Alternative bailout plan being discussed by house republicans

Discussion in 'Wall St. News' started by drsteph, Sep 30, 2008.

  1. from cnbc:

    Components of the alternative plan including the following, according to sources:

    * Require the Treasury Department to guarantee, at up to 100 percent, bank losses resulting from failed mortgage-backed securities originated prior to the plan's enactment. Such insurance, supporters say, would provide immediate value to the securities and a foundation for which they could then be sold. The Treasury Department would finance that insurance by assessing a premium on outstanding mortgage-backed securities.
    * Allow companies to carry back losses arising in tax years ending in 2007, 2008, or 2009 back five years, generating a tax refund and immediate capital
    * Allow a "repatriation window" for profits earned by U.S. firms overseas. Such repatriation amounts would not be taxed if invested in distressed debt (as defined by Treasury) for at least one year.
    * Allow banks to treat losses on shares of preferred stock in Fannie Mae and Freddie Mac as ordinary losses, not as capital losses
    * Suspend the capital gains tax rate for two years
    * Limit backing of high-risk loans by Fannie Mae and Freddie Mac
    * Schedule Fannie and Freddie for privatization
    * Suspend "mark-to-market" accounting until the SEC can issue new guidelines that will allow firms to mark these assets to their true economic value
    * Stabilize the dollar by repealing the Humphrey-Hawkins Full Employment Act, which alternative bailout supporters say diverts the Federal Reserve's attention from long-term price stability to short-term economic growth
    * Require the Treasury to write rules prohibiting excessive compensation or golden parachutes to executives of failed companies
    * Task the SEC with regular, annual audit reports of entities the federal government has brought under conservatorship or now owns
  2. Thoughts:

    1. Guaranteeing loan losses from failed MBS and CDO's. 700b might be the better deal there.

    2. Tax breaks - needs to have something in there to assure it would be SPENT by US businesses within the US! Perhaps employment?

    3. Suspend Mark to Market - this has been discussed extensively elsewhere

    4. Rescind Humprey Hawkins. Not sure what that would mean in practical terms. Ideas?

    5. Rules requiring golden parachutes should NOT be written by Treasury (at least not this treasury) but would be good for failed companies.
  3. imo this plan sounds alot better and certainly would cost less, i think a compromise will be reached tmrw but i still am leaning more towards a more conservative plan such as the one laid down by the republicans. The dems seem to just be agreeing with everything that hank and ben propose to them which is not exactly in best interests, what i am trying to say is it may solve the problem now in the short term but hank and ben don't take the long term into consideration,