read the CNNMoney.com article about Bush signing the Wall Street Bailout Bill here.

Read the CNN.com articles about the political side of the Wall Street Bailout Law here and here.

Read the New York Times article about the House's vote on the Wall Street Bailout Bill here.

plez sez: well, the House capitulated and passed the legislation. unfortunately, they buckled under the pressure from House and Senate leaders and a lame duck President and too much sizzlin' bacon to pass up the opportunity to lap up the swill from the trough!

the bill (which is now law) was forced down the throats of the Americans who are left holding the bag for the companies that got us into this mess. there is very little in the law that addresses those who have lost their homes to foreclosure, those companies who can't meet the payroll this week, or those folk who've had to file for bankruptcy already.

as plezWorld predicted, politics prevailed and the weasels that were sent to washington to protect the common man couldn't gird their loins against the onslaught of high pressure salesmanship by their leadership. i do applaud my congressman - Rep. Hank Johnson (D-GA) - for standing on principle and voting against this measure!

that $700 billion could've gone to protect the 600,000 Americans who've lost their jobs this year from foreclosure and bankruptcy... instead that money will go to reward the very institutions who abhor the government when they are reaping billions of dollars of profit, yet are lined up at the government teat as soon as their risky schemes go south.

this economy is STILL in shambles and even after being signed into law, the dow jones finished the day with a loss of over 150 points! this law fixes nothing and george bush doesn't repair his god-awful credibility with the US. and mark my words, wall street will be back within 12 months when we have a new president with new cache in congress.

the LAMEST of lame duck presidents suckered an opposition party-led congress into action again... a sad day in america, indeed!

UPDATE: Wachovia Sold To Wells Fargo

The Atlanta Journal-Constitution reports that Atlanta’s second-largest bank, Wachovia Corp., has changed dancing partners and will now be sold to Wells Fargo for $15.1 billion. It was reported earlier in the week that the sale was to be with Citigroup.

Citigroup was only going to take over the banking operations, the deal with Wells Fargo is a complete merger of the two banks.

Wells Fargo, whose biggest stakeholder is billionaire Warren Buffett's Berkshire Hathaway Inc., said its offer keeps Wachovia intact and needs no U.S. assistance. Citigroup's bid of $2.16 billion on Sept. 29 for Wachovia's banking businesses - valued at about $1 share - relied on help from the Federal Deposit Insurance Corp. and left out the securities brokerage and Evergreen mutual-fund units.

Wachovia has been among the banks hardest hit by the ongoing crisis in the mortgage market. Its current problems stem largely from its acquisition of mortgage lender Golden West Financial Corp. in 2006 for roughly $25 billion at the height of the nation’s housing boom. With that purchase, Wachovia inherited a deteriorating $122 billion portfolio of Pick-A-Payment loans, Golden West’s specialty, which let borrowers skip some payments.

Read the AJC.com article about Wachovia's merger here.

Read the Bloomberg.com article about Wachovia's merger here.

Read the CNNMoney.com article about Wachovia's merger here.


plez sez: it looks like wells fargo offered a sweeter deal.

the deal with citigroup was announced earlier this week.

Senate Passes Sweetened Emergency Economic Stabilization Act of 2008

By a vote of 74-25 (Sen. Ted Kennedy was not present), the US Senate passed an updated version of the Emergency Economic Stabilization Act of 2008 (EESA) that was voted down 2 days earlier by the House of Representatives. Over the past two days, Sen. Chris Dodd (D-CT) led a bipartisan effort to create a bill that would easily pass the Senate and bring along a sufficient number of disaffected House members when they address the bill on Friday (they are currently observing the Jewish New Year).

Senators McCain, Obama, and Biden all voted for passage of the bill. Suprisingly, the Republican ranking committee member Sen. Shelby (R-AL) voted against the bill.

The federal government would provide up to $700 billion in a far-reaching plan to rescue the nation's troubled financial system; the updated Senate version includes a few "sweetners" that would hopefully move the 12 House members necessary for it to pass in that legislative body.

