Late Friday the U.S. House of Representatives approved the Emergency Economic Stabilization Act by a 263 to 171 vote. The legislation was quickly signed into law by President Bush, capping what has been a very tumultuous two weeks for the credit and financial markets.
This was a difficult decision for our elected representatives to make, especially given the abbreviated time period for review and debate that the gravity of the situation warranted. While passage of the Act should enable the credit markets and the U.S. financial system to set the stage for their eventual recovery, this was only the first step in what will likely take weeks and even months to wend its way through the system before reaching Main Street.
But it was an important first step. The health of the nation’s housing market is critical to the financial well being of every household in the country, and is front and center here in Florida.
Here’s what the legislation does:
Helps American families keep their homes by requiring the Treasury Dept. and any federal agency that owns or controls troubled mortgages to modify those mortgages wherever possible; this may include reducing the principal or interest rate; and extends till the end of 2012 the exclusion from federal income tax of mortgage debt forgiveness.
Addresses the credit crisis by allowing financial institutions to immediately sell $250 billion in troubled assets to the U.S. Treasury Department under the newly created Troubled Assets Relief Program (TARP). Another $100 billion would be made available upon the President’s request. Should the President deem it necessary, and with Congressional review, the Treasury Dept. may utilize the remaining $350 billion;
Protects taxpayers by allowing the Treasury Dept. to take an ownership stake in participating companies. In addition, if after five years TARP has incurred a net loss, the President must propose legislation that would force participating companies to reimburse the government to make up the difference;
Sets up an insurance program, funded by the financial industry, to guarantee companies’ troubled assets, including mortgage-backed securities purchased prior to March 14 this year;
Curbs executive pay for companies utilizing TARP;
Sets up two oversight committees, a Financial Stability Board, and a congressional oversight panel, to which the Financial Stability Board would report;
Creates renewable energy tax breaks for individuals and businesses, including a deduction for the purchase of solar panels; as well as continuing other tax breaks that were set to expire; and extends relief from the Alternative Minimum Tax (AMT) by another year;
Allows the SEC to suspend the required mark-to-market accounting standards and orders a study to be done on the rule’s impact on financial institutions;
Shields bank deposits by temporarily raising the FDIC insurance cap to $250,000 from $100,000; and temporarily increases the federal insurance level for credit union savings to $250,000, both till the end of 2009.
I think we can all agree the congressional efforts have helped secure adequate protections for both consumers and taxpayers, as well as stricter oversight than what were initially contained in the legislation. Will we see the recovery of the housing market quickly? Will we see a return of a healthy real estate market that is a strong contributer to the overall US economy? I will keep you updated as things happen.
