Posted on 09/20/2008 10:17:51 AM PDT by Fox_Mulder77
LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY
TO PURCHASE MORTGAGE-RELATED ASSETS
Section 1. Short Title.
This Act may be cited as ____________________.
Sec. 2. Purchases of Mortgage-Related Assets.
(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.
(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:
(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;
(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;
(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;
(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and
(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.
Sec. 3. Considerations.
In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--
(1) providing stability or preventing disruption to the financial markets or banking system; and
(2) protecting the taxpayer.
Sec. 4. Reports to Congress.
Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.
Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.
(a) Exercise of Rights.--The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.
(b) Management of Mortgage-Related Assets.--The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.
(c) Sale of Mortgage-Related Assets.--The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.
(d) Application of Sunset to Mortgage-Related Assets.--The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.
Sec. 6. Maximum Amount of Authorized Purchases.
The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time
Sec. 7. Funding.
For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.
Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
Sec. 9. Termination of Authority.
The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.
Sec. 10. Increase in Statutory Limit on the Public Debt.
Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.
Sec. 11. Credit Reform.
The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.
Sec. 12. Definitions.
For purposes of this section, the following definitions shall apply:
(1) Mortgage-Related Assets.--The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.
(2) Secretary.--The term “Secretary” means the Secretary of the Treasury.
(3) United States.--The term “United States” means the States, territories, and possessions of the United States and the District of Columbia.
Further stress on the nation's financial markets could reverberate and "cause massive job losses, devastate retirement accounts, further erode housing values, and dry up new loans for homes, cars, and college tuitions," Bush said.
I amazed he got that whole sentence out without one of his usual mistakes that end up on Letterman.
And the subsequent lending crunch will mean that will have to save more to qualify for a normal, non-subprime loan.
Thank you, a$$holes.
Don’t think about it too hard or you will go psycho.
It looks like they are planning to buy the bad assets, and then pay the folks who made the bad loans to continue to manage them. It’s a win-win for the banks.
How many bank/S&L crooks is it that Bush has pardoned?
“We’ll have a government run banking system for the first time since the United States Bank in the 19th Century. “
We’ve had that since 1913. The Federal Reserve.
and where do you plan on spending a fraction of an ounce of physical gold or silver on staples if your checkbook and plastic are worthless?
This whole rollercoaster ride is terrifying, and I wish I could find the exit door. But, as you observed, this Section 8 is the one that made my heart stop.
.. Section 8 will become a new catchphrase, they could have at least thrown a little leavity our way and called it “Catch 22”
LOL U’ve got a point!
I totally agree with your sentiment and your conclusion, with one exception: If we let it die (and I think we should), we'll be suffering for much much longer than the short term. But long term suffering is truly the only viable choice if we're to preserve our Republic. I don't see that happening, however.
could reverberate and “cause massive job losses,
Nah.....that was caused by GATT, WTO, NAFTA, MFN, etc etc etc, all of which in effect exported the American market as well jobs and tech, not to mention our REAL former strength, which was our late great industrial base.....
“All this proves to me is that the banking system, as we know it, is dead and gone.”
Uh ... no. This actually preserves it.
What has been done here is the federal govt is providing liquidty in the market for toxic derivatives and bad mortgages. In doing so, they are stabilizing as system that had ‘seized up’ due to the lack of liquidity and buyers for this stuff. the price of this ‘good deed’ is to add billions to our national debt.
Yes, this is not a good option, but good options ran out when banks started going under. The choice would be to see more banks go under due to lack of liquidity, see the stock market and economy tank, and consequently we’d see a global slump. After about 3 years we’d get through the ‘pain’.
I would add that ‘trust’ is not an artificial construct as lack of trust changes investment decisions. Adding ‘trust’ to markets via govt intervention is not fakery, but the real stabilizing factor that can end panic phases of credit cycles. Had the govt been this interventionist in 1930, we probably wouldnt talk about the great depression (never mind that govt created the great depression with 3 actions: high tariffs, high taxes, and overly tight deflationary money policy; my point is the *right* govt policies will make the difference between depressions or not.)
“3. But really, the banking system has effectively evaporated. At least that’s what this bill tells me. “
Again, no. the banking system will endure, but it would have been greatly damaged without some aid.
I would also add that $700 billion is the holding limit in the bill. People assume that would be the cost incurred, but it would likely be less if/when the Govt buy at market-stabilized prices and takes their time to resell at reasonable price. I won’t give an estimate on real cost, but leave that to some economists/analysts to estimate. I don’t know.
“If it’s not gone, this is the greatest power grab of the executive branch since the CIvil War”
I dont see it that way. The structure is not much different from RTC in the last 1980s for S&L bailout. This is just the bailout part, This is the authority of the Govt to in effect buy up at a steep discount distressed financial products. I dont see much regulatory/power stuff here. That could make a difference if we start adding moreregulations on investment houses. That could be counterproductive (as Sarbanes-Oxley has been in some ways by scaring off the IPO market).
” and the quality of our representative republican form of government just got downgraded like AIG.”
hyperbole. Our govt spends $3 trillion of other people’s money each year. a $700 billion bailout is huge, but hardly novel of the govt to take from peter to give to a supposed ‘good cause’. $200 billion for katrina, $500 billion a year for medicare, $800 billion a year in domestic spending, a $200 billion farm bill, etc. ... easy money come, easy money go.
My only concerns are the moral hazard aspect of this and the question of what it does to our long-term financial stability.
“Section 8 will become a new catchphrase, “
A Section 8 discharge from the miitary is (or at least WAS) based on mental health.....and I think there is some form of subsidized housing called section 8 as well......perhaps the authors are a bit cynical, hmmmmm?
Be careful - they might reinstitute debtors' prison.
We have to stop this plan. This is horrible beyond belief.
Exactly.
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