The "sweeteners" in the updated bill include:

• An increase in the amount that the Federal Deposit Insurance Corporation will insure in bank accounts: to $250,000, up from $100,000
  
  
• A fix that would prevent middle-class taxpayers from paying the alternative minimum tax
  
  
• A number of tax extensions favored by either Republicans or Democrats
  
  
• Tax exemptions for renewable energy
  
  
• A measure that would require health insurers to treat mental health issues the same way they treat physical illnesses

Read and download a pdf version summary of
the Senate version of the "Emergency Economic Stabilization Act of 2008":

SUMMARY:SUMMARY OF THE “EMERGENCY ECONOMIC STABILIZATION ACT OF 2008”

I. Stabilizing the Economy
The Emergency Economic Stabilization Act of 2008 (EESA) provides up to $700 billion to the
Secretary of the Treasury to buy mortgages and other assets that are clogging the balance sheets
of financial institutions and making it difficult for working families, small businesses, and other
companies to access credit, which is vital to a strong and stable economy. EESA also establishes
a program that would allow companies to insure their troubled assets.

II. Homeownership Preservation
EESA requires the Treasury to modify troubled loans – many the result of predatory lending
practices – wherever possible to help American families keep their homes. It also directs other
federal agencies to modify loans that they own or control. Finally, it improves the HOPE for
Homeowners program by expanding eligibility and increasing the tools available to the
Department of Housing and Urban Development to help more families keep their homes.

III. Taxpayer Protection
Taxpayers should not be expected to pay for Wall Street’s mistakes. The legislation requires
companies that sell some of their bad assets to the government to provide warrants so that
taxpayers will benefit from any future growth these companies may experience as a result of
participation in this program. The legislation also requires the President to submit legislation
that would cover any losses to taxpayers resulting from this program from financial institutions.

IV. No Windfalls for Executives
Executives who made bad decisions should not be allowed to dump their bad assets on the
government, and then walk away with millions of dollars in bonuses. In order to participate in
this program, companies will lose certain tax benefits and, in some cases, must limit executive
pay. In addition, the bill limits “golden parachutes” and requires that unearned bonuses be
returned.

V. Strong Oversight
Rather than giving the Treasury all the funds at once, the legislation gives the Treasury $250
billion immediately, then requires the President to certify that additional funds are needed ($100
billion, then $350 billion subject to Congressional disapproval). The Treasury must report on the
use of the funds and the progress in addressing the crisis. EESA also establishes an Oversight
Board so that the Treasury cannot act in an arbitrary manner. It also establishes a special
inspector general to protect against waste, fraud and abuse.

Read and download a pdf version of the section-by-section analysis of
the Senate version of the "Emergency Economic Stabilization Act of 2008":

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION:

Section 1. Short Title.
“Emergency Economic Stabilization Act of 2008.”

Section 2. Purposes.
Provides authority to the Treasury Secretary to restore liquidity and stability to the U.S. financial system and to ensure the economic well-being of Americans.

Section 3. Definitions.
Contains various definitions used under this Act.

Title I. Troubled Assets Relief Program.
Section 101. Purchases of Troubled Assets.
Authorizes the 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.
Requires the Treasury Secretary to establish guidelines and policies to carry out the purposes of this Act.
Includes provisions to prevent unjust enrichment by participants of the program.

Section 102. 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.

Section 103. Considerations.
In using authority under this Act, 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 homeownership, 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.

Section 104. Financial Stability Oversight Board.
This section establishes the Financial Stability Oversight Board to review and make recommendations regarding the exercise of authority under this Act. 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.

Section 105. Reports.
Monthly Reports: Within 60 days of the first exercise of authority under this Act and every month thereafter, the Secretary is required to report to Congress its activities under TARP, including detailed financial statements.
Tranche Reports: For every $50 billion in assets purchased, the Secretary is required to report to Congress a detailed description of all transactions, a description of the pricing mechanisms used, and justifications for the financial terms of such transactions.
Regulatory Modernization Report: Prior to April 30, 2009, the Secretary is required to submit a report to Congress on the current state of the financial markets, the effectiveness of the financial regulatory system, and to provide any recommendations.

Section 106. Rights; Management; Sale of Troubled Assets; Revenues and Sale Proceeds.
Establishes the right of the Secretary to exercise authorities under this Act at any time. 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.

Section 107. Contracting Procedures.
Allows the Secretary to waive provisions of the Federal Acquisition Regulation where compelling circumstances make compliance contrary to the public interest. Such waivers must be reported to Congress within 7 days. If provisions related to minority contracting are waived, the Secretary must develop alternate procedures to ensure the inclusion of minority contractors.
Allows the FDIC to be selected as an asset manager for residential mortgage loans and mortgage-backed securities.

Section 108. Conflicts of Interest.
The Secretary is required to issue regulations or guidelines to manage or prohibit conflicts of interest in the administration of the program.

Section 109. Foreclosure Mitigation Efforts.
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.

Section 110. Assistance to Homeowners.
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, considering net present value to the taxpayer.

Section 111. 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.

Section 112. Coordination With Foreign Authorities and Central Banks.
Requires the Secretary to coordinate with foreign authorities and central banks to establish programs similar to TARP.

Section 113. Minimization of Long-Term Costs and Maximization of Benefits for Taxpayers.
In order to cover losses and administrative costs, as well as to allow taxpayers to share in equity appreciation, requires that the Treasury receive non-voting warrants from participating financial institutions.

Section 114. Market Transparency.
48-hour Reporting Requirement: The Secretary is required, within 2 business days of exercising authority under this Act, to publicly disclose the details of any transaction.

Section 115. Graduated Authorization to Purchase.
Authorizes the full $700 billion as requested by the Treasury Secretary for implementation of TARP. Allows the Secretary to immediately use up to $250 billion in authority under this Act. 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 report to Congress requesting such authority. The Secretary may use this additional authority unless within 15 days Congress passes a joint resolution of disapproval which may be considered on an expedited basis.

Section 116. Oversight and Audits.
Requires the Comptroller General of the United States to conduct ongoing oversight of the activities and performance of TARP, and to report every 60 days to Congress. The Comptroller General is required to conduct an annual audit of TARP. In addition, TARP is required to establish and maintain an effective system of internal controls.

Section 117. Study and Report on Margin Authority.
Directs the Comptroller General to conduct a study and report back to Congress on the role in which leverage and sudden deleveraging of financial institutions was a factor behind the current financial crisis.

Section 118. Funding.
Provides for the authorization and appropriation of funds consistent with Section 115.

Section 119. Judicial Review and Related Matters.
Provides standards for judicial review, including injunctive and other relief, to ensure that the actions of the Secretary are not arbitrary, capricious, or not in accordance with law.

Section 120. Termination of Authority.
Provides that the authorities to purchase and guarantee assets terminate on December 31, 2009. The Secretary may extend the authority for an additional year upon certification of need to Congress.

Section 121. Special Inspector General for the Troubled Asset Relief Program.
Establishes the Office of the Special Inspector General for the Troubled Asset Relief Program to conduct, supervise, and coordinate audits and investigations of the actions undertaken by the Secretary under this Act. The Special Inspector General is required to submit a quarterly report to Congress summarizing its activities and the activities of the Secretary under this Act.

Section 122. Increase in the Statutory Limit on the Public Debt.
Raises the debt ceiling from $10 trillion to $11.3 trillion.

Section 123. Credit Reform.
Details the manner in which the legislation will be treated for budgetary purposes under the Federal Credit Reform Act.

Section 124. Hope for Homeowners Amendments.
Strengthens the Hope for Homeowners program to increase eligibility and improve the tools available to prevent foreclosures.

Section 125. 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 4
prior to January 20, 2009. The panel will consist of 5 outside experts appointed by the House and Senate Minority and Majority leadership.

Section 126. FDIC Enforcement Enhancement.
Prohibits the misuse of the FDIC logo and name to falsely represent that deposits are insured. Strengthens enforcement by appropriate federal banking agencies, and allows the FDIC to take enforcement action against any person or institution where the banking agency has not acted.

