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.
Arrogant and rude, oh my.
“But his government is not socialistic. It is a mafioso”
Socialist Govts *are* mafioso governments! They have never been otherwise. And mafioso govts are inherently hostile to capitalism.
“Genius, socialism is what happens in Northern Europe,. You know, Sweden, Norway, Denmark and the UK. “
Genius, socialism happened in Africa, latin america and Asia too. And the USSR. Economic freedom in Norway is higher than in the 3rd world.
“We are socialists, we are enemies of today’s capitalistic economic system for the exploitation of the economically weak, with its unfair salaries, with its unseemly evaluation of a human being according to wealth and property instead of responsibility and performance, and we are all determined to destroy this system under all conditions.”
-Adolf Hitler
Project alert! I would be a bit careful with self-dealing condescending air of superiority.
You are not so stupid as to believe this oily condescending tripe.
The problem right now is that all the bubbles we have are not independent uncorrelated things where a drop in one is independent of other things going on. These bubbles are all pumped up by the same system of leverage and tightly interlocked and correlated through the enormous quantity of derivatives designed to do exactly that. That is why it is the system that is collapsing and not just individual sectors or banks or hedge funds that are collapsing.
Either you are as smart as the pompous ass you pretend to be and you already knew that so why are you lying to everyone? Or you are just a fool? I am happy to puncture that smug greasy exterior either way.
The slime oozing from your pores is not even English at this point.
“there is absolutely NOTHING that would have been improved in those areas if you forced all commercial banks and investment houses to stay separate. nothing.”
I disagree. One of the things that led to the banking system collapse at that time was their money was tied up in a stock market and was forced down by short sellers. This is one of the things learned when I studied for the series 7 licensing. They were allowed to loan as much money as they pleased for stock market trading. This was capped after the crash.
I believe in diversification, but the unwinding of the regulation allowed banks and insurance companies to do whatever they wanted. This is why insurance companies owned real estate as well as insured real estate. This puts more assets into one class instead of multiple classes. It also allowed Bear Stearns to claim that mortgage backed securities were of a higher grade than they actually were. They not only sold the investment, but they were too close to the ones who gave the investments the rating.
The real culprit here was the giving of unrealistic loans to people who didn’t deserve them. But there would have been less of it because those who were writing them would not have been so easily able to dump them off on investors.
“I have no problem with the markets being well regulated and policed, but the Federal Reserve does not regulate the markets.”
I agree. The Fed should have one job, keep the money supply stable. The Fed doesnt regulate markets nor should it.
The crisis point comes when a credit panic becomes a ‘systemic’ issue. I think the right thing is indeed to have a separate entity handle this from an asset persepctive while Fed manages the system’s liquidity.
” Honest people do make mistakes, and they also get to pay for them. The current shrieking that they shouldn’t be responsible for their mistakes makes me doubt their honesty.”
Nobody wants to defend irresponsibility, but when you have a chain of bad debtors, from a foreclosed homeowner, to a Fannie Mae bad asset, to bank going bankrupt, you have a question of who pays? You cant make the deadbeats pay, and the debts are large enough to threaten the system.
It’s like the old saw. If you owe $100 and cant pay it, you have a problem, if you owe $1 billion and you cant pay it, the bank has a problem.
Exactly how to make deadbeats pay up? You cant. The USA and our economy as a whole has a problem. We need to consider that this bailout isnt for *their* good but *our* good. Either we have a painful liquidation process which in the interim probably causes a steep recession/depression ... or we pay up with a Govt bailout and have a smoother liquidation process. Either way, we will pay a price, but the price of inaction seems more severe.
“The money system need not be privatized, just return monetary responsibility to the congress. “ Egads, Pelosi, Schumer, Reid etal?!?! Surely you jest. They would bollox things up horribly. I would take private money, gold standard, anything, over a politicized Congress control over money.
I think the Fed setup is a good compromise. At least with the ‘separate’ Federal reserve, you get less political pressure for inflation, ‘targetting’ unemployment and other keynesian nonsense. Not saying it never happens, but the degree of it is less.
So, either you are one of the crooks or in the employ of the crooks or have an awful lot to gain from this.
The more reasonable position, that most are taking is, first, absolute horror. Second, if it is really really necessary, then we want concessions including that the crooks who did this repay their debt to society. Third - honesty from our government and its officials.
What we have no tolerance for is this superior oozing condescension that we - the little people - are too unsophisticated to understand what is in our own best interests. We know when our pockets are being picked and we know the names of some of the people doing the picking. And that is enough.
Who is the "us" in "our good" when Paulson assures us that the CEO's that made horribly bad business decisions in making loans to folks who can't apy, bundling, writing derivatives against and leveraging these loans will get to keep their golden parachutes.
And it isn't the USA as whole that has this problem. A lot of us have lived prudent and careful lives and howled about this for years. Why should we pay, while the crooks go free. You don't think that the bunglers on Wall St. who made fortunes doing this are crooks? Well what are they? Oh yes, in your words, good kind hearted Mugabe style socialists.
“And the reason you are in my crosshairs is that”
... no, you are just being a jerk. Nobody is stopping your right to be a jerk.
“So, either you are one of the crooks or in the employ of the crooks or have an awful lot to gain from this.”
... and willing to slander people.
