Full Text of "HR 3997 Emergency Economic Stabilization Act of 2008"

The following site has the full text of the ""HR 3997 Emergency Economic Stabilization Act of 2008"

http://www.rules.house.gov/110/text/110_hr3997_amnd_samnd.pdf

HR 3997 is a 109 page document. The following is a condensation of the first 32 pages including selected excerpts:

The US Government, that is, the US Taxpayer, will establish a fund called "the TARP" and will purchase "any and all" of the troubled assets from "any" financial institution. This includes "foreign authorities and central banks". The terms and conditions (if any) will be determined by the Secretary of the Treasury.

Everyone, that is, Paulson and the politicians in favor of this legislation, say there is a "good chance" the taxpayer will break even on this. However, this could only be a good deal for the taxpayer if the government were to purchase the troubled assets at market prices. However, our government has already said it WILL NOT be paying market prices. Our government will purchase these troubled assets by paying ABOVE MARKET prices. It appears the purpose of this legislation is to recapitalize the banks without getting much equity in exchange. The cost of this WILL be passed on to the taxpayer!

It gets worse. What "troubled assets" are we talking about? "Any residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages...originated on or before March 14, 2008...[and] any other financial instrument that the Secretary after consultation with the Chairman...of the Federal Reserve System,"

"The Secretary shall take such steps as my be necessary to prevent unjust enrichment of financial institutions participating in a program established under this section [section 101 - purchases of troubled assets]."

There is also a provision for an "insurance program". This is contained in "Sec. 102. Insurance of Troubled Assets". "the Secretary shall establish a program to guarantee troubled assets originated or issued prior to March 14, 2008". "the Secretary may guarantee the timely payment of principal of, and interest on, troubled assets in the amounts not to exceed 100 percent of such payments." "the Secretary shall collect premiums from any financial institutions participating in the program". "Such premiums shall be in the amount that the Secretary determines necessary to meet the purposes of this Act and to provide sufficient reserves ["to meet anticipated claims, based on an actuarial analysis, and to ensure that taxpayers are fully protected."]."

The Secretary will be "providing financial assistance to financial institutions... that have assets less than $1,000,000,000, that were well or adequately capitalized as of June 30, 2008, and that as a result of the devaluation of the preferred government sponsored enterprises stock will drop one or more capital levels..".

The Secretary will be "protecting the retirement security of Americans by purchasing troubled assets held by or on behalf of eligible retirement plan described in clause (iii), (iv), (v) or (vi) of section 402(c)(8)(B) of the Internal Revenue Code of 1986 except...not compensation arrangements subject to section 409A..". "and the utility of purchasing other real estate owned and instruments backed by mortgages on multifamily properties." [Note: IRS section 402(c)(8)(B) defines an "eligible retirement plan" as (i) and individual retirement account as described in Code section 408(a), (ii) an individual retirement annuity as described in Code section 408(b), (iii) a section 401(a) qualified retirement plan, and (iv) and an annuity plan as described in section 403(a)].

"there is established the Financial Stability Oversight Board, which shall be responsible for...reviewing the exercise of authority under..this Act, including.. policies implemented by the Secretary and the Office of Financial Stability...including appointment of financial agents [and]... the asset classes to be purchased.." The FSOB will be "reporting any suspected fraud, misrepresentation, or malfeasance to the Special Inspector General for the Troubled Assets Relief Program.."

"The Financial Stability Oversight Board shall be comprised of..the Chairman of..the Federal Reserve System, the Secretary, the Director of the FHA, the Chairman of the SEC and the Secretary of HUD." "The chairperson shall be elected by the members of the board of the FSOB from among the members other than the Secretary."

The bill includes a list of reporting requirements.

Section 106 of the bill pertains to "Rights; Management; Sale of Troubled Assets; Revenues and Sale Proceeds". "the Secretary shall have authority to manage troubled assets purchased under this Act, including revenues and portfolio risks therefrom." "the Secretary may, at any time...sell or enter into securities loans, repurchase transactions, or other financial transactions in regard to, any troubled asset purchased under this Act." "Revenues...shall be paid into the general fund of the Treasury for the reduction of public debt."

Steamlined Process. "the Secretary may waive specific provisions of the Federal Acquisition Regulation upon a determination that urgent and compelling circumstances make compliance with such provisions contrary to the public interest."

"Additional Contracting Requirements. In any solicitation or contract....to the maximum extent practicable, the inclusion and utilization of minorities...and women- and minority and women-owned business."

"Eligibility of FDIC". "the Corporation...shall be elibible for...selection of asset managers for residential mortgage loans and residential mortgage-backed securities, and shall be reimbursed by the Secretary for any services provided."

Section "108. Conflicts of Interest." "The Secretary shall issue regulations or guidelines...to address and manage or to prohibit conflicts of interest..."

Section "109. Foreclosure Mitigation Efforts." "the Secretary shall implement a plan that seeks to maximize assistance for homeowners and use the authority of the Secretary to encourage the servicers of the underlying mortgages, considering net present value to the taxpayer, to tak advantage of the HOPE for Homeowners Program..".

Section "110. Assistance to Homeowners". To the extent that the [FHFA, bridge depository institution of the FDIC, Federal Reserve Bank] holds, owns or controls mortgages, mortgage backed securities, and other assets secured by residential real estate including multi-family housing...shall implement a plan that seeks to maximize assistance for homeowners and use its authority to encourage the servicers of underlying mortgages, and considering net present value to taxpayer, to take advantage of the HOPE for Homeowners Program...". Modifications... of a residentail mortgage loan... may include... reduction in interest rates, reduction in loan principal and other similar modifications. Tenant protections..on residential rental properties, modifications..shall ensure...the continuation of existing...subisidies; and that modifications take into account the need for operating funds to maintain decent living conditions at the property.

"Actions with respect to servicers. In any case in which [the FHFA, bridge depository institution of the FDIC, Federal Reserve Bank] is not the owner of a residential mortgage loand, but holds an interest in obligations or pools of obligations secured by residential morgage loans, the [FHFA, bridge depository institution of the FDIC, Federal Reserve Bank] shall encourage implementation by the loan servicers of loan modifications developed in section (b) [Homeowner Assistance by agencies] and... assist in facilitating such modifications...".

Section "111. Executive Compensation and Corporate Governance". "Any financial institution that sell troubled assets to the Secretary under this Act shall be subject to the executive compensation requirements of subsections (b) and (c) and the provisions under the Internal Revenue Code of 1986, as provided under the amendment by section 302, as applicable". " The standards requited under this subsection [criteria] shall include...limits on compensation that exclude incentives for senior executive officers [defined as one of the 5 top highly paid executives of a public company, whose compensation is required to be disclosed pursuant to SEC act of 1934...] of a financial institution to take unnecessary and excessive risks...". "A provision for the recovery by the financial institution of any bonus or incentive compensation paid to a senior exective officer...based on statements of earnings, gains or other criteria that are later proven to be materially inaccurate; and ...a prohibition on ...making golden parachute payment..".

Section "112. Coordination with Foreign Authorities and Central Banks." "...to the extent that such foreign authorities or banks hold troubled assets as a result of extending financing to financial institutions that have failed or defaulted on such financing, such troubled assets qualify for purchase...".