Monday, September 29, 2008

The Emergency Economic Stabilization Act of 2008

Thanks to more than three days of negotiations that were sometimes strained, Speaker of the House Nancy Pelosi announced Sunday afternoon that the bill was all but complete.

The Emergency Economic Stabilization Act of 2008, backed in principal by President George W. Bush and the two presidential candidates, features taxpayer guarantees and caps on executive compensation.

The House is expected to vote on the bill on Monday (appropriation bills must start in the house) with the Senate voting on Wednesday (Tuesday is the start of the Jewish holiday Rosh Hashana).

The act directs the U.S. Treasury to establish a troubled asset relief program (TARP) to purchase and make fund commitments to purchase troubled assets from any financial institution. The initial funding to start the plan is $250 billion with the Treasury then being able to ask Congress for another $100 billion. The final $350 billion would be available upon an action by Congress.

In a landmark move, the legislation calls for a provision to recover any bonuses or incentive compensation paid to any senior executive based on the statements of earnings that are later proven inaccurate. "It will be the first time in American history that there will be legislative restrictions on CEO compensation," said Barney Frank, D-Mass., chairman of the House Financial Services Committee.

The bill also requires that the president propose legislation to recoup losses from the financial services industry if the rescue plan leads to net losses for taxpayers five years after the plan is put in place.

The deal comes 10 days after Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke announced the plan to ease the nation’s financial crisis.

"I am confident Congress will do what is best for our economy by approving this legislation promptly," President Bush said in a statement today in Washington.

Sources: Investment News, Reuters, Yahoo, Bloomberg

1 comment:

Jamie Turner said...

Can our friends at Rollins please explain how on earth the "geniuses" in Washington are allowing this to happen? What's up with those guys? I thought the deal was done!