Breakdown of the final bailout bill!
WASHINGTON - September 28, 2008 - Section-by-section
breakdown of the "Emergency Economic Stabilization Act of 2008,"
otherwise known as the $700 billion Wall Street bailout bill.
The 106-page bill established
sweeping powers for Treasury Secretary Hank Paulson, and his successor, in
carrying out what the bill calls the "Troubled Asset Relief Program,"
whose acronym is TARP.
SECTION-BY-SECTION ANALYSIS OF THE
LEGISLATION
Section 1. Short Title.
"Emergency Economic Stabilization Act of 2008."
Section 2. Purposes.
Provides authority to the Treasury Secretary to restore liquidity and stability
to the U.S. financial system and to ensure the economic well-being of
Americans.
Section 3. Definitions.
Contains various definitions used under this Act.
Title I. Troubled Assets Relief Program.
Section 101. Purchases of
Troubled Assets.
Authorizes the Secretary to establish a Troubled Asset Relief Program
("TARP") to purchase troubled assets from financial institutions.
Establishes an Office of Financial Stability within the Treasury Department to
implement the TARP in consultation with the Board of Governors of the Federal
Reserve System, the FDIC, the Comptroller of the Currency, the Director of the
Office of Thrift Supervision and the Secretary of Housing and Urban
Development.
Requires the Treasury Secretary to establish guidelines and policies to carry out the purposes of this Act.
Includes provisions to prevent unjust enrichment by participants of the program.
Section 102. Insurance of
Troubled Assets.
If the Secretary establishes the TARP program, the Secretary is required to
establish a program to guarantee troubled assets of financial institutions.
The Secretary is required to establish risk-based premiums for such guarantees sufficient to cover anticipated claims. The Secretary must report to Congress on the establishment of the guarantee program.
Section 103. Considerations.
In using authority under this Act, the Treasury Secretary is required to take a
number of considerations into account, including the interests of taxpayers,
minimizing the impact on the national debt, providing stability to the
financial markets, preserving homeownership, the needs of all financial
institutions regardless of size or other characteristics, and the needs of local
communities. Requires the Secretary to examine the long-term viability of an
institution in determining whether to directly purchase assets under the TARP.
Section 104. Financial Stability
Oversight Board.
This section establishes the Financial Stability Oversight Board to review and
make recommendations regarding the exercise of authority under this Act. In
addition, the Board must ensure that the policies implemented by the Secretary
protect taxpayers, are in the economic interests of the United States, and are
in accordance with this Act.
The Board is comprised of the Chairman of the Board of Governors of the Federal Reserve System, the Secretary of the Treasury, the Director of the Federal Home Finance Agency, the Chairman of the Securities and Exchange Commission and the Secretary of the Department of Housing and Urban Development.
Section 105. Reports.
Monthly Reports: Within 60 days of the first exercise of authority under this
Act and every month thereafter, the Secretary is required to report to Congress
its activities under TARP, including detailed financial statements.
Tranche Reports: For every $50 billion in assets purchased, the Secretary is required to report to Congress a detailed description of all transactions, a description of the pricing mechanisms used, and justifications for the financial terms of such transactions.
Regulatory Modernization Report: Prior to April 30, 2009, the Secretary is required to submit a report to Congress on the current state of the financial markets, the effectiveness of the financial regulatory system, and to provide any recommendations.
Section 106. Rights; Management;
Sale of Troubled Assets; Revenues and Sale Proceeds.
Establishes the right of the Secretary to exercise authorities under this Act
at any time. Provides the Secretary with the authority to manage troubled
assets, including the ability to determine the terms and conditions associated
with the disposition of troubled assets. Requires profits from the sale of
troubled assets to be used to pay down the national debt.
Section 107. Contracting
Procedures.
Allows the Secretary to waive provisions of the Federal Acquisition Regulation
where compelling circumstances make compliance contrary to the public interest.
Such waivers must be reported to Congress within 7 days. If provisions related
to minority contracting are waived, the Secretary must develop alternate
procedures to ensure the inclusion of minority contractors.
