Update (3:30 p.m.): Apparently the bill under consideration will grant the Federal Reserve new powers to fix interest rates.
“The draft bill gives Fed authority as of Oct. 1 to pay interest on reserves held at the central bank by financial institutions, according to a copy obtained by Bloomberg News. That would encourage banks to deposit excess funds with the Fed rather than dumping them into the money markets and distorting its overnight federal funds rate,” Bloomberg says.
Update (3:20 p.m.): Uh-oh. While the House is likely to vote on the bailout tomorrow, the Senate may not vote until Wednesday, Reuters is reporting. At issue is the requirement that spending bills originate in the House, and the coming Jewish holiday, which begins at sundown on Monday and ends at sundown on Tuesday.
Judd Gregg says that there won’t be a delay, however, and reiterates that the Senate will vote tomorrow.
Also, we’re hearing that the initial tranche of bailout bucks for the Treasury will only be $250 billion, not the $350 billion that has been widely reported.
Update (3:04 p.m.): An exhausted Republican Senator Judd Gregg justice spoke to reporters. His nose was running so badly he had to wipe it with a tissue. He stumbled over his words, and seemed at pains to maintain his train of thought as he explained the bailout plain and the logic behind buying troubled mortgage backed securities.
“If we do not pass this, we shouldn’t be a Congress,” he said.
Meanwhile, conservative Republican House members seem to be organising against the bailout. They’ve organised a meeting immediately following the briefing by party leaders.
Indiana’s Mike Pence has written a letter to his House colleagues explaining why he opposes the bailout.
It’s still unclear how broad Republican opposition might be. Keep in mind, however, that Democrats control the House and can pass the bailout over any level of Republican opposition. The main reason Republican House members are playing such a pivotal role in this process is that the Democrats want the Republicans to provide political cover for passage of this deeply unpopular Wall Street bailout. They are insisting on a bipartisan vote for the bailout. Would the Democrats prefer to protect partisan interests even if it meant not passing the bailout bill? That seems highly unlikely. But once again it looks like we’re in a game of chicken, with both sides waiting for the other to backdown.
Update (1:50 p.m.): Never mind the speeches from the people who aren’t supporting the bailout regardless of what shape it takes. The real action is behind the scenes, and centres around Eric Cantor, the number three Republican in the House.
Cantor, who drafted the Republican insurance plan, was still voicing doubts about whether there was a deal when he appeared this morning on CNN’s Late Edition.
“We are not ready to say that a deal is done,” Cantor said.
Officially, Cantor is holding out because he says he hasn’t seen a draft of the bill yet. But on Capitol Hill many suspect that House Republicans may still be looking for a way to vote against the bailout. A source tells us the Democrats may have overplayed their hand by giving so much credit to House Speaker Nancy Pelosi for the breakthrough. This could have alienated Cantor’s cadres, who were hoping John McCain would get credit for an “improved bailout.” (A side note: Cantor was closely considered as a possible running mate by John McCain.)
Update (1:30 p.m.): Dissenting congressmen lashed out against the tentative bailout agreement this morning, as the House opened it’s Sunday session, Politico reports. But since none of the lawmakers delivering the one minute “tirades” were expected to back the plan anyway, this isn’t expected to slow plans to get a bill passed tomorrow.
Update (10:00 a.m.): Nancy Pelosi’s office has released a summary of the deal. Full text below.
Congressional leaders and Treasury Secretary Hank Paulson emerged a half hour after midnight to announce that they had reached an agreement on the Wall Street bailout. Apparently the break through came when Nancy Pelosi came up with some idea no one had ever heard of.
What idea? Apparently they are keeping it secret for now!
Speaking before a gaggle of Capitol Hill media, the negotiators declined to provide any details about the agreement. All we know is that Nancy Pelosi said that the “package” would stabilise the markets, protect the US taxpayers, provide for “equity in the upside,” include oversight, forebearance in terms of mortgage foreclosures and limits on executive compensation. Also, sources say the initial amount available under the bailout will be $350 billion. The additional $350 would become available later, perhaps after further Congressional action.
Apparently many of the details still need to be worked out. Already staffers for lawmakers are backing away from the notion that this is a final agreement, describing it as a “framework” for an agreement. So it’s like a term sheet, we guess. Hank Paulson sounded a cautionary note when he described the current status as “so far, so good.”
Staffers are supposed to be putting the agreement on paper, and the expectation is that details will be released sometime tomorrow. But look out for leaks before then! The negotiators will also have to go back to their fellow lawmakers to seek approval. Keep in mind that there’s many a slip twixt cup and lip.
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 stabilise 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 stabilise 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
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