The Deal - Latest Detailed Text of Bail Out - Updated. Legislation Draft - Actual Bill

Update5: Here is a table with a side-by-side comparison of the three different versions of the bills (DC Examiner).

Update4: New Bill with Version AYO08C04. View it Emergency Economic Stabilization Act of 2008. Also attached at bottom of this post. TARPAYO08C04.pdf.

Update3:: Bill Attached appears to be the latest draft but there are now reports that a new draft will be released this evening. The version of this draft is AYO08B94. From some internal Network Drive somewhere in D.C.: O:\AYO\AYO08B94.xml

Update2: - Actual Bill Draft Attached. Click here for download. Also attached at bottom of post.

Update:  From Calculated Risk, reposted here:

 

On suspending Mark-to-Market:

SEC. 132. SUSPENSION OF MARK-TO-MARKET ACCOUNTING.
(a) AUTHORITY.—The Securities and Exchange Commission shall have the authority under securities laws (as such term is defined under section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)) to suspend, by rule, regulation, or oder, the application of Statement Number 157 of the Financial Accounting Standards Board for any issuer (as such term is defined in section 3(a)(8) of such Act) or with respect to any class or category of transaction if the Commission determines that is necessary or appropriate in the public interest and is consistent with the protection of investors.

And on allowing banks to earn interest and maintain a "zero reserve ratio":

SEC. 128. ACCELERATION OF EFFECTIVE DATE.
Section 203 of the Financial Services Regulatory Relief Act of 2006 (12 U.S.C. 461 note) is amended by striking ‘‘October 1, 2011’’ and inserting ‘‘October 1, 2008’’.

Here is the previous text (hat tip Falcor):

Financial Services Regulatory Relief Act of 2006 - Section 203.

"Interest on Reserves and Reserve Ratios

"Federal Reserve Banks are authorized to pay banks interest on reserves under Section 201 of the Act. In addition, Section 202 permits the FRB to change the ratio of reserves a bank must maintain relative to its transaction accounts, allowing a zero reserve ratio if appropriate. Due to federal budgetary requirements, Section 203 provides that these legislative changes will not take effect until October 1, 2011."

Here are some parts on pricing mechanism:

(d) PROGRAM GUIDELINES.—Before the earlier of the end of the 2-business-day period beginning on the date of the first purchase of troubled assets pursuant to the authority under this section or the end of the 45-day period beginning on the date of enactment of this Act, the Secretary shall publish program guidelines, including the following:
(1) Mechanisms for purchasing troubled assets.
(2) Methods for pricing and valuing troubled assets.
(3) Procedures for selecting asset managers.
(4) Criteria for identifying troubled assets for purchase.

So it's all up to the Secretary to establish the rules. Same with Warrants - it's up to the Secretary to negotiate.

Here is the section on transparency:

SEC. 114. MARKET TRANSPARENCY.
(a) PRICING.—To facilitate market transparency, the Secretary shall make available to the public, in electronic form, a description, amounts, and pricing of assets acquired under this Act, within 2 business days of purchase, trade, or other disposition.

(b) DISCLOSURE.—For each type of financial institutions that is authorized to use the program established under this Act, the Secretary shall determine whether the public disclosure required for such financial institutions with respect to off-balance sheet transactions, derivatives instruments, contingent liabilities, and similar sources of potential exposure is adequate to provide to the public sufficient information as to the true financial position of the institutions. If such disclosure is not adequate for that purpose, the Secretary shall make recommendations for additional disclosure requirements to the relevant regulators.

 

Thank you Calculated Risk for the original pdf is corrupted!

 

Supposedly a deal was reached on the bail out. The Wall Street Journal is reporting. Yes, $700B, limits on executive pay, equity stakes, possible insurance and a time limit on making the money back and then getting it back from the private financial sector. So, we have a scenario of sure you can get the money back if it doesn't work out for you in 5 years or so, sure thing. The main:

The plan calls for the Treasury Department to buy deeply distressed mortgage-backed securities and other bad debts held by banks and other investors. The money should help troubled lenders make new loans and keep credit lines open. The government would later try to sell the discounted loan packages at the best possible price

Fox News published Bail out Text, reprinted below....

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

Office of Speaker Nancy Pelosi – September 28, 2008

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Not quite

The so called protections, securities, etc... are only for "some" banks/investment houses. Foreign banks, etc.. for example, will be able to avail themselves of the bailout without having to comply with any oversight, or having to allow the US to aquire a stake in what they're bailing out. Nor will they have to comply with restrictions on salaries/golden parachutes. 5 banks in the UK alone are planning on claiming 25% of the proposed 700bn.

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wow do you have references?

I can completely believe, especially because foreign capital has been keeping the US afloat for some time that this is true, but do you have references on the estimates of how much will be going to foreign banks?

(don't ya love this old story dressed up as a new story called globalization....more like let's turn the US into a S. Am. 3rd world financial disaster zone, now will the world bank loan us money at some sort of extortion rates?)

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Well........

I think it will depend a great deal on which companies sell assets, but consider the ownership at AIG. (You can check ownership for any stock at Yahoo fiance under Company Profile>Ownership>Major Holders.

