Understanding the Bush Bailout Bill
Today, we're facing a rocky stock market and financial markets that are in turmoil. The Bush Bailout Bill
was originally a three page document that provided sweeping authority to the Treasury Secretary to command $700 billion dollars
with literally no oversight and no "Monday morning quarterbacking". There was no way that the Bush Bailout Bill was going
to succeed this way.
Ultimately, a bill was passed in October of 2008 that provided some protection in the form of oversight. Let's take a look at
the highlights of the Bush Bailout Bill.
Management of the Bush Bailout Bill
This bill created a relief program that allows for the Treasury Secretary to purchase troubled bank assets. The Bush Bailout Bill
did finally agree that this would be done in conjunction with the FDIC, the Federal Reserve, the Comptroller of the Currency, the
Secretary of HUD and the Office of Thrift Supervision.
Funding the Bush Bailout Bill
It was agreed that the full amount of $700 billion in the original Bush Bailout Bill would be available in small tranches of funds
beginning with $250 billion and providing for authorization up to $100 by President Bush. Any additional tranches would be done after
Congress has approved it only.
Bush Bailout and Equity in Banks
Fortunately the Bush Bailout Bill did allow that warrants be issued to the Federal Government that allows for future purchase of
non-voting stock and/or senior debt positions in any company that agrees to accept funds through this program. While there are some
exceptions to this rule, the Bush Bailout Bill clearly states that those exceptions do not apply on any amount in excess of $100 million.
Bush Bailout Bill and Foreclosures
The Treasury Department under the Bush Bailout Bill is required to provide a plan to help homeowners by encouraging loan servicers
to take advantage of the HOPE program and minimize the number
of homeowners who are facing foreclosure. One thing the Bush Bailout Bill did not allow for was any change of terms without approval of the
companies who have a security position in those mortgages.
Bush Bailout Bill and Executive Pay
The Bush Bailout Bill specifically stated that any company that accepted funds and thereby offered a debt or equity position is
prohibited from offering golden parachutes from the time that the Treasury takes a position and includes all new
executive positions in the company.
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Bush Bailout Bill and Judicial Review
The most significant change from the original Bush Bailout Bill format is that the courts may review any actions that are taken
by the Treasury Secretary in the process of honoring the terms of the Bush Bailout Bill.
The Bush Bailout Bill and Transparency
The Bush Bailout Bill requires that any transactions that are completed by the Treasury Secretary must be fully disclosed within
two (2) days of the completion of a transaction and this must be completed by electronic mail.
The Bush Bailout Bill and the FDIC
The Bush Bailout Bill offered a provision that allowed the head of the FDIC to increase the currently offered insurance which
allows depositors funds to be insured up to $250,000 through December 31, 2009.
The Bush Bailout Bill and Oversight
While the original Bush Bailout Bill provided for little oversight the final bill offers a great deal of oversight including a
financial stability oversight board, a Congressional oversight panel and requires further oversight by the Comptroller General a
new officer called officer of the Special Inspector General for the Troubled Asset Relief Program (the Bush Bailout Bill).
The National Debt and the Bush Bailout Bill
One of the most negative aspects of the Bush Bailout Bill is that the annual budget deficit for 2009 may surpass $1 trillion
dollars. The original Bush Bailout Bill increases the federal debt by $700 billion increasing the current debt from
approximately $10.6 trillion to approximately $11.3 trillion.
See also: The HOPE NOW Alliance,
President Elect Barack Obama and The Bush Bailout Bill