Section 127. Cooperation With the FBI.
Requires any federal financial regulatory agency to cooperate with the FBI and other law enforcement agencies investigating fraud, misrepresentation, and malfeasance with respect to development, advertising, and sale of financial products.

Section 128. Acceleration of Effective Date.
Provides the Federal Reserve with the ability to pay interest on reserves.

Section 129. Disclosures on Exercise of Loan Authority.
Requires the Federal Reserve to provide a detailed report to Congress, in an expedited manner, upon the use of its emergency lending authority under Section 13(3) of the Federal Reserve Act.

Section 130. Technical Corrections.
Makes technical corrections to the Truth in Lending Act.

Section 131. Exchange Stabilization Fund Reimbursement.
Protects the Exchange Stabilization Fund from incurring any losses due to the temporary money market mutual fund guarantee by requiring the program created in this Act to reimburse the Fund. Prohibits any future use of the Fund for any guarantee program for the money market mutual fund industry.

Section 132. Authority to Suspend Mark-to-Market Accounting.
Restates the Securities and Exchange Commission’s authority to suspend the application of Statement Number 157 of the Financial Accounting Standards Board if the SEC determines that it is in the public interest and protects investors.

Section 133. Study on Mark-to-Market Accounting.
Requires the SEC, in consultation with the Federal Reserve and the Treasury, to conduct a study on mark-to-market accounting standards as provided in FAS 157, including its effects on balance sheets, impact on the quality of financial information, and other matters, and to report to Congress within 90 days on its findings.

Section 134. Recoupment.
Requires that in 5 years, the President submit to the Congress a proposal that recoups from the financial industry any projected losses to the taxpayer.

Section 135. Preservation of Authority.
Clarifies that nothing in this Act shall limit the authority of the Secretary or the Federal Reserve under any other provision of law.

Section 136. Temporary Increase in Deposit and Share Insurance Coverage. Raises the FDIC and the National Credit Union Share Insurance Fund deposit insurance limits from $100,000 per account to $250,000 until December 31, 2009. Temporarily raises the borrowing limits at the Treasury for the FDIC and the National Credit Union Share Insurance Fund.


Title II—Budget-Related Provisions
Section 201. Information for Congressional Support Agencies.
Requires that information used by the Treasury Secretary in connection with activities under this Act be made available to CBO and JCT.

Section 202. Reports by the Office of Management and Budget and the Congressional Budget Office.
Requires CBO and OMB to report cost estimates and related information to Congress and the President regarding the authorities that the Secretary of the Treasury has exercised under the Act.

Section 203. Analysis in President’s Budget.
Requires that the President include in his annual budget submission to the Congress certain analyses and estimates relating to costs incurred as a result of the Act; and

Section 204. Emergency Treatment.
Specifies scoring of the Act for purposes of budget enforcement.


Title III—Tax Provisions
Section 301. Gain or Loss From Sale or Exchange of Certain Preferred Stock.
Details certain changes in the tax treatment of losses on the preferred stock of certain GSEs for financial institutions.

Section 302. Special Rules for Tax Treatment of Executive Compensation of Employers Participating in the Troubled Assets Relief Program.
Applies limits on executive compensation and golden parachutes for certain executives of employers who participate in the auction program.

Section 303. Extension of Exclusion of Income From Discharge of Qualified Principal Residence Indebtedness.
Extends current law tax forgiveness on the cancellation of mortgage debt.

Read and download the 451 page pdf version of the entire Senate version of the the Senate version of the "Emergency Economic Stabilization Act of 2008".

Read the CNN.com article about what the Senate added to make the bill more attractive to House Republicans here and here.

Read the CNNMoney.com article about Senate version of the Emergency Rescue Bill here.

Read the New York Times article about the US Senate and the Emergency Rescue Bill here.

plez sez: well, the Senate passed the legislation as promised. unfortunately, it is a lot easier to marshall 100 US Senators than the widely disparate 438 Congressman!

this bill still feels like a bailout of the companies that got us in the mess, without much for those who were victimized and lost their homes to foreclosure. as odious as it seems, plezWorld predicts that politics will prevail and this thing will pass in the House by the slimmest of margins on friday!

