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House approves revised bailout bill
Published October 3, 2008 - BizTimes Daily
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The U.S. House of Representatives voted today to approve a new version of the Emergency Economic Stabilization Act, and the bill now awaits the signature of President George W. Bush, who has pledged to sign it.
The bill was approved today in the House by a 263-171 margin.
Voting in favor of the today were U.S. Reps. Tammy Baldwin (D-Madison); Ron Kind (D-La Crosse); Gwen Moore (D-Milwaukee); Dave Obey (D-Wausau); and Paul Ryan (R-Janesville).
Voting against the bill today were U.S. Reps. Steve Kagen (D-Appleton); Tom Petri (R-Fond du Lac); and F. James Sensenbrenner (R-Menomonee Falls).
Overall, 172 Democrats and 91 Republicans voted for the revised bill today, while 63 Democrats and 108 Republicans voted against the bill.
The Senate approved the bill Wednesday, with Democrat Herb Kohl voting for it and Democrat Russ Feingold voting against it.
SBT has posted special dueling edtions of the Milwaukee Biz Blog about the bill this afternoon. Ryan, one of the architects of the revised bill, again strongly denounces the Bush administration in his blog. Sensenbrenner warns in his blog that the bill could lead to higher inflation.
Ryan said the new bill includes the following provisions:
- Reduces taxpayer exposure - Rather than a $700 billion blank check, as requested by the Bush administration, $250 billion would be available immediately to the Treasury Secretary with stringent oversight. Any additional funds would require additional government action and Congressional approval.
Guaranteed taxpayer protections - Requires any participating institution that sells their troubled assets to the government to provide equity warrants to the U.S. Treasury. Ryan fought for this provision to guarantee that taxpayers will be the first to benefit from any future growth of companies that take part in this recovery effort. - Strengthens support for homeowners - Keeping the focus on Main Street over Wall Street, additional assistance is provided for those facing the prospect of foreclosure. In addition to assisting struggling financial institutions, the Treasury Department is directed to develop an action plan to help mitigate home foreclosures.
- Wall Street helps bail itself out - The House Republican alternative, crafted by Ryan, focused on an insurance model, rather than a purchase model, to address the frozen assets clogging up the financial system. Participating institutions holding these assets would pay the insurance premiums - in effect helping bail themselves out rather than rely on taxpayers' money. An insurance program was included in the final agreement.
- Eliminates special interest giveaways - House Republicans were able to remove unrelated and costly provisions that would funnel funds to special interest groups, such as ACORN. Instead of creating a special interest slush fund, all funds recouped will be returned to the taxpayer to pay down the debt.
Increased oversight and transparency - While the Paulson proposal explicitly removed any judicial oversight and lacks transparency provisions, the negotiated economic rescue package establishes a bipartisan oversight committee that requires honest and transparent reporting to Congress and the public. In addition, the programs will be monitored by a Special Inspector General and reviewed and audited by the Government Accountability Office. - Caps on executive compensation - Limits executive compensation to ensure that bad actors who contributed to this crisis are not rewarded with golden parachutes or severance pay.
Reaction to Congressional approval of the bill quickly poured in from public officials and corporate interests this afternoon.
Kurt Bauer, president and chief executive officer of the Wisconsin Bankers Association, issued the following statement: “Wisconsin's FDIC-insured depository banks applaud the courage and leadership of the Wisconsin Representatives who ultimately supported the Emergency Economic Stabilization Act despite some public opinion to the contrary. Passage of the Stabilization Act was critical to restore confidence and stability to US and world financial markets. As the week progressed, much of the public has come to realize that the costs of not passing a stabilization package are too high. The bipartisan leadership demonstrated in both the US House and Senate was significant and necessary. The Stabilization Act will not only benefit the financial industry as a whole, but will also directly benefit the taxpaying consumer. The temporary increase in Federal Deposit Insurance Corporation (FDIC) insurance coverage limits from $100,000 to $250,000 through December 31, 2009, further reminds consumers that the safest place for their money is in an FDIC-insured depository institution. WBA expects President Bush to sign the Emergency Economic Stabilization Act within hours."
