Sunday, September 28, 2008
And The Deal Is?
Congressional leaders say they've reached a deal on the federal bailout out of America's financial industry sector. The plan calls for the government buying at least $700 billion in distressed mortgage securities and other bad securities held by banks and other investors, $350 billion of which would become immediately available. A provision insisted on by House Republicans will encourage the holders of bad debt to keep the debt and take out insurance from the government to cover defaults. A tax on the financial industry could be triggered if the government fails to recover its investment after five years. Emphasis is being placed on trying to work out repayment plans for homeowners, such as reduced payment terms so they can keep their homes. The deal supposedly has provisions ensuring that taxpayers are first in line to be repaid. New executive compensation requirements are a part of the deal. There will be new limitations on executive compensation in general, no multi-million dollar golden parachute contracts for former executives and a requirement that bonuses be repaid for unfulfilled gains. Congressional deal-makers also removed the controversial plan by Democrats to divert 20% of any amounts recovered by the government to a housing fund that could be tapped by nonprofit groups for housing-related programs.