Wachovia Sold To Citigroup

BREAKING NEWS!


This just in from the Atlanta Journal-Constitution, Atlanta’s second-largest bank, Wachovia Corp., will be sold to Citigroup in a deal facilitated by the Federal Deposit Insurance Corp.

The FDIC says Wachovia didn’t fail, and that all depositors are protected and there will be no cost to the Deposit Insurance Fund.

The sale of Wachovia Corp. comes just days after the government’s seizure of Seattle-based Washington Mutual Inc. — the largest bank failure in U.S. history.

Wachovia has been among the banks hardest hit by the ongoing crisis in the mortgage market. Its current problems stem largely from its acquisition of mortgage lender Golden West Financial Corp. in 2006 for roughly $25 billion at the height of the nation’s housing boom. With that purchase, Wachovia inherited a deteriorating $122 billion portfolio of Pick-A-Payment loans, Golden West’s specialty, which let borrowers skip some payments.

Read the AJC.com article about Wachovia's sale here.

Read the New York Times article about the Wachovia sale here.

Read the CNNMoney.com article about the Wachovia sale here.


plez sez: first, i have to give props to my friend Torrance over at Raw Dawg Buffalo... he called out the possibility of a Wachovia sale at least a week ago in a comment on plezWorld!

NOW... WTF! two years ago, the mortgage bubble was beginning to bust... who at wachovia thought it was a good idea to purchase a mortgage company that offered loans where borrowers could skip payments?!? that would've seemed like a risky investment in 4 years ago!

i've been with wachovia since i started college back in the early 80's (when it was First Atlanta)... i remember the first ATM machines were named "Tillie"! as a matter of fact, my current checking account is the same account i opened when i enrolled in college. it is hard to believe that things have gotten this bad. i wonder why Wachovia couldn't hold out on this sale until the bailout cash came available?

i'll be honest, plezWorld is not comfortable with this rash of bank failures and the overall contraction of the number of banks. at this current trend, we'll only be left with 2 or 3 large national banks (Bank of America, JPMorgan Chase, and Citigroup)... i'm not an economist, but something tells me that this trend cannot be good for long term economic growth and business development in the united states when all of the financial resources are concentrated in the hands of the few (and when the Treasury Dept holds all of the cards on cash and credit).

Emergency Economic Stabilization Act of 2008

The GOP House leadership has finally gotten on board and joined the Democratic House leadership in endorsing the hastily prepared Emergency Economic Stabilization Act of 2008 at the behest of President George W. Bush and the begging of Treasury Secretary Henry Paulson.

The federal government would provide up to $700 billion in a far-reaching plan to rescue the nation's troubled financial system, according to a bill released by Democratic lawmakers. CNNMoney.com reports that House Minority Leader John Boehner cited "great improvement" in the bill and urged fellow Republicans to support it. Rep. Boehner led a weekend charge of House Republicans who opposed a previous version of the bill.

Read and download the full text version of the Emergency Economic Stabilization Act of 2008 at the House Committee on Financial Services page (~PDF VERSION~).

Read and download a pdf version summary of
the "Emergency Economic Stabilization Act of 2008":

SUMMARY:

I. Stabilizing the Economy

The Emergency Economic Stabilization Act of 2008 (EESA) provides up to $700 billion to the Secretary of the Treasury to buy mortgages and other assets that are clogging the balance sheets of financial institutions and making it difficult for working families, small businesses, and other companies to access credit, which is vital to a strong and stable economy. EESA also establishes a program that would allow companies to insure their troubled assets.


II. Homeownership Preservation

EESA requires the Treasury to modify troubled loans – many the result of predatory lending practices – wherever possible to help American families keep their homes. It also directs other federal agencies to modify loans that they own or control. Finally, it improves the HOPE for Homeowners program by expanding eligibility and increasing the tools available to the Department of Housing and Urban Development to help more families keep their homes.


III. Taxpayer Protection

Taxpayers should not be expected to pay for Wall Street’s mistakes. The legislation requires companies that sell some of their bad assets to the government to provide warrants so that taxpayers will benefit from any future growth these companies may experience as a result of participation in this program. The legislation also requires the President to submit legislation that would cover any losses to taxpayers resulting from this program from financial institutions.


