Since the failure of the rescue bill, i have been privately imploring friends on The Hill to provide a viable alternative. Looks like they are crafting just that.
I like a lot of the provisions under consideration. I wonder if it could pass without “Christmas Tree” add-ons from the Left. Here are key provisions:
* Require the Treasury Department to guarantee, at up to 100 percent, bank losses resulting from failed mortgage-backed securities originated prior to the plan’s enactment. Such insurance, supporters say, would provide immediate value to the securities and a foundation for which they could then be sold. The Treasury Department would finance that insurance by assessing a premium on outstanding mortgage-backed securities.
* Allow companies to carry back losses arising in tax years ending in 2007, 2008, or 2009 back five years, generating a tax refund and immediate capital
* Allow a “repatriation window” for profits earned by U.S. firms overseas. Such repatriation amounts would not be taxed if invested in distressed debt (as defined by Treasury) for at least one year.
* Allow banks to treat losses on shares of preferred stock in Fannie Mae and Freddie Mac as ordinary losses, not as capital losses
* Suspend the capital gains tax rate for two years
* Limit backing of high-risk loans by Fannie Mae and Freddie Mac
* Schedule Fannie and Freddie for privatization
* Suspend “mark-to-market” accounting until the SEC can issue new guidelines that will allow firms to mark these assets to their true economic value
* Stabilize the dollar by repealing the Humphrey-Hawkins Full Employment Act, which alternative bailout supporters say diverts the Federal Reserve’s attention from long-term price stability to short-term economic growth
* Require the Treasury to write rules prohibiting excessive compensation or golden parachutes to executives of failed companies
* Task the SEC with regular, annual audit reports of entities the federal government has brought under conservatorship or now owns
If the bill comes up with the above provisions, I bet the bill passes overwhelmingly. AND the stock market would shoot straight up. Go John McCain!
What the Congressional supporters of this bill fail to comprehend is that this bill bails out Wall Street AND Chris Dodd, Barney Frank, Nancy Pelosi, Harry Reid and the fiscally irresponsible unpopular President.
Tell me again why the House GOP should support this bill? And I write this as someone who supports its passage. If it’s that obvious to me, how freaking blind are Congressional leaders?
The devil will be in the details (and I haven’t seen the final bill), but if the provisions below are true, this bill will be a good compromise. From The Corner:
1. No ACORN money: All money goes to debt reduction
2. No blank check: Treasury is required to develop an insurance program
3. No union power grab: Dodd-Frank permitted unions to force themselves into the board room. This proposed compromise eliminates that.
4. No “cram down” bankruptcy provision (aka, trial bar giveaway):
5. No tax hikes: The proposed compromise simply requires a proposal to Congress to recoup any potential losses.
Note: Here is the office of Roy Blunt’s side-by-side comparison of a) The original Paulson Plan, b) the Dodd-Frank bill, and c) the final bill (according to Blunt).
This final bill is looking much better than the original iterations.
Michael Barone has the scoop on how to get this rescue plan done. Alter the plan so it is insuring tax-payers against Wall Street excesses and not bailing out Wall Street and you can get a deal done:
What do House Republicans want? A senior House Republican gave me and some other reporters a look yesterday at what a working group headed by Assistant Minority Whip Eric Cantor is demanding. The senior House Republican (hereinafter SHR) has what sounded to me like an ingenious approach. He cited Ginnie Mae loans to low-income borrowers, which the government can insure. He proposed that the government (presumably through the entity envisioned by the Paulson plan) offer to sell insurance to financial institutions that hold mortgage-backed securities (hereinafter MBS). Premiums would be determined by the rates of foreclosure on each class of securities so far. Under this plan, the government would be taking in money, not paying it out. Of course, if the premiums are not enough to cover losses, the government might eventually take losses, as it did when the savings and loan industry collapsed. But losses don’t seem inevitable and in any case will mostly occur in out-years, not now.
[Would] House Republicans would go along if Paulson pledged to use authority in the statute to set up an insurance program within a month of passage. “That would go far toward convincing [Republican] members.”
As one of the few people that actually understands the inner-workings of these banks and what needs to get done to avert disaster, I like this plan. A deal needs to get done, but Paulson and the Democrats need to take a few more steps closer to tax-payer protection to get the deal done. It’s that simple.
