Congress passed, and President Bush signed on October 3, the Emergency Economic Stabilization Act of 2008, H.R. 1424 (the “Act”). The purposes of the Act are twofold: It authorizes the Secretary of the Treasury (the “Secretary”) to restore stability and liquidity to the U.S. financial system and to do so in a manner that protects home values, college funds, retirement accounts and life savings; preserves home ownership and promotes jobs and economic growth; maximizes overall returns to American taxpayers; and provides public accountability to the exercise of that authority.
That’s a tall order. The key provision involves a Troubled Asset Relief Program (“TARP”). Under this program, the Secretary, through an office of Financial Security that is to be established, may purchase up to $700 billion in financial institution assets. The assets must be residential or commercial mortgages or securities, obligations or other instruments relating to such mortgages originated on or before March 14, 2008 or other financial instruments that the Treasury determines necessary. They may be purchased from all U.S. institutions of all sizes, including the licensed U.S. branches and agencies of foreign banks. The Treasury can manage and sell the assets or enter into financial transactions regarding any purchased asset.
Some other provisions that sought to increase financial stability include an increase in FDIC deposit insurance from $100,000 per account to $250,000 per account until December 31, 2009 and an authorization for the SEC to suspend mark-to-market accounting.
The Act also included a number of unrelated provisions relating to tax relief, tax cut extensions, an R&D tax credit, tax incentives, mental health and creating environmentally-friendly jobs, among others.
The House Majority Leader, Steny Hoyer, offers a section-by-section summary of the legislation here.