Edward Yingling, president and CEO of the American Bankers Association, said: "The American Bankers Association supports the compromise legislative package that Congress is considering to address the current financial crisis. The crisis on Wall Street and in financial centers around the world has reached a point where extraordinary action is required. The proposal put forth by Treasury Secretary Henry Paulson and modified by Members on both sides of the aisle is a constructive solution to the crisis we face. It will provide the financial backstop needed to unfreeze the financial markets and provide for greater transparency and accountability for firms that participate in the program. The banking industry entered this crisis in very strong shape. With more than $1.3 trillion in capital, the vast majority of banks remain well capitalized and are well-positioned to weather this storm. The FDIC fund is sound and the banking industry remains committed to paying the insurance premiums needed to keep it sound. We support this compromise package because we recognize the impact that a failure to pass this legislation would have on the national economy."
Todd Stottlemyer, president and CEO of the National Federation of Independent Business, said: "We are pleased that Congress has heeded the call to pass bipartisan legislation that will restore confidence in our financial system. While small business owners have strong and conflicting feelings about the economic rescue package, in the end, their ability to grow their businesses depends upon stability and liquidity in the financial markets. Small business owners, whether or not they use credit to run or expand their own businesses, know that access to credit and a fully functioning financial market are important to them and to their customers, suppliers and vendors. These are trying times for the country, and we appreciate the hard work put in by Congress. Now that this immediate crisis has passed, we need to press forward to be a loud voice for an end to the 'business as usual' ways of Washington. It's time to get our fiscal house in order - both in Washington and in households nationwide. It is essential for the prosperity of small business, and for the country's future economic growth."
Robert Nardelli, chairman of the board for Chrysler LLC in Auburn Hills, Mich., said: "Chrysler LLC strongly supports the passage of H.R. 1424, the Emergency Economic Stabilization Act of 2008 which is an important step in stabilizing our credit markets and the overall economy. As a result of the economic contraction and illiquidity in the credit markets, the ability of domestic manufacturers to finance new motor vehicle sales for consumers has been substantially weakened. To stimulate car and truck sales, Congress should pass the Financial Rescue Plan.
Kind said: As Monday’s vote showed us, the consequences of not acting are dire. When the bill failed earlier this week, in a matter of minutes, the stock market lost $1.2 trillion and western Wisconsin families saw their investments, their kids’ college funds, and their retirement savings lose tremendous value. The danger of inaction was much greater than the danger of action. My fear was that without this plan, we would see another economic free fall, followed by a long and painful recession in this country affecting people on Main Street more than anyone. Our credit markets were already shutting down. The result would be individuals unable to take out basic loans and businesses large and small unable to pay their employees. The changes we made to the Bush Administration’s initial proposal made this rescue plan about Main Street, not Wall Street, about protecting taxpayers, not executive salaries. This bill now ensures that taxpayers will be reimbursed at the end of the day, that there will be proper transparency and oversight in the process, and that there will be no golden parachutes for Wall Street CEOs that helped get us into this mess. This was a much better bill, and it now goes a long way to protect the taxpayer’s investment. I was outraged, however, that the Senate chose to add a number of extraneous items to this bill that will only add billions to our national debt. They used the urgency of action to include tax provisions without paying for them. The culture of deficit spending in this body has got to stop, and I do not appreciate the way the Senate has extorted the House into accepting billions in extraneous spending."
To view more information about the provisions of the bill, click here.
After the bill was approved, the Dow Jones Industrias Average, which had been up by more than 300 points earlier today, erased all of those gains was down by about 7 points.
Immediately after passing the bailout bill, the House began to debate a bill to extend the length of unemployment benefits for Americans who have lost their jobs. The U.S. Department of Labor today reported that the U.S. economy lost 159,000 jobs in September, the ninth consecutive month of national job losses.
