Bailout Bill Becomes Law
Saturday, October 04, 2008
After more than a week of debate that triggered palpitating market response, Congress has approved H.R. 1424, the Emergency Economic Stabilization Act of 2008 (EESA). Within hours of the House's 262-171 approval this afternoon, President Bush signed the bill into law.
Treasury Secretary Henry Paulson said his Department, along with the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC), were poised to implement the new legislation “rapidly and methodically.”
EESA allows the Treasury Secretary to purchase as much as $700 billion in troubled mortgage assets from financial institutions whose balance sheets have been hit hard by the fallout of the subprime crisis and decaying property values.
The government's action is expected to resuscitate lending and quell the growing turbulence within the financial sector. The historic “bailout” legislation is one of the most far-reaching economical interventions since the Great Depression.
Federal Reserve Chairman Ben Bernanke, who played an instrumental role in the Bush Administration's crafting of the proposal, said he was pleased with lawmakers' commitment to strengthening the nation's economy. “The legislation is a critical step toward stabilizing our financial markets and ensuring an uninterrupted flow of credit to households and businesses,” he said.
Just five days ago, the House rejected the bailout with a 228-205 vote. Revisions made by the Senate seemed to soften the House opposition and included more than $100 billion in tax breaks for businesses and a temporary increase of the FDIC's insured deposit limit to $250,000.
Although lobbyists pushed hard for changes to the bankruptcy law that would let judges modify mortgages on primary residences, they were unsuccessful in convincing lawmakers to include such a provision.
But according to Representative Maxine Waters (D-California), EESA is more than just a bailout for Wall Street and big banks. “For anybody who says there's nothing in this bill for homeowners, they're incorrect,” Waters said during the floor debate. “When we buy up this toxic paper, we're in charge,” Waters continued, allowing the government to make the kind of loan modifications it's been urging the industry to initiate.
“By coming together on this legislation, we have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country,” President Bush said. “We have shown the world that the United States of America will stabilize our financial markets and maintain a leading role in the global economy.”
According to John A. Courson, COO of the Mortgage Bankers Association, the true long-term cost of the program may be far less than $700 billion, since the Treasury has the discretion to redeem or sell the assets it purchases when the market recovers.
Treasury Secretary Henry Paulson said his Department, along with the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC), were poised to implement the new legislation “rapidly and methodically.”
EESA allows the Treasury Secretary to purchase as much as $700 billion in troubled mortgage assets from financial institutions whose balance sheets have been hit hard by the fallout of the subprime crisis and decaying property values.
The government's action is expected to resuscitate lending and quell the growing turbulence within the financial sector. The historic “bailout” legislation is one of the most far-reaching economical interventions since the Great Depression.
Federal Reserve Chairman Ben Bernanke, who played an instrumental role in the Bush Administration's crafting of the proposal, said he was pleased with lawmakers' commitment to strengthening the nation's economy. “The legislation is a critical step toward stabilizing our financial markets and ensuring an uninterrupted flow of credit to households and businesses,” he said.
Just five days ago, the House rejected the bailout with a 228-205 vote. Revisions made by the Senate seemed to soften the House opposition and included more than $100 billion in tax breaks for businesses and a temporary increase of the FDIC's insured deposit limit to $250,000.
Although lobbyists pushed hard for changes to the bankruptcy law that would let judges modify mortgages on primary residences, they were unsuccessful in convincing lawmakers to include such a provision.
But according to Representative Maxine Waters (D-California), EESA is more than just a bailout for Wall Street and big banks. “For anybody who says there's nothing in this bill for homeowners, they're incorrect,” Waters said during the floor debate. “When we buy up this toxic paper, we're in charge,” Waters continued, allowing the government to make the kind of loan modifications it's been urging the industry to initiate.
“By coming together on this legislation, we have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country,” President Bush said. “We have shown the world that the United States of America will stabilize our financial markets and maintain a leading role in the global economy.”
According to John A. Courson, COO of the Mortgage Bankers Association, the true long-term cost of the program may be far less than $700 billion, since the Treasury has the discretion to redeem or sell the assets it purchases when the market recovers.
