The Emergency Economic Stabilization Act of 2008
Significant bipartisan work has built consensus around dramatic improvements to the original Bush-Paulson plan to stabilize American financial markets—including requiring a plan to ensure the taxpayer is repaid in full. On September 29, 2008, the House voted on this bill. While 205 Members voted for the bill, it failed to receive the necessary votes for passage.
The defeat of the Economic Emergency Stabilization Act resulted in additional severe economic impacts both on Wall Street and on Main Street. The consequences of the vote – an historic drop in the stock market and the loss of $1.2 trillion in savings, investments, and retirement funds – had a major impact on American families, small businesses, and others that demonstrated the imperative for Congressional action.
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CRITICAL IMPROVEMENTS TO THE RESCUE PLAN
Democrats have insisted from day one on substantial changes to make the Bush-Paulson plan acceptable—protecting American taxpayers and Main Street—and these elements are included in the draft legislation under consideration.
PROTECTION FOR TAXPAYERS, REQUIRING A PLAN TO BE REPAID IN FULL
- Requiring Congressional review after the first $350 billion is disbursed
- Gives taxpayers a share of the profits of participating companies, or puts taxpayers first in line to recover assets if a company fails
- Requires a President five years from now to submit a plan to ensure taxpayers are repaid in full, with Wall Street making up any difference
- Allows the government to also purchase troubled assets from pension plans, local governments, and small banks that serve low- and middle-income families
LIMITS ON EXCESSIVE COMPENSATION FOR CEOs AND EXECUTIVES
For companies publicly auctioning over $300 million:
- No multi-million dollar golden parachutes for top 5 executives after auction
- No tax deduction for executive compensation over $500,000
- Penalizes golden parachutes for CEOs who are fired or have run the company into the ground
- No multi-million dollar golden parachutes
- Limits CEO compensation that encourages unnecessary risk-taking
- Recovers bonuses paid to executives who promise gains that later turn out to be false or inaccurate
- Four separate independent oversight entities or processes to protect the taxpayer
- A strong oversight board appointed by bipartisan leaders of Congress
- GAO oversight and audits at Treasury to ensure strong controls; to prevent waste, fraud, and abuse
- An independent Inspector General to monitor the Treasury Secretary’s decisions
- Transparency—requiring posting of transactions online
- Meaningful judicial review of the Treasury Secretary’s actions
- The government can work with loan servicers to change the terms of mortgages (reduce principal or interest rate, lengthen time to pay back the mortgage) to reduce the 2 million projected foreclosures in the next year
- Extends provision (enacted earlier in this Congress) to stop tax liability on mortgage foreclosures
- Helps save small businesses that need credit by aiding small community banks hurt by the mortgage crisis—allowing these banks to deduct losses from investments in Fannie Mae and Freddie Mac stocks