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Sweeping Bailout Bill Unveiled
By yesterday, the measure had grown to 110 pages, many of them devoted to the creation of myriad oversight agencies, including an independent inspector general. Still, the measure would give Paulson broad authority to create an Office of Financial Stability within the Treasury, to hire its staff and to direct their activities. The head of the office would be subject to Senate confirmation and would be required to quickly publish guidelines for identifying, pricing and purchasing troubled assets.
Money for the program would be released in segments, with the Treasury secretary receiving $250 billion immediately. Paulson has said he expects to spend about $50 billion a month on the program.
The Treasury secretary's power to purchase assets would end on Dec. 31, 2009, although the next administration could seek a one-year extension. The assets could be held indefinitely and sold when the housing market recovers, theoretically for a profit.
To protect taxpayers, participating firms would be required to give the government warrants to buy stock so taxpayers could benefit if they return to profitability. If the government does not regain all of its money after five years, the president would be required to submit a plan for recovering the money "from entities benefiting from the program." Given those provisions, some firms might be discouraged from participating, but few have so far indicated their intentions either way.
The measure also would require federal officials to rein in excessive compensation for corporate executives who participate in the bailout program, a first step toward addressing a longtime Democratic priority. According to a recent report by the Institute for Policy Studies, the chief executives of large U.S. companies made an average of $10.5 million last year, 344 times the pay of the average worker.
The bill also requires Paulson to establish a new federal insurance program, funded by the banks, that would protect firms against loss from troubled assets. Although Paulson and Bernanke had concluded that such a program would not be an effective way to pump needed cash into struggling firms, House Republicans demanded the provision, saying it would offer an alternative method for shoring up companies at no cost to taxpayers.
After days of at-times grueling negotiations, House Speaker Nancy Pelosi (D-Calif.) said lawmakers will now be asked to approve the bill without further changes. "The bill is frozen. It's on the Internet," she told reporters. "The public is looking at it."
While the bill is likely to have strong support in the Senate, its chances are less clear in the House, where leaders in both parties said they were still unsure how many votes it would receive. Democrats and Republicans were summoned into separate private meetings late yesterday where leaders shared the final details of the bill and urged a vote for its passage.
After stalling negotiations late last week, key Republicans spoke in support of the measure. Rep. Eric Cantor (R-Va.) who helped draft the insurance provision, assured lawmakers that the bill now contains important safeguards for taxpayers. Rep. Chris Shays (R-Conn.), a moderate who represents many financial services industry executives, said the meeting took on a solemn tone as several retiring lawmakers spoke with passion about the historic nature of what will likely be their last vote.
Meanwhile, Democrats meeting nearby in the basement of the Capitol also heard a rallying cry from their leaders, who won support from some surprising corners. Rep. Jim Marshall (D-Ga.), who represents a conservative-leaning district and is a frequent GOP target, told his colleagues that passing the legislation is more important than winning re-election.
"I am willing to give up my seat over this," Marshall said, according to one attendee.
In both meetings, lawmakers continued to worry aloud about how to protect taxpayers from bearing the cost of the bailout, an issue that was also one of the most fiercely contested matters in talks with Paulson early yesterday.