UPDATE 2: Shortly before 2 p.m., it was revealed that the House of Represenatives falied to pass the Emergency Economic stabilisation Act., getting 202 votes compared to the 218 needed. Eight votes are still left to be counted. The stock market dropped dramatically on the news, once again suggesting that lawmakers should probably APPROVE THE DEAL.
UPDATE: The deal is sealed and now it’s votin’ time! Congress is expected to vote anytime after 12:30 today. President Bush went on TV this am to urge them to act quickly.
WSJ: The White House and congressional leaders agreed on a deal to authorise the biggest banking rescue in U.S. history.
The $700 billion program would effectively nationalize an array of mortgages and securities backed by them — instruments whose deteriorating value has clogged the nation’s financial system.
Lawmakers finished writing the bill late Sunday, after which Speaker of the House Nancy Pelosi declared it “frozen,” meaning no changes would be made. The bill leaves many mechanics of the operation up to the Treasury. Among these are the crucial issues of how the U.S. government would decide which assets it will buy and how it would decide what to pay for them. The legislation leaves the Treasury 45 days to issue guidelines on those procedures. The bill awaits votes in Congress starting on Monday.
EARLIER: When Congress adjourned Thursday night without a bailout deal in place, we thought it was kind of weak of them not to spend the night the way they did a few years ago when they were debating an Iraq War bill and set up cots in their offices.
Apparently, they were willing to pull an all-nighter on Saturday night, because early Sunday they announced that they’d reached a bailout deal—in principle.
NY Times: Congressional leaders and the Bush administration reached a tentative agreement early Sunday on what may become the largest financial bailout in American history, authorizing the Treasury to purchase $700 billion in troubled debt from ailing firms in an extraordinary intervention to prevent widespread economic collapse.
Officials said that Congressional staff members would work through the night to finalise the language of the agreement and draft a bill, and that the bill would be brought to the House floor for a vote on Monday.
The bill includes pay limits for some executives whose firms seek help, aides said. And it requires the government to use its new role as owner of distressed mortgage-backed securities to make more aggressive efforts to prevent home foreclosures.
In some cases, the government would receive an equity stake in companies that seek aid, allowing taxpayers to profit should the rescue plan work and the private firms flourish in the months and years ahead.
The White House also agreed to strict oversight of the program by a Congressional panel and conflict-of-interest rules for firms hired by the Treasury to help run the program.
And how exactly will the $700 billion be divided up?
The money will disbursed in parts, with an initial $250 billion to get the rescue effort under way, followed by another $100 billion upon a report by Mr. Bush to Congress.
The president could then request the balance of $350 billion at any time. If Congress disapproved, it would have to act within 15 days to deny the Treasury the money.
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