Later On

A blog written for those whose interests more or less match mine.

The Democrats’ developing bailout plan

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The Democrats are building a good bailout plan, rather than the Paulson-Bush plan. Damian Paletta reports in the Wall Street Journal:

Senate Democrats want to add tough new measures to the Treasury Department’s proposal to bail out financial firms, including strict limits on executive compensation and a provision that would allow the government to take shares of any financial institution that participates in the program.

Senate Banking Committee Chairman Christopher Dodd of Connecticut began circulating his 44-page draft Sunday night. The draft is likely to prove problematic for the Bush administration, which has tried to prevent lawmakers from making big changes to a much simpler proposal it unveiled over the weekend. Treasury’s plan would allow the government to buy up to $700 billion in mortgage-related assets from banks and others to prevent a worsening of the financial market turmoil.

Lawmakers hope to finalize a plan by the end of the week, but multiple obstacles remain.

Sen. Dodd’s plan would not allow the Treasury Department to purchase any assets “unless the Secretary receives contingent shares in the financial institution from which such assets are to be purchased equal in value to the purchase price of the assets to be purchased.”

Treasury officials have not suggested that the government would receive any shares of companies that sell distressed assets into the huge government fund.

Democrats are also expected to clash with the Treasury Department on a separate provision that could limit executive compensation at firms that participate in the program. Sen. Dodd’s plan would limit the pay “to exclude incentives for executives to take risks that the Secretary deems to be inappropriate or excessive.” It would also allow limitations to senior executives as it is “determined to be appropriate in the public interest in light of the assistance being given to the entity.”

The draft would also create a special inspector general program and a separate emergency oversight board, which would include top officials from the Federal Reserve, Federal Deposit Insurance Corp., and Securities and Exchange Commission.

Sen. Dodd met throughout the weekend with other lawmakers in designing his plan. His counterpart in the House of Representatives, Financial Services Committee Chairman Barney Frank, is working on a separate plan that also includes limits on executive compensation. Rep. Frank’s bill is expected to move faster than the Senate version and could see a vote in the next few days.

Continue reading.

Written by Leisureguy

22 September 2008 at 9:59 am

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