Tentative Deal Reached on Bailout Plan
WASHINGTON – A key Democrat negotiating a $700 billion financial bailout says the Bush administration has agreed to include mortgage aid and strong congressional oversight in the plan.
Rep. Barney Frank, the Financial Services Committee chairman, says a great deal of progress has been made in talks between lawmakers and President Bush’s team on the rescue.
A government official with knowledge of the talks also said the administration has agreed to create a plan to help prevent foreclosures on mortgages it acquires as part of the bailout.
Glad to see that Congress didn’t fold on this issue. It was clear they had the leverage. We’ll have to wait and see what the specific details are. It seems to mirror what Senator Obama was demanding as well.
udges could rewrite mortgages to lower bankrupt homeowners’ monthly payments as part of congressional Democrats’ proposal for a $700 billion financial system bailout.
Also, companies that unloaded their bad assets on the government in the massive rescue would have to limit their executives’ pay packages and agree to revoke any bonuses awarded based on bogus claims, according to a draft of the plan obtained Monday by The Associated Press.
The proposal by Sen. Chris Dodd, D-Conn., the Banking Committee chairman, gives the government broad power to buy up virtually any kind of bad asset — including credit card debt or car loans — from any financial institution in the U.S. or abroad in order to stabilize markets.
But it would end the program at the end of next year, instead of creating the two-year-long initiative that the Bush administration has sought. And it would add layers of oversight, including an emergency board to keep an eye on the program with two congressional appointees, and a special inspector general appointed by the president.
Per Obama, he wanted six specific things before he would sign off on any deal:
1. If you can borrow from the government, you should be subject to government oversight and supervision.
2. There needs to be general reform of the requirements to which all regulated financial institutions are subjected.
* Capital requirements should be strengthened.
* We must develop and rigorously manage liquidity risks.
* We must investigate ratings agencies and potential conflicts of interest with the people that they are rating.
* Transparency requirements must demand full disclosure by financial institutions to shareholders and counter parties.
* Work with international arrangements … to address the same problems abroad.
3. We need to streamline a framework of overlapping and competing regulatory agencies.
4. We need to regulate institutions for what they do, not what they are.
5. We must remain vigilant and crack down on trading activity that crosses the line to market manipulation.
6. We need a process that identifies systemic risks to the financial system.