So we can see that the UK's Barclay's has almost 95 million shares valued at close to $2.5 billion on the 30th of June. Now that the stock has collapsed and is valued at $3.18 share, that value has fallen to just over $302 million. An almost 90% drop in value in not so many days.

Barclay's lost the equivalent of its net income from the 2nd quarter of 2008 in this one instance alone. Foreign ownership is the norm. Barclay's also had their hand in at Lehman Brother's.

A lot of this cash is going to head overseas, not stay in the US.

And some of the courters for failed US banks are going to be European. Spanish banks in particular seem to be eying an entry into the US market. Banco Santander and BBVA in particular. Spain's in the middle of real estate decline too, but there's a lot of Spanish money that's finding it hard to head to South American like it used to. So they've discovered the United States.

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I keeping remembering a quote

Price

is an important question in this deal. Also what are we buying.

Are we buying bad loans to balance the financial companies books? If so at what discount rate are we getting the asset?

Getting a loan at 60 cents on the dollar, and then passing those savings onto the mortgage holder in the form of a cut in monthly payments means that we can do two things.

1) Limit losses to the financial companies, and (hopefully) restore liquidity to credit markets.

2) Limit the collateral damage of keeping millions of people onto the street.

The United States government can give money to the companies now so that can exchange an asset for money now.

I would prefer to see an outright nationalization at market prices.

The current market cap of AIG is $8.47 billion. On September 8th it was over $61 billion.

If we pay the current market price, and offer a premium matching the Sept 8th price up to $100,000 per person including fractional ownership through mutual funds, then we might be headed someplace.

I think however, that the idea is to just pour in good money after bad.

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Going fer Burgers

I have to step out so I'm hoping others read the actual bill text (believe me, more nasties get buried in legalize and they can be stuck in there in non-published amendments, "managers" amendments, conferees, ya name it, most often per the demands of lobbyists!)

for it's over 160 pages. That said, last I saw in analysis and from my first scan it appears that Paulson has absolute control over pricing...i.e. not a damn thing is changed (which is one of the biggest issues from economists from "all schools of thought".

Happy reading!

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Bailout Scam

The new language promises that the taxpayers are repaid in full....if other protections have not actually produced a profit?

What other protections????

Who will guarantee the repayment to the taxpayers...the Chinese? The Petro-Rich Russians? The Saudis. A mere $700 Billion? Future taxpayers?

Who in the hell do these scam artists think they are, to pull the wool over our eyes so obnoxiuosly?

Did anyone notice, in the original bailout draft of 21 September is mentioned extending the National Debt to $11.315 Trillion. Not a word about this in Pelosi's release.

Who will pay off this debt? At 5%, this represents an annual interest rate of $565 Billion; at 4% $452.6 Billion

Fred Teeboom
Nashua, NH
603-889-2316

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THANK YOU

Thank you, I am so glad I am not the only person wondering where the hell they are going to get this "Guaranteed Repayment" from?

Call me Naive, but I would like to know, in the simplest format possible, EXACTLY what their entire plan is start to finish. I would be willing to bet, based on some of the other brilliant decisions made by the government, that if they put it in it's simplest form and propose it that way, there will be a lot more opposed.

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A small detail...

The price? Will the banks be force to take some losses now?

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just posted

I'm sure everyone is grabbing the bill as fast as they can get it but in this first scan by me, it sure appears that it's all up to Paulson in terms of pricing the assets...
(not lookin' good for them to take a loss in other words).

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Acorn/La Raza

I know this is going like wildfire through the blogs that the Democrats tried to redirect 20% of this money to La Raza and Acorn.

I have looked through this latest draft and that funding appears to be removed.

This clause confirms:

(d) TRANSFER TO TREASURY.—Revenues of, and
proceeds from the sale of troubled assets purchased under
this Act, or from the sale, exercise, or surrender of warrants or senior debt instruments acquired under section 113 shall be paid into the general fund of the Treasury for reduction of the public debt.

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Wondering if Homeowners get Bailed Out? Hell no.

There is nothing in here to modify the bankrupty laws to enable renegotiation of mortages on primary residences and simply defers to the previous act which was counseling....yes millions of taxpayer dollars to explain to you how you are fucked.

Aren't you glad all of those taxpayer dollars go to counseling instead of the real problem...you need mo' money!.

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bailout/takeover

mickwd1
minuteman justice
I just finished reading the first twenty pages of the bill.
That was enough. I don't care how much intervention occurred with any opposition to the original plan, but the manner in which this sits presently is wrought with potential malfeasence, manipulation, and impropriety, and the language in which this proposal is defined, wreaks of an underlying motive by those whom the plan places in control.
For everyone's best interest, this thing must not succeed nor pass. Please, everyone, make the call to your representative and demand that this not succeed.

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mickwd1

bailout/takeover

mickwd1
minuteman justice
NO BAILOUT
NO TAKEOVER

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mickwd1

hello mickwd1

This is an "all things economic site". While we'll talk about immigration related issues, but only from some very solid statistics and in terms of economics....

the minutemen is a little outside the scope of this blog.

Most of us really question this even working and don't think it's a good plan by that's by analysis primarily.

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doesn't really limit executive pay

Says basically new pay cannot be issued while the Treas. Secretary holds an asset and also just says a "payment cannot be made" but only while an asset is in holding. There also appear to be significant other loopholes so I don't get the impression it would stop any pre-negotiated agreements...which every executive puts into place before they even accept the job.

It looks like swiss cheese, highly limited, at minimum surely not this advertised claim that the executives are not going to get their large sums of money.

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robert oak

mickwd1
minuteman justice
Mr. Oak,
Just read your reply to a previous post of mine - been away.
I apologize if I missed your point, and/or if I am incorrect in surmising that your comment makes absolutely no sense to me.
I am courious when you became a moderator of content, and when or why it was you who decided what will work or what is or is not within the scope of this site?
I am not able to comment on your thought, because your comment was not exactly coherent.
But, since you point out that this site is an economic site, let me point out that the bill I was referring to was, excuse me, an economic bill, was it not?
And I must say, in retort, if all you are concerned about is the executive pay poriton of the bill, maybe I should suggest you re-read the bill and make an attempt to grasp the real concern with it.
Thank you.
Respectfully, sir.

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mickwd1

uhhhh

I am the owner, administrator as well as one of the main bloggers who write on the site.

There are many here who are making the site high quality and creating a community blog, but we're all pretty clear and one can tell by our writings that we are only focused on all things $$ related.

My comment is perfectly clear and the rules are stated in the FAQ.

You're welcome to comment but we're asking you to respond to the issues at hand, that's all. the site is non-partisan but the minutemen is one of those controversial issues and we don't want to go there, especially because it's not what this site is about.

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mickwd1 minuteman

mickwd1
minuteman justice
Sir,
I am not quite clear on your assessment of "the minuteman". What is it exactly you perceive the "minuteman" to be?
FYI, minuteman justice is merely a "nickname" I use to blog with. If you perceive this nickname to represent something other, you, sir, are certainly off the mark.
Let me make myself quite clear to you if that is necessary.
My intentions are to comment only on the issues that appear on your site, and I believe that I have done only that, and that included nothing out of the context or outside the content that had already been written on the site.
If you misunderstood my intentions or meaning, due to something I may have authored on your site, then I apologize. However, that is not the case. On the other had, if you have insinuated that I or my insight may represent something unsavory, without first asking me, and with first clarifying your assumptions, I would expect an apology instead.
I hope to be able to offer some interesting insight to your site without further insult to the nature of my intentions or comments.
Thank you, sir.
Respectfully,
Minuteman Justice.

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mickwd1

there are two groups

The Minutemen Project and the Minutemen Civil Defense Corps. As already most politely implied, this site is on economics, trade, middle class issues and we will talk about illegal immigration, but only in terms of labor economics, wages and globalization.

There are people on this site with the entire spectrum of thought on this topic but I'd say the goals are all pretty much about raising up middle classes even when we may disagree on what does what. The site is about analyzing what does what but only from an economics viewpoint.

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mickwd1 minuteman justice As

mickwd1
minuteman justice
As I will politely emphasize I am not affiliated with nor promote either of these groups' interests nor am I even familiar with their organizations. I am not certain what I may have stated that would have led you to be of the opinion that I did.
I do not have any opposition to limiting my comments to economic issues, which is precisely what I was addressing in my comment that apparently started this wastefull dialogue. You have made your point, without contest and without objection, but I would hope in the future that my pen name has no bearing on the content nor context of my economic comments, just as yours would not. May we please, put this issue to bed if you are in agreement?
I appreciate your time and insight.
Respectfully, sir

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mickwd1

Repeating earlier reply

Robert- I think you're off on a tangent here. One admittedly caused by mickwd1's use of "miniuteman justice" as a byline, but he's yet to post the common agenda here, at least divorced from the economics of the matter.

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-------------------------------------
Maximum jobs, not maximum profits.

adsf

Fine by me, as long as he's aware that's the "illegal immigration invasion" rallying cry slogan. He says it means something else, fine by me. It does also stand for a group of comic book characters and a host of other things.

I'm done with the topic. There are certain "wedge" issues that I am hyper vigilant on because they will tear apart a blog and a consensus in rapid fire...and this is one of them.

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no more minuteman justice

mickwd1
In order to appease yours, or anyone else who may find some discomfort in the use of my by-line, "minuteman justice", I have eliminated its presence. While I prefer the topic to be history, I cannot help to still feel that something I stated was misinterpreted, or worse, that there is some confusion regarding a comment. Robert, you continue to reference the immigration issue. I have never commented on an immigration issue in my limited dialogue on this site.
I hope we can overcome this misunderstanding and move along with more insightful and helpful commentary. And, I appreciate any moderation by others on this topic.
Thank you.
Respecfully, sors

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mickwd1

ok

that's probably a good idea for as you can see why the original comment, if you don't know who the minutemen are...well, ya do now.

Ok, let's all move on and get to what's happening on the economics front. There are hearings going on at the hill, most of it useless corporate driven testimony but a few gems.

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