From the New York Times late last night:
WASHINGTON — Congressional leaders and the Bush administration reached a tentative agreement early Sunday on what may become the largest financial bailout in American history, authorizing the Treasury to purchase $700 billion in troubled debt from ailing firms in an extraordinary intervention to prevent widespread economic collapse.
Officials said that Congressional staff members would work through the night to finalize the language of the agreement and draft a bill, and that the bill would be brought to the House floor for a vote on Monday.
The bill includes pay limits for some executives whose firms seek help, aides said. And it requires the government to use its new role as owner of distressed mortgage-backed securities to make more aggressive efforts to prevent home foreclosures.
In some cases, the government would receive an equity stake in companies that seek aid, allowing taxpayers to profit should the rescue plan work and the private firms flourish in the months and years ahead.
The White House also agreed to strict oversight of the program by a Congressional panel and conflict-of-interest rules for firms hired by the Treasury to help run the program.
What this means is that negotiations have succeeded in a plan that may make Congress comfortable, and has the possibility of coercing the public into agreement.
The problem is that we’re still putting taxpayers’ money at risk, just in a slightly more controlled fashion. I still don’t like this. Neither does the Senior Republican on the Banking Committee, Richard Shelby.
Now the deal has the prospect of not only recovering all of the taxpayers money, it may even provide additional funds for the treasurer (which would hopefully go toward debt reduction). But it is still very risky. As I’ve been thinking about it, I wonder why the government can’t issue some kind of bond to finance this. This would create the opportutnity of letting people invest in this voluntarily, and remove the risk from the taxpayer.
Just a thought.
When the bill is made available, we’ll take a look at it and provide some thoughts.
