FINANCIAL CRISIS: Bailout
To read federal documents, letters, and reports regarding the Troubled Asset Relief Program (TARP), visit the House Financial Services Committee TARP Oversight and Accountability Reports page.
Congress OKs historic bailout bill
Associated Press, October 3, 2008
Congress has approved the $700 billion government bailout of the financial industry and sent it to President Bush for his signature.
The final vote: 263-171 in the House.
Stocks were up on Wall Street.
Also today, the Labor Department said employers slashed 159,000 jobs in September, the largest cut in five years and further evidence of a sinking economy.
The Commerce Department has reported factory orders in August plunged by 4 percent.
According to White House spokesman Tony Fratto: “If [this legislation] works as we hope it will, credit will be able to begin flowing again.”
Critics were unrelenting.
“How can we have capitalism on the way up and socialism on the way down," said Rep. Jeb Hensarling of Texas, a Republican who opposes the unprecedented federal intervention into the private capital markets.
The core of the plan remains little changed from its inception: The Treasury Department would have $700 billion at its disposal to purchase bad mortage-related securities that are weighing down the balance sheets of institutions that hold them.
[But lawmakers] insisted on adding:
• greater congressional supervision over the $700 billion,
• taking measures to protect taxpayers, and
• steps to crack down on “golden parachutes” that go to corporate executives whose companies fail.
The legislation also was altered to:
• expand the federal insurance program for individual bank deposits, while
• the Securities and Exchange Commission took steps to ease the impact of the questionable mortgage-backed securities on financial institutions.
Democratic presidential candidate Barack Obama made calls to members of the Congressional Black Caucus, who publicly credited him with changing their minds.
Obama pledged:
• if he wins the White House he would help homeowners facing foreclosure on their mortgages;
• to support changes in the bankruptcy law to make it less burdensome on consumers.
John McCain’s impact was not immediately clear.
Bailout focus on House as crisis spreads
Reuters, October 2, 2008
Shockwaves from the global credit crisis spread on Thursday, hitting industry and jobs worldwide and putting pressure on the U.S. Congress to finish up a $700 billion bailout of the U.S. financial sector.
The Senate passed the bill Wednesday night and the House is expected to vote again on Friday.
U.S. economic data amplified warnings that a recession is approaching:
• U.S. factory orders fell 4 percent in August, the sharpest contraction in two years.
• Manufacturing activity in September was at its weakest since the 2001 recession.
• U.S. jobless claims rose last week to their highest level in seven years.
Top automakers including GM and Ford warned of tough times, as evaporating credit for consumers cuts demand and could force production cuts and job losses.
Marriott International Inc. urged Congress to pass the bill, citing “thousands, maybe tens of thousands of jobs at stake” [in their company alone].
Even if the bill is passed, worries remain over the global economic outlook, said [a] senior economist at JPMorgan in Tokyo. “It’s a completely different world now. All the things U.S. authorities are doing now are simply aimed at preventing a global meltdown.”
The bailout plan, equivalent to some $2,300 per American, is intended to reinvigorate credit markets and interbank lending that has frozen up while overleveraged financial institutions staggered under the weight of failed mortgages.
[Following Monday’s defeat in the House,] the Senate added:
• income tax cuts and
• an increase in bank deposit insurance.
Under the deal, the Treasury would buy illiquid assets held by banks, in the hope of restoring confidence and unfreezing credit markets vital to the wider economy.
Both presidential candidates John McCain and Barack Obama voted for the package.
“This plan still isn’t perfect. But it’s what we must do to prevent a crisis from turning into a catastrophe,” Obama said.
Furious lobbying for much-maligned bailout bill
Associated Press, October 2, 2008
The troubled $700 billion financial industry bailout bill [is winning converts] from both parties on the eve of a showdown vote.
The measure was returned to the House after the Senate resuscitated it with tax cuts and other sweeteners in a 74-25 vote late Wednesday. The bill had been defeated in the House on Monday.
The rescue package would let the government spend billions of dollars to buy bad mortgage-related securities and other devalued assets held by troubled financial institutions.
If successful, advocates say, that would allow frozen credit to begin flowing again and prevent a serious recession.
The Senate-passed bill contains a provision to raise the cap on federal deposit insurance from $100,000 to $250,000.
Rep. Earl Blumenauer, D-Ore., a liberal opponent, is reconsidering his vote, a spokeswoman said. But Blumenauer, [like others], wants to see:
• a mechanism to pay for the bailout and
• more help for homeowners staring at foreclosure.
The modified Senate bill:
• extends several tax breaks popular with businesses,
• would keep the alternative minimum tax from hitting 20 million middle-income Americans,
• would provide $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana,
• would help rural schools,
• extends the deductibility of state and local taxes for people in states without income taxes
• extends a tax break for homeowners who do not itemize their tax returns.
Increasing the deposit insurance cap was a bid to reassure individuals and small businesses that their money would be safe in the event their banks collapsed.
[The increase] was particularly geared toward small banks that fear customers will pull their money and park it in larger institutions seen as less likely to fold.
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