Compromise Bailout Deal Emerges
Sep 26th, 2008 | By William Patalon III | Category: Politics & EconomicsCongressional negotiators late yesterday reached a tentative agreement on a credit-crisis compromise. It gives the Bush administration about a third of the $700 billion it has requested up front but made sure half that outlay was subject to a congressional veto, reports William Patalon III.
The tentative plan calls for the federal government to buy the “toxic,” mortgage-backed assets of failing – or failed – financial institutions in a bid to keep the U.S. financial system from melting down. A meltdown would be the penultimate event that would sap investor confidence, setting in motion a series of irreversible events that would wipe out savings, cause a big spike in home foreclosures, and ultimately, cause a major surge in unemployment after thousands of small businesses fail and major companies resort to widespread layoffs.
The Bush administration has made concessions almost daily to demands from both the political right and left from its original three-page proposal, including agreeing to limit pay for executives of bailed-out financial institutions.
Debate has been fierce on such questions as whether to phase in the cost and whether to give taxpayers an equity stake in rescued companies. House Financial Services Committee Chairman Barney Frank, D-Mass., told AP that both would be included in the legislation.
While details of the plan were not immediately provided, the compromise is said to include provisions to curb executive compensation for participating companies, provide more oversight of the Treasury’s actions, and supply the government with stock warrants that let the government share in profits generated by participating Wall Street firms.
“We came to some agreements on a lot of important issues,” Frank told the Los Angeles Times. “We are on track to pass this.”
Source: While Lawmakers Reach Credit Crisis Compromise, Money Morning Bailout Plan Expert Displays Doubt
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William (Bill) Patalon III is the Managing Editor and Senior Research Analyst for Money Morning, and is also the Managing Editor for The Money Map Report. Patalon's work has appeared in Kiplinger's personal finance magazine, USA Today, and The South China Morning Post, among other publications.
