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Mortgage & Housing Market News from HSH.com
September 22nd, 2008

Congress Adds Provisions to the $700 Billion Bailout



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.

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5 Responses to “Congress Adds Provisions to the $700 Billion Bailout”

  1. Ed Robinson Says: September 25th, 2008 at 3:09 pm






  2. Tim Manni Says: September 25th, 2008 at 3:56 pm

    Ed — Thanks for commenting we appreciate it! Yea, only if the American people could add in their own provisions in order for the bailout to go through. Health care is a huge issue that seems to be swallowed at the present time by economic news. As taxpayers, it’s tough to stomach being left to foot a $700 billion bill without having a say in the matter.

    Please keep checking back in with us. Have a good one,


  3. Wayne Eskridge Says: September 25th, 2008 at 10:39 pm

    I’m against the 700 billion dollar bailout of the banks.

    Instead, I’m in favor of giving $85,000,000,000 to America in “The We Deserve It Dividend”.

    To make the math simple, let’s assume there are 200,000,000 bona fide U.S. Citizens 18+.

    Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up.

    So divide 200 million adults 18+ into $85 billon that equals $425,000.

    Give $425,000 to every person 18+ as a “We Deserve It Dividend”.

    Of course, it would NOT be tax free. So let’s assume a tax rate of 30%.

    Every individual 18+ has to pay $127,500.00 in taxes.

    That sends $25,500,000,000 right back to Uncle Sam. But it means that every adult 18+ has $297,500 in their pocket. A husband and wife has $595,000.

    What would you do with $297,500 to $595,000 in your family?

    Pay off your mortgage – housing crisis solved.

    Repay college loans – what a great boost to new grads

    Put away money for college – it’ll be there

    Pay off all your consumer debt.

    If we’re going to re-distribute wealth let’s really do it.

    If we’re going to do a bailout, let’s bail out every adult US Citizen 18+!

    Sure it’s a crazy idea that can “never work.”

    But can you imagine the Coast-To-Coast Block Party! How do you spell Economic Boom?

    I trust my fellow adult Americans to know how to use the “We Deserve It Dividend” more than I do the geniuses in Washington DC .

    And remember, The Family plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam.

    The rules:
    The use of funds must go first to your mortgage.
    Any surplus funds must go to pay consumer debt.
    If there are still funds left over, it must be invested in an IRA to provide for retirement.

    If the money doesn’t pay off the entire mortgage, it will build sufficient equity so that the banks can renegotiate a mortgage and shall be required to do so on fixed 30 year terms. This will solve the mortgage problem. It will enhance rather than destroy the financial structure and well being of the American people. If we the people are going to borrow so much to bail out someone lets bail out we the people.

    If you think this could work please forward this idea to anyone you think might help.

  4. Tim Manni Says: September 29th, 2008 at 1:57 pm

    Wayne — I don’t believe your calculations work out in the way you had planned. $425,000 multiplied by 200 million citizens equals $85 trillion, not billion. Each of the 200 million 18+ citizens would only get $425 if we were using a cap of $85 billion.

  5. Tim Manni Says: September 29th, 2008 at 2:04 pm

    Shawn, we’d be interested in hearing your proposals. Securing American jobs will be just one of the essential factors that help stimulate the financial assistance plan and get America back where it needs to be!

    Thanks for commenting, and please continue to read the blog and share your thoughts.


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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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