IV. No Windfalls for Executives

Executives who made bad decisions should not be allowed to dump their bad assets on the government, and then walk away with millions of dollars in bonuses. In order to participate in this program, companies will lose certain tax benefits and, in some cases, must limit executive pay. In addition, the bill limits “golden parachutes” and requires that unearned bonuses be returned.


V. Strong Oversight

Rather than giving the Treasury all the funds at once, the legislation gives the Treasury $250 billion immediately, then requires the President to certify that additional funds are needed ($100 billion, then $350 billion subject to Congressional disapproval). The Treasury must report on the use of the funds and the progress in addressing the crisis. EESA also establishes an Oversight Board so that the Treasury cannot act in an arbitrary manner. It also establishes a special inspector general to protect against waste, fraud and abuse.

Read and download a pdf version of the section-by-section analysis of
the "Emergency Economic Stabilization Act of 2008":

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION:

Section 1. Short Title.“Emergency Economic Stabilization Act of 2008.”

Section 2. Purposes.
Provides authority to the Treasury Secretary to restore liquidity and stability to the U.S. financial system and to ensure the economic well-being of Americans.

Section 3. Definitions.
Contains various definitions used under this Act.


Title I. Troubled Assets Relief Program.
Section 101. Purchases of Troubled Assets.
Authorizes the 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. Requires the Treasury Secretary to establish guidelines and policies to carry out the purposes of this Act.
Includes provisions to prevent unjust enrichment by participants of the program.

Section 102. 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.

Section 103. Considerations.
In using authority under this Act, 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 homeownership, 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.

Section 104. Financial Stability Oversight Board.
This section establishes the Financial Stability Oversight Board to review and make recommendations regarding the exercise of authority under this Act. 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.

Section 105. Reports.
Monthly Reports: Within 60 days of the first exercise of authority under this Act and every month thereafter, the Secretary is required to report to Congress its activities under TARP, including detailed financial statements.
Tranche Reports: For every $50 billion in assets purchased, the Secretary is required to report to Congress a detailed description of all transactions, a description of the pricing mechanisms used, and justifications for the financial terms of such transactions.
Regulatory Modernization Report: Prior to April 30, 2009, the Secretary is required to submit a report to Congress on the current state of the financial markets, the effectiveness of the financial regulatory system, and to provide any recommendations.

Section 106. Rights; Management; Sale of Troubled Assets; Revenues and Sale Proceeds.
Establishes the right of the Secretary to exercise authorities under this Act at any time. 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.

Section 107. Contracting Procedures.
Allows the Secretary to waive provisions of the Federal Acquisition Regulation where compelling circumstances make compliance contrary to the public interest. Such waivers must be reported to Congress within 7 days. If provisions related to minority contracting are waived, the Secretary must develop alternate procedures to ensure the inclusion of minority contractors.
Allows the FDIC to be selected as an asset manager for residential mortgage loans and mortgage-backed securities.

Section 108. Conflicts of Interest.
The Secretary is required to issue regulations or guidelines to manage or prohibit conflicts of interest in the administration of the program.

Section 109. Foreclosure Mitigation Efforts.
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.

Section 110. Assistance to Homeowners.
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, considering net present value to the taxpayer.

Section 111. 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.

Section 112. Coordination With Foreign Authorities and Central Banks.
Requires the Secretary to coordinate with foreign authorities and central banks to establish programs similar to TARP.

Section 113. Minimization of Long-Term Costs and Maximization of Benefits for Taxpayers.
In order to cover losses and administrative costs, as well as to allow taxpayers to share in equity appreciation, requires that the Treasury receive non-voting warrants from participating financial institutions.

Section 114. Market Transparency.
48-hour Reporting Requirement: The Secretary is required, within 2 business days of exercising authority under this Act, to publicly disclose the details of any transaction.