Allows the FDIC to be selected as an asset manager for residential mortgage loans and mortgage-backed securities.
Section 108. Conflicts of
Interest.
The Secretary is required to issue regulations or guidelines to manage or
prohibit conflicts of interest in the administration of the program.
Section 109. Foreclosure
Mitigation Efforts.
For mortgages and mortgage-backed securities acquired through TARP, the
Secretary must implement a plan to mitigate foreclosures and to encourage
servicers of mortgages to modify loans through Hope for Homeowners and other
programs. Allows the Secretary to use loan guarantees and credit enhancement to
avoid foreclosures. Requires the Secretary to coordinate with other federal
entities that hold troubled assets in order to identify opportunities to modify
loans, considering net present value to the taxpayer.
Requires federal entities that hold mortgages and mortgage-backed securities, including the Federal Housing Finance Agency, the FDIC, and the Federal Reserve to develop plans to minimize foreclosures. Requires federal entities to work with servicers to encourage loan modifications, considering net present value to the taxpayer.
Section 111. Executive
Compensation and Corporate Governance.
Provides that Treasury will promulgate executive compensation rules governing
financial institutions that sell it troubled assets. Where Treasury buys assets
directly, the institution must observe standards limiting incentives, allowing
clawback and prohibiting golden parachutes. When Treasury buys assets at
auction, an institution that has sold more than $300 million in assets is
subject to additional taxes, including a 20% excise tax on golden parachute
payments triggered by events other than retirement, and tax deduction limits
for compensation limits above $500,000.
Section 112. Coordination With
Foreign Authorities and Central Banks.
Requires the Secretary to coordinate with foreign authorities and central banks
to establish programs similar to TARP.
Section 113. Minimization of
Long-Term Costs and Maximization of Benefits for Taxpayers.
In order to cover losses and administrative costs, as well as to allow
taxpayers to share in equity appreciation, requires that the Treasury receive
non-voting warrants from participating financial institutions.
Section 114. Market Transparency.
48-hour Reporting Requirement: The Secretary is required, within 2 business
days of exercising authority under this Act, to publicly disclose the details
of any transaction.
Section 115. Graduated
Authorization to Purchase.
Authorizes the full $700 billion as requested by the Treasury Secretary for
implementation of TARP. Allows the Secretary to immediately use up to $250
billion in authority under this Act. Upon a Presidential certification of need,
the Secretary may access an additional $100 billion. The final $350 billion may
be accessed if the President transmits a written report to Congress requesting
such authority. The Secretary may use this additional authority unless within
15 days Congress passes a joint resolution of disapproval which may be
considered on an expedited basis.
Section 116. Oversight and
Audits.
Requires the Comptroller General of the United States to conduct ongoing
oversight of the activities and performance of TARP, and to report every 60
days to Congress. The Comptroller General is required to conduct an annual
audit of TARP. In addition, TARP is required to establish and maintain an
effective system of internal controls.
Section 117. Study and Report on
Margin Authority.
Directs the Comptroller General to conduct a study and report back to Congress
on the role in which leverage and sudden deleveraging of financial institutions
was a factor behind the current financial crisis.
Section 118. Funding.
Provides for the authorization and appropriation of funds consistent with
Section 115.
Section 119. Judicial Review and
Related Matters.
Provides standards for judicial review, including injunctive and other relief,
to ensure that the actions of the Secretary are not arbitrary, capricious, or
not in accordance with law.
Section 120. Termination of
Authority.
Provides that the authorities to purchase and guarantee assets terminate on
December 31, 2009. The Secretary may extend the authority for an additional
year upon certification of need to Congress.
Section 121. Special Inspector
General for the Troubled Asset Relief Program.
Establishes the Office of the Special Inspector General for the Troubled Asset
Relief Program to conduct, supervise, and coordinate audits and investigations
of the actions undertaken by the Secretary under this Act. The Special
Inspector General is required to submit a quarterly report to Congress
summarizing its activities and the activities of the Secretary under this Act.
Section 122. Increase in the
Statutory Limit on the Public Debt.
Raises the debt ceiling from $10 trillion to $11.3 trillion.
