Monday, September 29 - AM Report

Today is game day in the House of Representatives as members prepare to vote for or against the Emergency Economic Stabilization Act of 2008 at 1 p.m. Early this morning, President Bush appeared before cameras at the White House urging Congress to adopt the rescue plan, saying, "Every member of Congress and every American should keep in mind, a vote for this bill is a vote to prevent economic damage to you and your community."

The House went into session unusually early this morning to allow for three hours of debate on the bill. Speaker Nancy Pelosi had indicated yesterday that she would like to hold the vote as early as 11 a.m. The currently scheduled 1 p.m. vote suggests members needed more time to shore up support. One positive sign is that Rep. Paul Ryan (R-WI), the ranking member of the House Budget Committee and a chief architect of the Republican alternative, has announced he will vote for the rescue plan.

The Senate is expected to vote on the House-passed bill on Wednesday. Attached are three documents for your review – the text of the bill; a section-by-section analysis prepared by Hill staff; and a letter from the Director of the Office of Management and Budget to House Minority Leader John Boehner addressing Republican concerns. We will continue to monitor developments throughout the day and into the week.

Sunday, September 28 - Afternoon Report

According to our contacts, Congressional leaders do not expect to finish drafting the financial rescue legislation before early this evening. As reported earlier, House Speaker Nancy Pelosi promised to post the final legislation on the Internet by noon today. The timing indicates the House will not vote on the package before tomorrow afternoon at the earliest, given that all sides will need time to review the final package. At a news conference this afternoon, key negotiator Sen. Judd Gregg (R-NH) said he would like to see the Senate vote on Monday. We expect the Senate will vote on the House-passed bill later in the week, following the Jewish holiday. In the meantime, we have received outlines from House and Senate staff privy to the negotiations.

Following is the list of what we understand will be in the legislation.

  • $700 billion â€" The Secretary will have access to $250 billion immediately. The next $100 billion will be available after the president reports to Congress, and the remaining $350 billion will require additional congressional action.
  • Insurance â€" In order to reduce taxpayer exposure, the Treasury will set up a mandatory insurance program for participating companies, and outlays will be reduced by the premiums collected.
  • Executive Compensation â€" Where the federal government completely takes over a firm (e.g. AIG), there will be no "golden parachutes" or severance pay. Where the government takes equity in firms, amounting to $300 million or more, those firms' will not be able to deduct compensation above $500,000 for their top five executives, and there will be a 20 percent surtax on any "golden parachute."
  • Oversight and Transparency â€" The legislation will establish a bipartisan oversight committee, evenly split between Democrats and Republicans. The committee will regularly report to Congress and the public. There will be a new "Special Inspector General." It will also create a " Financial Stability Oversight Board." There will be strict, new conflict of interest rules and "unjust enrichment rules." After five years, if the rescue has produced a net loss, the president must submit a plan to Congress explaining how to recoup taxpayer losses from the participating firms.
  • Mark-to-Market Accounting â€" The General Accountability Office must study the effects of this accounting rule and how it may have affected the current situation. The legislation will also affirm the governmentâ€"s authority to suspend mark-to-market accounting standards.
  • Equity/Warrants â€" Where government completely takes over a firm, the government must take equity interest in that firm. Where there is a partial government takeover, the Treasury Secretary has the discretion to take proportional equity interest based on the percentage of assets sold.
  • Tax Benefits for Community Banks â€" The legislation will allow for community banks to take capital losses on Government Sponsored Enterprise losses against ordinary income.

The Democratic leadership agreed to remove entirely three provisions they had been pushing â€" "Say on Pay" or "Proxy Access" provision to mandate shareholder votes on corporate governance issues for rescued firms; an affordable housing fund that would have directed money to organizations that Republicans claim are unethical; and bankruptcy provisions that would have allowed bankruptcy judges to reduce mortgage principal amounts.

We will send further updates as we receive more details.

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