US leaders reach agreement on final bailout plan

28 September 2008 14:49  [Source: ICIS news]

By Joe Kamalick

 

WASHINGTON (ICIS news)--US congressional leaders and top officials of the Bush administration reached agreement early Sunday on the final terms of a $700bn (€476bn) bailout plan to rescue financial markets, House Speaker Nancy Pelosi said.

 

In a press conference just after midnight local time (4:00 GMT), Pelosi, other congressional leaders of both parties and Treasury Secretary Henry Paulson said they had resolved differences among Democrats and Republicans that had scuttled an earlier proposal on Thursday of last week.

 

She indicated that top leadership of both the Democrat and Republican members of Congress have agreed with Bush administration officials on the fundamental principles of the bailout plan.

 

According to the list of principles released by Pelosi’s office, the revised bailout plan will give the Treasury Department $350bn initially, with a subsequent installment of the $350bn balance as the rescue plan is put into play.

 

A bipartisan oversight board will be appointed by Congress to monitor Treasury’s spending of bailout funds, and the Government Accountability Office (GAO) - the federal financial accounting agency - will audit Treasury’s acquisition of distressed mortgage securities. 

 

Treasury’s acquisitions will be posted on the internet in real time so that the public at large can follow and examine the purchases.

 

The final plan also limits executive compensation and extravagant “golden parachute” retirement or firing bonuses to officials of failed banks, with some of those limits to apply retroactively.

 

Taxpayers also will be given equity share in the financial institutions that are revived by the plan, and Treasury will have authority to adjust the terms of those mortgages or mortgage-backed securities it acquires in order to forestall many of the 2m home loan foreclosures projected for 2009.

 

Congressional staff are working to render the terms of that agreement into a formal legislative bill that the House and Senate can approve with formal votes as soon as possible.

 

Representative Roy Blunt of Missouri, the second highest Republican in the House of Representatives, said the house would meet in a special Sunday session at 13:00 Washington time to consider the bailout legislation.

 

There was no immediate word on when the US Senate might vote on the finished plan.

 

“We have made great progress,” Pelosi said in a statement, “in resolving our differences so that we can go forward with a package to stabilise the markets and, most importantly, to protect the US taxpayers.”

 

“We have to get it [the agreement] committed to paper so that we can formally agree, but I want to congratulate all the negotiators for the great work that they have done,” said Pelosi.

 

US government officials had been under considerable pressure to conclude a bailout plan before the Asian markets open on Monday. The reaction of those trading venues will provide the first indication of whether the markets see the rescue plan as effective.

 

Pelosi said the agreement will “send a good, strong message to the markets”.

 

Senator Judd Gregg of New Hampshire, the ranking Republican on the Senate Budget Committee and lead negotiator for Senate Republicans, said bipartisan talks had made “dramatic progress towards accomplishing something that is critical to the American people”.

 

“We are on track to doing something that will be very substantive and appropriate to address this issue,” he said.

 

“We can’t underestimate the threat we face relative to the fiscal meltdown and the impact it will have on Main Street,” Senator Gregg said, indicating that the final plan will get quick approval in the Senate.

 

($1 = €0.68)

 

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By: Joe Kamalick
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