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.
It has the same problem the first two “Federal Reserves” had. It concentrates the money supply and binds the politicians to it. Jefferson and Jackson were correct to kill it in their time. Unfortunately, we are totally out of men with the same quality of character of either of them.
We need not worry about socialism, precisely. Why worry about that when you can set up either an outright kleptocracy or ogligarchy.
The problem as I see it, is that nobody has followed or enforced the law or common sense with regards to lending and Wall Street in quite some time. The SEC does absolutely mothing to stop Naked Short Sells, when that ought to be a career killer if you get caught at it. Nobody thought that having more money than the GDP of the entire planet was a problem. The only people thinking were the ones who realized they could destroy businesses and get rich doing it.
There are four or five hedge fund managers that should be shut down and investigated for their role in all this. The DTCC needs to be forced to have heavy federal oversight. The OCD market either needs to be voided or regulated.
The sad fact is our government has failed. It is largely incapable of enforcing it’s own laws. We may as well have no immigration policy. Anyone on this board can tell you where to go in their town to get a joint. The police operate outside of the bounds of no-go areas, yet enforce the law heavily against the generally law abiding. It has billions that dissappear into a black hole, not waste just lost and no one know’s where it went. That the laws and Wall Street are scoffed at should be no surprise, I guess.
Yep, and if that isn’t the definition of a despotism, then I don’t know what is.
Not really. If you can compare the banking system of... say... a week ago... and one that becomes, by definition, an agent of the federal government, you would notice that one is a private banking system and one that is nationalized.
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.
The federal gov't stopped the stock market from crashing by creating the illusion that the insurmountable debt -- which is hidden as Level 3 assets - will simply be taken off the shoulders of these financial institutions. The problem is not liquidity. The problem is a lack of confidence and trust among the banks. Check the TED spread and LIBOR. They injected $300 BILLION of cash into they system on Wednesday and Thursday, and LIBOR went up! This isn't liquidity. It's a lack of solvency and the extreme distrust not built up among banks. Money is being hoarded in the system, not circulated.
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’.
A trillion dollars of Level 3 assets and CDS billed to the public will get the job done. Note, this only assumes what banks classified as "Level 3". Watch the rush to re-classify "Level 2" assets as "Level 3" so those can be sold off as well. The cost of this bailout will soar well beyond a trillion dollars. That's will kill the economy any way you cut it, and three years of pain is extreme optimism.
Adding ‘trust’ to markets via govt intervention is not fakery, but the real stabilizing factor that can end panic phases of credit cycles.
It's fakery when the government implies it can resolve the problem. It can't. The gov't injected enough trust into the system to stem the avalanche landing on Goldman and Morgan Stanley and relieve the intense pressure that was exerted on the bond market.
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.
The bill only prescribes a maximum account value of $700 billion at any given time. i.e., if the fund is $700 billion and they sell $50 billion, they will buy another $50 billion of dead securities off of some bank's Level 3 sheet and add it back to the fund, bringing it back to $700 billion. This is not an estimate of total cost, only a limit on how much will be on the gov't balance sheet at any given point.
I dont see it that way. The structure is not much different from RTC in the last 1980s for S&L bailout.
Those banks were already failed, were they not?
hyperbole.
This is a repudiation of the free market system in broad daylight. Gov't manipulation of the stock market, gov't equity positions in private companies, socialization of private sector losses... unlimited powers.
It’s going to be a lot more than $800 billion.
What does the gov’t plan on doing with the muni market? There’s another trillion dollars looking for a bailout.
Well this is how I feel: the taxpayer is footing the bill, so the taxpayer should know what is going on with their money.
Section 8 of this proposal is scary..... especially considering the fact that no one in the government is telling us exactly what is going on and what they want to do with our money!
This bailout may be good, but right now we don't even know what this bailout is going to do.... and we won't find out until after it becomes law!
We're being asked to have total faith in the government, and I just don't feel comfortable with that.
If you had ‘rad’ my full post.....there would be no reason for you to have clipped the part you didn’t want to include in this post....lol
Straight flush....lol
By 2036 I won’t give a damn cause i’ll have been dead a long time or so old it wouldn’t make a difference.!
Amazing that people cannot figure that out. If it were just a temporary bank run, or a glitch in a market, Helicopter Ben could fix that in an instant, or wonderful arbitrage opportunities would exist. We already spent a year trying all of the temporary loans and swaps and special credit windows and things. Broke is broke.
Yeah, this proposal basically makes the Secretary of Treasury the “Master of the Universe” for the next two years when the bill expires....But we don't even know who the Secretary of the Treasury will be for 20 of those months. For all we know, it could be Chris Dodd if 0bama gets elected...
“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.”
So the Federal Government is authorized to make the same mistakes Bear Stearns made.
The deregulation of the banking system under Clinton was the single biggest act of bipartisan stupidity in US history. This act however will instantly take over 1st place.
It’s high time for the citizens of this country to take the government back. When does the revolution begin? I guess we need a list of who needs to be hung first?
“Start calling your reps and Senators.”
Complete waste of time, they are completely clueless in all of this. If they had any real ability, this would have never happened.
I want to know where this money is coming from.
We better see some budget cutting by this next congress and White House.
McCain better win. We need someone with the balls to cut the budget. Sorry, I really like Bush, but he has spent money like a teenager on payday! If we don’t see some conservative spending, and values promoted by McCain, I tell you what, I will campaign for Hillary, cuz I am sick of this crap. They DO have a OPM addiction!
We worked hard, lived on a budget, scrimped and saved, were good citizens, bought used cars so we wouldn’t have a car payment, bought clothes at the second hand store or took hand me downs from the neighbors, we grew our own food, cut our own hair, watched for grocery store sales, stayed married when we didn’t want to, raised our kids and volunteered in our community.
Why should we have to pay for those people who weren’t responsible, like we were? It isn’t fair, and it isn’t right.
Vote all the bums out of office.
We could fire them all and they would be replaced by the like-minded. We need to change the system from the state/local level.
If your definition is correct then their market value is zero since these securities are unmoveable in today’s market. But I don’t think that’s true.
These securities have junk bundled with value and must be unwound to determine their worth.
The SEC and Congress and Clinton allowed non-registered derivatives between institutions. It is these derivatives that are particularly damaging to market liquidity now. House of cards.
Are you saying that in your opinion there is no value in the mortgage backed seurities for the Feds to sell?
I have also been reading about the credit default swap contracts clogging the markets. What do you think?
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