Section 123. Credit Reform.
Details the manner in which the legislation will be treated for budgetary
purposes under the Federal Credit Reform Act.
Section 124. Hope for Homeowners
Amendments.
Strengthens the Hope for Homeowners program to increase eligibility and improve
the tools available to prevent foreclosures.
Section 125. Congressional
Oversight Panel.
Establishes a Congressional Oversight Panel to review the state of the
financial markets, the regulatory system, and the use of authority under TARP.
The panel is required to report to Congress every 30 days and to submit a
special report on regulatory reform prior to January 20, 2009. The panel will
consist of 5 outside experts appointed by the House and Senate Minority and
Majority leadership.
Section 126. FDIC Enforcement
Enhancement.
Prohibits the misuse of the FDIC logo and name to falsely represent that
deposits are insured. Strengthens enforcement by appropriate federal banking
agencies, and allows the FDIC to take enforcement action against any person or
institution where the banking agency has not acted.
Section 127. Cooperation With
the FBI.
Requires any federal financial regulatory agency to cooperate with the FBI and
other law enforcement agencies investigating fraud, misrepresentation, and
malfeasance with respect to development, advertising, and sale of financial
products.
Section 128. Acceleration of
Effective Date.
Provides the Federal Reserve with the ability to pay interest on reserves.
Section 129. Disclosures on
Exercise of Loan Authority.
Requires the Federal Reserve to provide a detailed report to Congress, in an
expedited manner, upon the use of its emergency lending authority under Section
13(3) of the Federal Reserve Act.
Section 130. Technical
Corrections.
Makes technical corrections to the Truth in Lending Act.
Section 131. Exchange
Stabilization Fund Reimbursement.
Protects the Exchange Stabilization Fund from incurring any losses due to the
temporary money market mutual fund guarantee by requiring the program created
in this Act to reimburse the Fund. Prohibits any future use of the Fund for any
guarantee program for the money market mutual fund industry.
Section 132. Authority to
Suspend Mark-to-Market Accounting.
Restates the Securities and Exchange Commission's authority to suspend the
application of Statement Number 157 of the Financial Accounting Standards Board
if the SEC determines that it is in the public interest and protects investors.
Section 133. Study on Mark-to-Market
Accounting.
Requires the SEC, in consultation with the Federal Reserve and the Treasury, to
conduct a study on mark-to-market accounting standards as provided in FAS 157,
including its effects on balance sheets, impact on the quality of financial
information, and other matters, and to report to Congress within 90 days on its
findings.
Section 134. Recoupment.
Requires that in 5 years, the President submit to the Congress a proposal that
recoups from the financial industry any projected losses to the taxpayer.
Section 135. Preservation of
Authority.
Clarifies that nothing in this Act shall limit the authority of the Secretary
or the Federal Reserve under any other provision of law.
Title II--Budget-Related Provisions
Section 201. Information for
Congressional Support Agencies.
Requires that information used by the Treasury Secretary in connection with
activities under this Act be made available to CBO and JCT.
Section 202. Reports by the
Office of Management and Budget and the Congressional Budget Office.
Requires CBO and OMB to report cost estimates and related information to
Congress and the President regarding the authorities that the Secretary of the
Treasury has exercised under the Act.
Section 203. Analysis in
President's Budget.
Requires that the President include in his annual budget submission to the
Congress certain analyses and estimates relating to costs incurred as a result
of the Act; and
Section 204. Emergency
Treatment.
Specifies scoring of the Act for purposes of budget enforcement.
Title III--Tax Provisions
Section 301. Gain or Loss From
Sale or Exchange of Certain Preferred Stock.
Details certain changes in the tax treatment of losses on the preferred stock
of certain GSEs for financial institutions.
Section 302. Special Rules for
Tax Treatment of Executive Compensation of Employers Participating in the
Troubled Assets Relief Program.
Applies limits on executive compensation and golden parachutes for certain
executives of employers who participate in the auction program.
Section 303. Extension of Exclusion of Income From
Discharge of Qualified Principal Residence Indebtedness.
