Rescue Plan Update…

September 26, 2008

Proposed rescue plan that was initially submitted by the U.S. Dept. of the Treasury last Friday and received numerous edits and additions throughout the week appears to have made significant progress today, with members of both parties announcing they have reached general agreement to move forward with a $700 billion federal rescue plan.

If the plan announced today is approved, it would allow the U.S. Dept. of the Treasury to purchase troubled residential and commercial mortgage-related assets, including mortgage-backed securities and loans – up to $700 billion, which would promote stability in the U.S. financial markets.

Some of the key components of the current federal rescue plan as outlined today include:

.  Providing the U.S. Dept. of the Treasury authority to issue up to $250 billion of treasury securities to finance the purchase of troubled residential and commercial mortgage-related assets, including mortgage-backed securities and loans, right away. If needed, the Treasury could request an additional $100 billion; however, the Treasury would need Congressional approval to receive the remaining $350 billion;
.  Cash received from liquidating the assets will be returned to the Treasury’s general fund for the benefit of taxpayers;
.  Funding for the program will be provided directly by the Treasury from its general fund by increasing its debt by $700 billion;
.  Help for troubled homeowners to avoid foreclosure;
.  Limiting compensation to executives of troubled firms receiving assistance;
.  Greater oversight than the limited bi-annual reporting mechanism in the current proposal; and
.  Allowing the government to take an ownership stake in companies

And what it means for consumers:

.  Although the rescue plan is not yet finalized, lawmakers and the Treasury would appear to agree on provisions that would provide assistance to many homeowners facing foreclosure. Earlier this week, the National Association of REALTORS® announced the creation of a Presidential Advisory Group to address this critical issue.

.  One of Congress’ primary goals as this proposal moves forward is to minimize the financial impact of this rescue on the U.S. taxpayers. The current proposal would allow the Treasury not only to sell the acquired mortgage assets at a later date, but also to acquire an equity stake in the companies that participate in the program. The stocks could be sold at a later date, which could enable Congress to recoup some – if not all – of the $700 billion.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: