Huge US financial rescue plan expected Monday

19 September 2008 23:26  [Source: ICIS news]

WASHINGTON (ICIS news)—The US Treasury Department is expected to deliver to Congress as early as Monday or Tuesday a comprehensive plan to resolve the financial crisis, but sources said on Friday a final package may include new energy taxes.


Treasury Secretary Henry Paulson said earlier on Friday that he and his staff would be working throughout the weekend with congressional leaders and their staffs to craft a plan to absorb “hundreds of billions of dollars worth” of bad home mortgage loans and related securities.


Sources at Washington, DC, law firm McKenna, Long & Aldridge said they expect Treasury and the Bush administration will ask Congress for legislative authority to establish something similar to the Resolution Trust Corporation (RTC). That government-owned entity was created to resolve the US savings and loan (S&L) crisis in the 1980s and 1990s when nearly 750 S&Ls collapsed.


The new government entity, said the firm, would acquire the illiquid mortgage-related assets of private US financial institutions at heavily discounted rates.


“Early indications point to the Treasury wanting to hold financial instruments in this new government body to maturity,” the firm said. “However, the legislation could provide circumstances where private sector groups are able to purchase highly undervalued assets from the new government entity.”


The law firm, which specialises in regulatory affairs for the chemicals manufacturers and industry sectors, said that members of Congress may take the opportunity to include in the rescue package “certain bankruptcy, consumer protection and regulatory provisions” that Wall Street and the banking sector have long opposed but now may be unable to block.


In addition, said the firm, because the bailout package will be massive – obligating US taxpayers, as Paulson said, with hundreds of billions of dollars worth of debt – Congress may seek to offset a portion of that burden with “targeted revenue raisers”.


“Industry sectors seen as insulated from the turmoil or benefiting from windfall profits could be singled out for tax increases,” the firm said, suggesting that oil and gas companies and major government and military contractors might be targeted.


Certainly in the last year and more the Democrat-controlled Congress has tried several times to impose a windfall profits tax on oil and gas companies or to deny them tax breaks that Congress had earlier granted to all manufacturing firms.


In addition, “Some talk is being heard of additional or floundering legislative items being added to this fast-track bill,” the law firm said, including what might be characterised in Congress as “stimulus” measures for infrastructure improvements and other projects.


To discuss issues facing the chemical industry go to ICIS connect

By: Joe Kamalick
+1 713 525 2653

AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly

Get access to breaking chemical news as it happens.
ICIS Global Petrochemical Index (IPEX)
ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index