Office of Speaker Nancy Pelosi -- Sept. 28, 2008
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
Note some obvious flaws:
* No salary caps for executives of firms that take taxpayer money.
* Vague language around taxpayers getting equity; my guess is that many firms would get taxpayer money without giving up equity.
* Automatic additional funding unless blocked by a supermajority. If this is a bipartisan solution, why not require affirmative Congressional action for additional funds?
There is still time to press the rank-and-file to fix this stuff. Investment advisor Mike Shedlock says to hit the switchboard!
There is a bill in the house. There is not one in the Senate so we need to create as much doubt as we can, as soon as we can..
Do they have the votes? That is another story. They won't if we can scare every junior member in the house, or appeal to the right few in the Senate.
There are still changes worth getting. So let's get them