My only involvement with wall street is as an investor.
Yeah, I also have something at stake. $100,000 lost in a single day if the market opens down 15% because the bailout wont happen. More downside as we lose jobs including my own (nonfinancial) job in a recession, etc.
“What we have no tolerance for is this superior oozing condescension”
Then stop being an arrogant flamer with your own condenscing attitude. All I did was dispute your terminology, and you become a raging hostile lunatic over everything I say. It’s uncalled for.
Get a grip. Good day.
“If your definition is correct then their market value is zero since these securities are unmoveable in today’s market”
Clearly the MBSs have value if the market can get unclogged and they are actually “backed” but not so sure about the CDSs. These may end up being completely written down. That is really the problem if you try to buy the MBSs you have to unwind the CDSs. I think they will be pretty much wiped out. Could be wrong. That is the part of the plan I am really interested in seeing.
A: ALL OF THEM, IF WE ACT QUICKLY!
I have left phone messages for my two Senators and Congressman, and now am preparing faxes to send today in opposition to the ONE TRILLION DOLLAR BAILOUT!
Yes, I know. I agree. But, what I want to see, is the government FINALLY CUTTING spending! I want to hear McCain and Palin talking about cutting spending. They need to live in a budget. I have heard how Palin cut spending, but now how she is going to cut it if they get in the White House.
Well the shorts were all forced out of the market last week(Which automatically forces the markets to appear to rise). The media has been pushing this bill as a done deal to save everything. They are even still lying and saying that foreign banks won’t be able to participate. Even though Paulson said this morning that they will. And with all of this the US futures are tanking after open.
DJIA INDEX 11,157.00 -198.00
S&P 500 1,224.90 -21.10
NASDAQ 100 1,707.00 -32.50
So far the dollar is continuing to slide tonight as well.
Shake a tree hard enough and the nuts fall out.
First, lots of us have stakes in the system, but are not screaming for bailouts. In addition to a diversified portfolio I have a house that Greenspan says is worth three times what I paid for it. I really doubt that and don't hold the taxpayers responsible if it drops to a price that folks similarly situated might actually be able to afford to pay using real money that they earn.
Second, without wanting the details, a lot of folks have figured that something was going to blow sooner or later and put their funds in safer places. They did not enjoy the benefit of a wild ride up in the markets. Why should they cushion the fall of those that did?
If you mean the Speaker of the House and President of the Senate, whomever that may be then yes. Of course, I also favor repealing the fifteenth and sixteenth amendments.
The people selected for leadership may be much different if the legislature didn’t mainly just meet to divide up the spoils.
More petty comments from you misses the point, which was that your earlier slander was wrong: I have the same stake in as others in the working, investing and home-owning class, no more no less. I (we) who help make the American economy work dont want nor need a bailout for us, but we also dont want another depression created by a credit panic. We just want the economy to keep working.
The question is what is the best policy to resolve the current crisis, and it would be better to discuss that without personal attacks.
If you want to understand what made Paulson jump out of his skin on Weds to propose this, just look at the fact that money market redemptions were accelerating mid-week. Look at this:
http://alephblog.com/2008/09/19/liquidity-for-the-government-and-no-liquidity-for-anyone-else/
300 BPS between treasuries and corporate 90-day paper. That alone, if it persists, would send the economy reeling.
“Do nothing” is not an option unless you wanted the credit system on a global basis to seize up.
Food for thought. Found on a blog ref’d above:
“I would suggest that readers here look at how the Asian Financial crisis resolved itself. It was done only with the intervention of the government thru the set up of a unit to buy over failed assets. These govt vehicles actually made money - a few years later.
Its not the end of the world with this ‘bailout’. It allows the economy to move on, ringfences the problem and provides a systematic way of resolving the problem.
The problem with America is that it has to eat humble pie with this proposal and Paulson has so bravely admitted that it was a humbling proposal. The US was the most vehement in opposing then Malaysian prime minister (Dr Mahatir) when he instituted capital controls to protect the Malaysian currency, banned short selling and set up a state owned vehicle to bail out the Malaysian banks. Likewise, Indonesia, Japan, Korea, Thailand had similar plans.
Life for these countries have moved on since. And for the people, it was a well deserved lesson and the result was much stronger balance sheet and a less reckless attitude to leverage. “
“The people selected for leadership may be much different if the legislature didn’t mainly just meet to divide up the spoils.”
Nah, the Congress of 1850-1900 was as corrupt as today’s but they had less levers (money) to play with.
PJ ORourke said something like give money to Congress is like giving whiskey and car keys to teenaged boys. giving them direct political control over the monetary printing press would be like adding crystal meth to the mix.
“I have left phone messages for my two Senators and Congressman, and now am preparing faxes to send today in opposition to the ONE TRILLION DOLLAR BAILOUT! “
OK, but what alternative do you propose that would avert a credit system meltdown?
Having people we can trust work out a different plan.
So now we citizens are on the hook for $37,717 EACH? And being the breadwinner for three, that means I have to cough up $113,150? Right. Sure. Even over 10+ years, with no interest payments and no additional debt compounding the issue, I have to fork over >$11K/year JUST for my family's alleged share of that debt? Right. Sure.
I'm lookin' for an exit strategy, and the only one is to inflate our way out of it.
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