President George W. Bush and Congressional leaders including Speaker of the House Nancy Pelosi and Senate Majority Leader Harry Reid agreed early this morning to a bailout of the nation's banks hit hard buy the downturn in the real estate market and the misuse of Subprime mortgage loans.
The key provisions which still have to be transcribed to paper are as follows:
The plan calls for the Treasury Department to buy deeply distressed mortgage-backed securities and other bad debts held by banks and other investors. The money should help troubled lenders make new loans and keep credit lines open. The government would later try to sell the discounted loan packages at the best possible price.
At the insistence of House Republicans, some money would be devoted to a program that would encourage holders of distressed mortgage-backed securities to keep them and buy government insurance to cover defaults.
The legislation would place "reasonable" limits on severance packages for executives of companies that benefit from the rescue plan, said a senior administration official who was authorized to speak only on background. It would affect fired executives of financial firms, and executives of firms that go bankrupt. Some of the provisions would be retroactive and some prospective, the official said.
Also, the government would receive stock warrants in return for the bailout relief, giving taxpayers a chance to share in financial companies' future profits.
To help struggling homeowners, the plan would require the government to try renegotiating the bad mortgages it acquires with the aim of lowering borrowers' monthly payments so they can keep their homes.
Yahoo is reporting that house Repubicans who earlier this week sent the market into a panic when they refused to support the bush plan, indicated they would not block the new proposal. Democrats hold the majority of both houses but they would not accept a package that did not limit the amount of money executives of these failed companies could earn in "Golden Parachutes" and provide taxpayers relief from their own indebtness.
I may come back to this later but for now, you know at least what I know. I am sure there are many around who "know far more."
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