Emergency Economic Stabilization Act of 2008 - Mercedes-Benz Forum

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post #1 of 242 (permalink) Old 09-28-2008, 08:32 PM Thread Starter
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Emergency Economic Stabilization Act of 2008

Here is the whole thing:
http://online.wsj.com/public/resourc...ll20080928.pdf

Here's a summary from the WSJ:
I. Stabilizing the Economy

The Emergency Economic Stabilization Act of 2008 (EESA) provides up to $700 billion to the Secretary of the Treasury to buy mortgages and other assets that are clogging the balance sheets of financial institutions and making it difficult for working families, small businesses, and other companies to access credit, which is vital to a strong and stable economy. EESA also establishes a program that would allow companies to insure their troubled assets.

II. Homeownership Preservation

EESA requires the Treasury to modify troubled loans – many the result of predatory lending practices – wherever possible to help American families keep their homes. It also directs other federal agencies to modify loans that they own or control. Finally, it improves the HOPE for Homeowners program by expanding eligibility and increasing the tools available to the Department of Housing and Urban Development to help more families keep their homes.

III. Taxpayer Protection

Taxpayers should not be expected to pay for Wall Street's mistakes. The legislation requires companies that sell some of their bad assets to the government to provide warrants so that taxpayers will benefit from any future growth these companies may experience as a result of participation in this program. The legislation also requires the President to submit legislation that would cover any losses to taxpayers resulting from this program by charging a small, broad-based fee on all financial institutions.

IV. No Windfalls for Executives

Executives who made bad decisions should not be allowed to dump their bad assets on the government, and then walk away with millions of dollars in bonuses. In order to participate in this program, companies will lose certain tax benefits and, in some cases, must limit executive pay. In addition, the bill limits "golden parachutes" and requires that unearned bonuses be returned.

V. Strong Oversight

Rather than giving the Treasury all the funds at once, the legislation gives the Treasury $250 billion immediately, then requires the President to certify that additional funds are needed ($100 billion, then $350 billion subject to Congressional disapproval). The Treasury must report on the use of the funds and the progress in addressing the crisis. EESA also establishes an Oversight Board so that the Treasury cannot act in an arbitrary manner. It also establishes a special inspector general to protect against waste, fraud and abuse.

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post #2 of 242 (permalink) Old 09-28-2008, 08:34 PM Thread Starter
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Paulsons statement on the EESA:
I thank my colleagues on both sides of the aisle for their hard work over a very short time period to craft strong legislation that will enable us to strengthen our financial markets and promote the flow of credit to businesses and consumers that is so vital to our economic growth and prosperity.

This bill provides the necessary tools to deploy up to $700 billion to address the urgent needs in our financial system, whether that be by purchasing troubled assets broadly, insuring troubled assets, or averting the potential systemic risk from the disorderly failure of a large financial institution.

I am confident this legislation gives us the flexibility to unclog our financial markets increase the ability of our financial institutions to deliver the credit that will help create jobs. We are taking the steps needed to be ready to begin implementing this legislation as soon as it is signed.

Members on both sides were focused on the right things – creating an effective program that can be implemented quickly and effectively, and doing everything possible to protect the taxpayers.

Quick, effective and bipartisan action sends a signal to investors large and small, here and abroad, that we are committed to taking the necessary actions to protect our financial system and our economy. The American people will recognize the leadership you have all shown to protect them – to preserve their access to credit, and preserve jobs.

When devils will the blackest sins put on, they do suggest, at first with heavenly shows - Othello
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post #3 of 242 (permalink) Old 09-28-2008, 08:37 PM
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Well, it's ugly but it was necessary.

We were already assuming we would have to clean up the $5Trillion in overspending that Bush executed during his Administration, So this is "only" 16% more, worse case.

Plan for the worst, hope for the best. Time to focus kids. All those under 55 are going to get screwed hard and often if we don't.

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post #4 of 242 (permalink) Old 09-28-2008, 08:38 PM Thread Starter
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It has almost everything I wanted. Point II is the best. If the loan sharks didn't push people to obtain loans they could not afford, and in some cases, con people into new loans, we would not have this mess.

Last point missing there is allowing judges to be able to amend loans on the primary home during bancruptcy. A reworking of loans might allow a bank to get back 70-80 cents on the dollar. A foreclosure gets the bank about half that. Investors be damned as I care more for the people who bear the burden of the brunt of the 12-14% gains investment papers carry.

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post #5 of 242 (permalink) Old 09-28-2008, 08:41 PM
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While it is too late, as soon as it is executed [this week] Paulson and Bernanke should both resign. Their failure to manage this back in 2006 when we were first banging this drum is totally unacceptable.

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post #6 of 242 (permalink) Old 09-28-2008, 08:47 PM Thread Starter
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I'm guessing Paulson at GS had his fingerprints all over these bad CDO's. I still believe this is more of a gun to the head move from our "friends" overseas holding the weak paper than a rescue plan.
Either way, I'd like to know how to trade it. I'm glad i'm not short anything tomorrow. The part of this that I don't like is that to participate companies must give warrants to the government. This is going to dilute shareholder value and any bank that participates is going to screw their shareholders, stock price, and valuation.

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post #7 of 242 (permalink) Old 09-28-2008, 08:50 PM
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Originally Posted by mcbear View Post
While it is too late, as soon as it is executed [this week] Paulson and Bernanke should both resign. Their failure to manage this back in 2006 when we were first banging this drum is totally unacceptable.
Hear hear. Then we can start diving into congressional hearings on every motherfucker involved, and take their sizes before they take oath so we know how big the orange jumpsuit they're going to wear will need to be.
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post #8 of 242 (permalink) Old 09-28-2008, 08:54 PM
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Quote:
Originally Posted by cozette View Post
It has almost everything I wanted. Point II is the best. If the loan sharks didn't push people to obtain loans they could not afford, and in some cases, con people into new loans, we would not have this mess.
...
The sooner people take responsibility for their own shit ,the better.

The "new loans" (cash out refinancing) people got were spent in most likelihood on goods and services they cannot afford. Who are you gonna blame for that ?
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post #9 of 242 (permalink) Old 09-28-2008, 08:57 PM
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Disgusting.

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post #10 of 242 (permalink) Old 09-28-2008, 09:00 PM
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The "must limit executive pay" part had better have some real teeth, or these guy's careers are over. I don't think Barney Frank has quite the career he might expect awaiting him on the lecture circuit.
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