Mortgage Bailout Plan
The mortgage bailout plan is a bill pledging over $700 billion to the ailing financial markets. Officially called the Emergency Economic Stabilization Act of 2008, the plan was approved by the U.S. Senate on October 1 and the House of Representatives on October 3.1
The bill was initially rejected by the House on September 29. The revised bill that was passed includes several revisions, including some that critics--including John McCain--have assailed as earmarks.2
Fast Facts
- House approved bill on October 3, 2008
- House vote: 263-171
- Senate approved the bill on October 1, 2008
- Senate vote: 74-25
- Plan proposed by the White House on September 20, 2008
- Purpose: To make banks more willing to lend by removing their toxic debts3
- Long-term cost of plan is unknown3
- September 28, 2008: "Emergency Economic Stabilization Act" (2008) drafted3
Announcement That Deal Was Made
House Speaker Nancy Pelosi announced that a deal had been reached on the proposed $700 bailout of the ailing financial markets, just after midnight EST on September 28, 2008.4 Pelosi said Democrats and Republicans in Congress had reached an informal agreement that would soon be made official.4
Basic Bailout Outline
In its basic outline, the plan calls for the government to buy the worst mortgage-related assets, known as "toxic debt," while raising the U.S. national debt limit and calling a temporary halt to the practice of short selling on certain financial stocks.5 Both Democratic and Republican lawmakers had criticized the original plan, as proposed by the Bush administration, in its scale and lack of safeguards for homeowners at risk of foreclosure.6 7
Bush Plea
On September 30, President Bush urged members of Congress and the general public to support the bailout plan and warned that savings accounts, personal retirement accounts and pension funds could be effected if action was not taken soon.8
Emergency Economic Stabilization Act 2008
The result was a bill called the "Emergency Economic Stabilization Act" (2008).3 The deal includes a measure that makes the government a stakeholder in companies they bailout, allowing recovery of taxpayer money if those companies grow in the future. The bill also recommended limits on executive compensation.9
Bailout Details
- Move mortgage-related debt from U.S. banks and onto the U.S. government
- Increase the U.S. national debt limit from $10.615 trillion to $11.315 trillion
- Treasury department will hire asset managers10
- Purchases would include residential and commercial mortgages and related instruments which originated or were issued before September 17, 200810
- Authority to purchase bad debts ends in two years; authority to hold the assets continues indefinitely10
- Short selling of 799 financial stocks stopped for at least 30 days5
- Investment banks to become bank holding companies, subject to tighter regulation 11
- Hedge funds not eligible10
First Steps
Initial steps in the plan developed by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke include a $50 billion program to stabilize money market mutual funds, insuring up to $2 trillion of those funds. The Fed will engage in lending and purchases practices up to $300 billion to prop up Fannie Mae and Freddie Mac. 5
Objections
Members of Congress had some objections to the plan. Some Republicans were concerned about the initial price tag which will increase the national debt and potentially burden generations of taxpayers.5 Some Democrats were concerned that help is being offered to financial companies that bet on the foreclosures but not the people who lost their homes, and that no additional safeguards or oversight had been proposed.5
Revisions
Major revisions added in the Senate's version of the bill include $100 billion in tax cuts for businesses and the middle class, and a boost in the level of federal insurance for bank deposits from $100,000 to $250,000. 12
Latest News on the Financial Crisis
Treasury Department investing $250 billion in banks
$700B bailout bill passes Congress
FDIC recommends hike
Bailout bill text
Emergency Economic Stabilization Act of 2008
Related Pages on Mahalo
Bailout Bill Passes | Emergency Economic Stabilization Act of 2008 | Bailout Bill Text | Black Monday 2008 | 2008 Economic Stimulus Plans | Bush Tax Rebate 2008 | 2008 Recession | Subprime Mortgage Crisis | 300 Billion Dollar Mortgage Bill | High-Risk Mortgages | Subprime Mortgage Bailout | Short Selling Ban | Henry Paulson | Ben Bernanke | Bill Perkins Ad | Paul Kanjorski | Buy My Shitpile | Pelosi Bailout Speech | Office of Financial Stability | National Debt Clock| 250 Billion Bank Investment Plan | Andrew Lahde
- ↑ MarketWatch: House Readies for Second Bailout Vote Friday (October 3, 2008)
- ↑ Politico: McCain decries bailout earmarks
- ↑ 3.0 3.1 3.2 3.3 CNN Money: Big bailout: Where things stand (September 20, 2008)
- ↑ 4.0 4.1 Breitbart: Deal reached on financial markets bailout (September 28, 2008)
- ↑ 5.0 5.1 5.2 5.3 5.4 Los Angeles Times: Economic bailout plan ... (September 20, 2008)
- ↑ Forbes: Your Guide To The Bailout Debate (September 24, 2008)
- ↑ Forbes: Your Guide To The Bailout Debate (September 24, 2008)
- ↑ Forbes.com: Can Bush Get His Bailout Done? (September 30, 2008)
- ↑ Market Watch: Bailout bill unveiled, heads to House (September 28, 2008)
- ↑ 10.0 10.1 10.2 10.3 Washington Post: Congress gets $700 billion financial bailout plan (September 20, 2008)
- ↑ LA Times: Fed jumps in for Wall St. again (September 22, 2008)
- ↑ Los Angeles Times: Senate approves bailout after revisions, 74-25 (October 2, 2008)
Categories