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Senate Economic Stabilization Act Summary

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There is so much misinformation flying around in the blogosphere that I felt it was time to read and publish the facts. Here is a summary from the Senate of the bill:

SUMMARY OF THE “EMERGENCY ECONOMIC STABILIZATION ACT OF 2008”
I. Stabilizing the Economy
The Emergency Economic Stabilization Act of 2008 (EESA) provides up to $700 billion to the
Secretary of the Treasury to buy mortgages and other assets that are clogging the balance sheets
of financial institutions and making it difficult for working families, small businesses, and other
companies to access credit, which is vital to a strong and stable economy. EESA also establishes
a program that would allow companies to insure their troubled assets.
II. Homeownership Preservation
EESA requires the Treasury to modify troubled loans – many the result of predatory lending
practices – wherever possible to help American families keep their homes. It also directs other
federal agencies to modify loans that they own or control. Finally, it improves the HOPE for
Homeowners program by expanding eligibility and increasing the tools available to the
Department of Housing and Urban Development to help more families keep their homes.
III. Taxpayer Protection
Taxpayers should not be expected to pay for Wall Street’s mistakes. The legislation requires
companies that sell some of their bad assets to the government to provide warrants so that
taxpayers will benefit from any future growth these companies may experience as a result of
participation in this program. The legislation also requires the President to submit legislation
that would cover any losses to taxpayers resulting from this program from financial institutions.
IV. No Windfalls for Executives
Executives who made bad decisions should not be allowed to dump their bad assets on the
government, and then walk away with millions of dollars in bonuses. In order to participate in
this program, companies will lose certain tax benefits and, in some cases, must limit executive
pay. In addition, the bill limits “golden parachutes” and requires that unearned bonuses be
returned.
V. Strong Oversight
Rather than giving the Treasury all the funds at once, the legislation gives the Treasury $250
billion immediately, then requires the President to certify that additional funds are needed ($100
billion, then $350 billion subject to Congressional disapproval). The Treasury must report on the
use of the funds and the progress in addressing the crisis. EESA also establishes an Oversight
Board so that the Treasury cannot act in an arbitrary manner. It also establishes a special
inspector general to protect against waste, fraud and abuse.

For a more in depth summary of each of the bill’s section or the complete bill, go here.

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Written by Valerie Curl

October 2, 2008 at 12:31 AM

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