As expected, this weekend the U.S. Dept. of the Treasury submitted its proposal to promote stability in the U.S. financial markets.
Key components of the Treasury’s proposal include:
- The authority to issue up to $700 billion of Treasury securities to finance the purchase of troubled residential and commercial mortgage-related assets, including mortgage-backed securities and loans.
- This authority would expire in two years, and assets must have been originated or issued on or before Sept. 17, 2008, to qualify.
- Assets will be managed by private asset managers at the direction of the Treasury.
- 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 limit by $700 billion.
- Once the program is up and running, Treasury will provide updates to Congress semi-annually.
The proposal also grants Treasury Secretary Paulson sweeping authority regarding the purchase of assets, the timing and sale of assets, determining financial institutions’ eligibility to participate and more. To access a fact sheet on the Treasury proposal, go to http://www.treasury.gov/press/releases/hp1150.htm.
Congress is weighing in on the Treasury’s proposal today, and may seek to add an oversight structure, limit the compensation of executives at the companies benefiting from the rescue, and provide mortgage relief for struggling borrowers. We’ll report on this effort in detail tomorrow. As part of that process, House Financial Services Committee Chairman Barney Frank has scheduled a committee hearing this Wednesday.
Our sources tell us that it may be overly optimistic to expect final legislation to be brought forward by Friday and cautioned us to expect this to run into next week.
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