Section 115. Graduated Authorization to Purchase.
Authorizes the full $700 billion as requested by the Treasury Secretary for implementation of TARP. Allows the Secretary to immediately use up to $250 billion in authority under this Act. 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 report to Congress requesting such authority. The Secretary may use this additional authority unless within 15 days Congress passes a joint resolution of disapproval which may be considered on an expedited basis.

Section 116. Oversight and Audits.
Requires the Comptroller General of the United States to conduct ongoing oversight of the activities and performance of TARP, and to report every 60 days to Congress. The Comptroller General is required to conduct an annual audit of TARP. In addition, TARP is required to establish and maintain an effective system of internal controls.

Section 117. Study and Report on Margin Authority.
Directs the Comptroller General to conduct a study and report back to Congress on the role in which leverage and sudden deleveraging of financial institutions was a factor behind the current financial crisis.

Section 118. Funding.
Provides for the authorization and appropriation of funds consistent with Section 115.

Section 119. Judicial Review and Related Matters.
Provides standards for judicial review, including injunctive and other relief, to ensure that the actions of the Secretary are not arbitrary, capricious, or not in accordance with law.

Section 120. Termination of Authority.
Provides that the authorities to purchase and guarantee assets terminate on December 31, 2009. The Secretary may extend the authority for an additional year upon certification of need to Congress.

Section 121. Special Inspector General for the Troubled Asset Relief Program.
Establishes the Office of the Special Inspector General for the Troubled Asset Relief Program to conduct, supervise, and coordinate audits and investigations of the actions undertaken by the Secretary under this Act. The Special Inspector General is required to submit a quarterly report to Congress summarizing its activities and the activities of the Secretary under this Act.

Section 122. Increase in the Statutory Limit on the Public Debt.
Raises the debt ceiling from $10 trillion to $11.3 trillion.

Section 123. Credit Reform.
Details the manner in which the legislation will be treated for budgetary purposes under the Federal Credit Reform Act.

Section 124. Hope for Homeowners Amendments.
Strengthens the Hope for Homeowners program to increase eligibility and improve the tools available to prevent foreclosures.

Section 125. 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 4
prior to January 20, 2009. The panel will consist of 5 outside experts appointed by the House and Senate Minority and Majority leadership.

Section 126. FDIC Enforcement Enhancement.
Prohibits the misuse of the FDIC logo and name to falsely represent that deposits are insured. Strengthens enforcement by appropriate federal banking agencies, and allows the FDIC to take enforcement action against any person or institution where the banking agency has not acted.

Section 127. Cooperation With the FBI.
Requires any federal financial regulatory agency to cooperate with the FBI and other law enforcement agencies investigating fraud, misrepresentation, and malfeasance with respect to development, advertising, and sale of financial products.

Section 128. Acceleration of Effective Date.
Provides the Federal Reserve with the ability to pay interest on reserves.

Section 129. Disclosures on Exercise of Loan Authority.
Requires the Federal Reserve to provide a detailed report to Congress, in an expedited manner, upon the use of its emergency lending authority under Section 13(3) of the Federal Reserve Act.

Section 130. Technical Corrections.
Makes technical corrections to the Truth in Lending Act.

Section 131. Exchange Stabilization Fund Reimbursement.
Protects the Exchange Stabilization Fund from incurring any losses due to the temporary money market mutual fund guarantee by requiring the program created in this Act to reimburse the Fund. Prohibits any future use of the Fund for any guarantee program for the money market mutual fund industry.

Section 132. Authority to Suspend Mark-to-Market Accounting.
Restates the Securities and Exchange Commission’s authority to suspend the application of Statement Number 157 of the Financial Accounting Standards Board if the SEC determines that it is in the public interest and protects investors.

Section 133. Study on Mark-to-Market Accounting.
Requires the SEC, in consultation with the Federal Reserve and the Treasury, to conduct a study on mark-to-market accounting standards as provided in FAS 157, including its effects on balance sheets, impact on the quality of financial information, and other matters, and to report to Congress within 90 days on its findings.

Section 134. Recoupment.
Requires that in 5 years, the President submit to the Congress a proposal that recoups from the financial industry any projected losses to the taxpayer.

