Congress Adds Provisions to the $700 Billion Bailoutby Tim Manni
In a vote that could be cast as early as Thursday, the most widespread financial rescue by a government could be passed into law. The Treasury Department sent the latest version of their proposal to Congress yesterday, where Democrats have already begun to critique and add provisions to the bailout that leaves taxpayers footing a $700 billion bill.
Congress would like to increase their oversight over the Treasury Department, add additional aid for homeowners, make changes to the bankruptcy laws, and most controversially, curb the large salaries of the top executives of the firms participating in the government’s rescue plan.
Many of these proposals are reminiscent of what Democrats were pushing for in the housing rescue bill (aid to homeowners and changes to bankruptcy laws). Even curbing executives’ salaries is deja vu of the problem some lawmakers saw with quasi-government entities Fannie Mae and Freddie Mac before they were entered into a conservatorship two weeks ago.
Treasury Secretary Paulson is set to testify before the House and Senate committees on Tuesday and Wednesday, which could set up a vote by the House on Thursday, and in the Senate on Friday. Congress is likely to develop a compromise with the White House later today. While it’s unlikely Congress will vote against the proposal, time is of the essence, and if a compromise cannot be made quickly, more damage could be caused by dithering about.
The housing market, much the root of this entire problem, was only further damaged as lawmakers took far too long in drafting and issuing plans to heal that market. When a version of the housing rescue bill was finally agreed to, the voluntary status of its main component has proven to be ineffective. That is the main reasoning behind Paulson’s disagreement with the Congressional provision to limit executives’ salaries. That provision could void the entire proposal by giving firms a reason not to participate, said Paulson.
Secretary Paulson has already commented that the bailout will assist homeowners:
The administration already believes its plan will provide relief to borrowers even though the specific legislative language doesn’t address the question. Because Treasury will own mortgage-backed securities and actual home loans, Mr. Paulson said on ABC’s “This Week” that the government will be able to exert pressure on mortgage servicers to modify terms.
Until compromises are drafted and votes are cast, the true specifics of the bill will be unknown. As they say, the devil is in the details.