Sunday, 28 September 2008
Bailout plan comparison based on statements and press coverage. Sources and revision history at the bottom.
|Original (Paulson) Plan
|Interim proprosals (mostly Frank-Dodd)
|$700 billion taxpayer-funded Line-Of-Credit
(all at once)
in $150 billion tranches
|â€œToxic paperâ€ backed by subprime mortgages.
|â€¡ Adds â€œother troubled assetsâ€ owned by â€œpension plans, local governments, and small banksâ€
|Government Acquires Equity?
|Mandatory equity interest in all participating firms.
|Mandatory equity interest in total takeover scenario.
Proportional equity interest based on percentage of assets sold if deemed appropriate by Treasury Secretary.
|Requirement to establish mandatory insurance/guarantee program at no expense to the taxpayer. â€œPay to playâ€ for participating companies, based on risk.
|none, plus immunity from court review
|(Various reporting and oversight requirements)
|Bipartisan oversight commission, split evenly between minority and majority.
â€ Inspector General and GAO to monitor Treasury Dept. actions.
â€ Treasury must post all transactions online.
â€ Immunity provision OUT.
|Executive compensation standards that would affect companies not involved in this financial crisis.
Lowered the deduction on executive pay to $400,000 for ALL companies.
|Prohibitions on executive compensation to ensure bad actors are not rewarded:
In a total takeover (like what happened with AIG), no golden parachutes or severance pay.
â€¡ Recovers bonuses paid based on promised gains that later turn out to be false or inaccurate.
For equity participation over $300M, total ban for top 5 executives on golden parachutes and tax deduction limit on compensation above $500,000.
|â€œAffordable Housingâ€ Slush Fund
|20% of any transaction profits channeled to Housing Trust Fund and Capitol Magnet Fund. â€œProfitâ€ calculated on each individual sale, taxpayers stuck with any losses. See Jim Lindgren
|â€œSay on Payâ€
(Mandated union representation on corporate boards)
|Mandate a nonbinding shareholder vote on proxy access [by unions] and other corporate governance issues for any company in which the Treasury Department buys a direct stake in certain assets.
|Allow bankruptcy judges to reduce mortgage principal.
|OUT (Blunt) but...
â€¡ â€œThe government can use its power as the owner of mortgages and mortgage backed securities to facilitate loan modifications (such as, reduced principal or interest rate, lengthened time to pay back the mortgage)â€ (Pelosi)
|Loan to auto industry
|$25 Billion for developing energy-efficient vehicles
|Moved to continuing resolution. (Not part of this bill, but will be spent anyway.)
|Oil shale development ban
|Extend to September 30, 2009
|Not in â€œdiscussion draftâ€
|â€œMark-to-Marketâ€ Accounting Standard
|GAO study on the impacts of mark-to-market accounting standards and effects on the banking crisis.
Restatement of existing authority to suspend mark-to-market.
|Tax benefits for community banks
|Allow community banks to offset capital losses on GSE assets (= Fannie Mae and Freddie Mac paper) against ordinary income. (i.e., tax deduction)
|â€¡ Extends a provision (passed earlier in this Congress) to stop tax liability on mortgage foreclosures.
Anything Iâ€™ve missed?
â€ Wall Street Journal coverage
â€¡ House Speaker Nancy Pelosi
 (Added 23:35) Thanks to â€œVicâ€ at Ace
 (Added 23:55) thanks to Bill Quick
 (Added 080929 14:01)
Old Grouche: the only thing I've read about this deal that's not mentioned in your chart is the Treasury Sec. ability to re-establish the real estate value of foreclosed mortgaged properties. This is one of the details that could be un-constitutional.
For instance: you live in a cul-de-sac of eight homes (all are pretty equal in value and features), four of which are foreclosed and empty. You value your home at $300,000. The Treasury comes in revalues the foreclosed homes at $100,000 to get them sold, what does that do to the value of your home, which is either paid for or current with your payments?
If I missed that in your chart I apologize. Thanks.
All The Best,
Frank W. James
Posted by: Farmer Frank at 09/29/08 12:39:30 (1QbQK)
Effectively, this means if you are in a non-foreclosed home it is nearly impossible to get the tax appraisers to reduce your home appraisal based upon nearby house prices on foreclosed houses. Similarly, if you buy a foreclosed house at auction on the courthouse steps, the appraised value of the house is based on non-foreclosed comparables in the neighborhood. However, if you buy a foreclosed home (say, from an investor who got it at auction) at a good price, that price is definitive for the first year of your tax appraisal. It then can go up the next year.
Posted by: Mikee at 09/29/08 13:31:18 (PN5d2)
Actually, the value adjustment appears to apply to any property whose mortgage the government winds up owning, not just those in foreclosure. See Pelosi quote in "Bankruptcy cramdown" section
â€œThe government can use its power as the owner of mortgages and mortgage backed securities to facilitate loan modifications (such as, reduced principal or interest rate, lengthened time to pay back the mortgage)â€There's already been concern that the language in the "draft document" actually mandates reevaluation, making it a backdoor mass-bailout of foolish borrowers. See next post.
Posted by: Old Grouch at 09/29/08 13:47:56 (jfwiq)
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