Section 135. Preservation of Authority.
Clarifies that nothing in this Act shall limit the authority of the Secretary or the Federal Reserve under any other provision of law.


Title II—Budget-Related Provisions
Section 201. Information for Congressional Support Agencies.
Requires that information used by the Treasury Secretary in connection with activities under this Act be made available to CBO and JCT.

Section 202. Reports by the Office of Management and Budget and the Congressional Budget Office.
Requires CBO and OMB to report cost estimates and related information to Congress and the President regarding the authorities that the Secretary of the Treasury has exercised under the Act.

Section 203. Analysis in President’s Budget.
Requires that the President include in his annual budget submission to the Congress certain analyses and estimates relating to costs incurred as a result of the Act; and

Section 204. Emergency Treatment.
Specifies scoring of the Act for purposes of budget enforcement.


Title III—Tax Provisions
Section 301. Gain or Loss From Sale or Exchange of Certain Preferred Stock.
Details certain changes in the tax treatment of losses on the preferred stock of certain GSEs for financial institutions.

Section 302. Special Rules for Tax Treatment of Executive Compensation of Employers Participating in the Troubled Assets Relief Program.
Applies limits on executive compensation and golden parachutes for certain executives of employers who participate in the auction program.

Section 303. Extension of Exclusion of Income From Discharge of Qualified Principal Residence Indebtedness.
Extends current law tax forgiveness on the cancellation of mortgage debt.

Negotiations between the House, Senate, and Bush administration went on throughout Saturday night until Sunday afternoon, when an agreement was met. The Republican House members who had been holding out, seemed to signal that they were willing to support the 100-plus page bailout bill.

Read the CNN.com article about how Obama & McCain will support the bill here.

Read the CNNMoney.com article about Emergency Bailout Bill here.

Read the New York Times article about Emergency Bailout Bill here.


plez sez: it is what it is!

these wall street financial institutions were given the keys to the us economy and they ditched the bentley. now WE have to pay to drag that damn thing out of the mud. there is one consolation prize, those who are stuck with loans from predatory lenders may have the opportunity to have their mortgages re-financed.

plezWorld is more than just a little upset that those "fat cats" who profited from this mess over the past decade aren't made to pay some form of restitution for their scam. since the regular person going in to get a home financed doesn't have the background nor information to make a more informed decision, the "let the buyer beware" maxim doesn't fit here. those high risk sub-prime mortgages were a "get rich quick" scheme gone awry and has left the us economy in near ruins... i stand by my contention that a whole bunch of someone's should be serving some jail time (along with a liquidation of their personal assets to help pay for this bailout)!

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BLOG UPDATE - 09/29/2008 6:00 PM - The House of Representatives voted 228-205 to reject a $700 billion rescue of the financial industry. This vote was followed closely by the biggest one day drop in the Dow Jones - 777 points. (read more here and here)

Wall Street Bailout Agreement Reached?

Like Moses descending from Mount Sinai with the stone tablets that would lay down the law to save humanity, House Speaker Nancy Pelosi announced that Congressional leaders and the Bush administration had reached a tentative agreement on a bailout of those financial markets that are on the brink of collapse.

CNN.com reports that the House could vote on it on Sunday and the Senate on Monday. House Speaker Nancy Pelosi announced the accord just after midnight Saturday and said it still has to be put on paper.

Treasury Secretary Henry Paulson talked of finalizing the deal but added: "I think we're there."

The aim of the deal is to prevent credit from drying up and causing a meltdown of the U.S. economy.

Read the New York Times article about the tentative bailout agreement here.

Read the CNN.com article about Congressional bailout agreement here and here.

Read the Atlanta Journal-Constitution article about the tentative bailout agreement here.

plez sez: in their haste to respond the clarion call by president bush, it seems that the congress has forgotten that all of us are going to have to pay for this bailout... it would be nice for the citizens of the us to have an opportunity to review and critique this "agreement" BEFORE it is voted on by the house.

a few days ago, i expressed some concerns (here) about this bailout package. methinks that plezWorld needs to give his congressman a call on sunday... i strongly urge you to call yours.