The legislation authorizes $250 billion immediately, with another $100 billion upon presidential certification. An additional $350 billion would also be available subject to congressional approval.
"I appreciate the leadership shown by members on both sides of the aisle, who came together to write a very good bill," President Bush said in a statement. "This bill provides the necessary tools and funding to help protect our economy against a systemwide breakdown."
The Treasury can use a combination of tactics to buy bad loans, focusing on mortgages and mortgage-backed securities but also including other types of loans under certain conditions. Treasury could purchase the bad debt through an auction process as well as by buying loans directly, a Treasury official said in a conference call with reporters.
The proposed legislation also allows companies to participate in an insurance program, whereby Treasury would guarantee troubled assets, charging companies a premium "sufficient to cover anticipated claims," according to the bill.
"This bill provides the necessary tools to deploy up to $700 billion to address the urgent needs in our financial system, whether that be by purchasing troubled assets broadly, insuring troubled assets, or averting the potential systemic risk from the disorderly failure of a large financial institution," Treasury Secretary Henry Paulson said in a press release.
"I am confident this legislation gives us the flexibility to unclog our financial markets [and] increase the ability of our financial institutions to deliver the credit that will help create jobs. We are taking the steps needed to be ready to begin implementing this legislation as soon as it is signed," he said.
The government would get a stake in companies receiving bailout funds so that taxpayer money could be recovered if those companies grow in the future, according to the bill.
The proposed legislation also requires that in five years, the president submit a proposal to Congress "that recoups from the financial industry any projected losses to the taxpayer.
Sunday, September 28, 2008
Details of Bailout Plan Unveiled to Public; House Starts Work Monday
Details of the "Emergency Economic Stabilization Act of 2008" is available, and can be seen here. The bill will be introduced in the House of Representatives on Monday morning and then head to the Senate, Senate Majority Leader Harry Reid, D-Nev, announced to reporters on Capitol Hill today. Marketwatch.com reported these details: