On October 3rd, 2008 Congress passed the Emergency Economic Stabilization Act, what is being called "The $700 Billion Bailout Plan." Initially I reacted to this measure with distrust and fear, $700 billion is a lot of money and I was worried that this was a rushed and incorrect step to take. When the House and Senate passed the bill and the President signed it into law, I decided it was in my best interest to read it and figure out exactly what our politicians got us into.

So I logged on to the Library of Congress website, THOMAS, and downloaded the bill in its entirety. I printed out all 169 pages (four pages per double sided sheet to save some paper) and began reading. At first it was really hard to translate the legal style writing of the bill, but after a few hours it became second nature to decipher what they were really saying. Still, it was slow going because things were out of order and often repeated - and after a week of reading I only managed to read the first section of the bill, the section that actually pertains to the economy. These 43 pages are the meat and potatoes of the bailout, the rest of the 100+ pages are energy policy and other miscellaneous pork barrel bribes to get votes. As I read those sections I will publish updates as well.My goal for the end of the month is to read the entire bill from start to finish. In the mean time the section most important and with most impact to taxpayers and the economy is Division A - which I will condense and outline below. This bill can be looked at as if it were a large pig - the main ham (meat) of the animal is below, later on I will explain the lipstick that came along with it. I am doing my best to condense, but it will still be a long post - there's a lot here.

Division A - Emergency Economic Stabilization

GOAL:
The purpose of this act can be summed up as follows: to provide the authority to the Secretary of the Treasury restore liquidity and stability of the financial system.

But there's a catch - he has to do this while: ensuring that home values, college funds, retirement accounts, and life savings are protected; promoting home ownership, jobs, and economic growth; maximizing return on taxpayer investments; and providing detailed accountability for his actions.
Just how he can do all that is somewhat vague, and not very well expanded on later in the bill.

ACCOUNTABILITY:
As for oversight of such a powerful position - the Secretary of the Treasury needs to report to: The committees on Banking, Housing and Urban Affairs, Finance, the Budget, Appropriations of the House, Financial Services, Ways and Means, Appropriations of the Senate, and the Board of Governors of the Federal Reserve System. He also needs to involve the Congressional Budget Office and the Joint Committee on Taxation, as well as the FDIC. - in other words, he has to report to A LOT of people, and anyone who might vaguely be involved in this crisis. They weren't kidding when they said there was going to be a lot of accountability.

MEAT:
The Troubled Assets Relief Program (TARP): this program can purchase troubled assets from any American financial institution.
Just what a troubled asset is is left up to interpretation.

NEW PROGRAMS:
TARP is part of the Office of Financial Stability, which is specially created in this bill as a child of the Office of Domestic Finance and the Department of the Treasury. The head of TARP will be an assistant Secretary Treasury appointed by the President, and this whole operation will be overseen by the Comptroller General.

The assistant Secretary of TARP has the power to "take such actions as the Secretary deems necessary to carry out the authorities of this act" - basically they can do whatever they want.

Specific powers are listed, including the ability to: enter contracts; designate financial institutions as agents of the Federal Government; purchase, hold, and sell troubled assets; and issue regulations to get this done.

Before the Secretary does any of that he needs to tell Congress:
HOW he's going to PURCHASE troubled assets,
HOW he's going to PRICE troubled assets,
HOW he's going to SELECT asset managers, and
CRITERIA for deciding which assets to buy.

There's another catch - to prevent banks from taking advantage of the government money nothing can be bought a price higher than what the seller originally paid.

If TARP is created (which it was) then the Secretary needs to create another program as well - this program doesn't have a catchy acronym but needs to guarantee all troubled assets (including Mortgage Backed Securities) that originated before March 14th, 2008 - and premiums can be charged to ensure these assets.

Details: The Secretary may guarantee the timely payment of principle, interest, or both, on troubled assets up to 100%. In other words - the Fed can pay the bills for you! (but you have to ask)

Restrictions: The Secretary needs to do a number of things, including but not limited to: determining the long term viability of companies before it buys their troubled assets, providing financial assistance to banks servicing "low income" communities that have been affected by "devalued preferred government sponsored enterprises", and ensure that counties and cities don't go broke due to the increased turmoil. - He has to prop up cities, towns, and "low income" banks that are preferred by the government with cash.

Also - the Secretary can purchase real estate and mortgages of multi-family properties! (The Fed can own your apartment)
This will all be reviewed by the Financial Stability Oversight Board, which is made up of the Chairman of the Board of Governors, the Secretary, the Directory of the Federal Housing Finance Agency, the Chairman of the SEC, and the Secretary of Housing and Urban Development.

Every 30 days this Board needs to report on what it did (all agreements made), what contracts it is in, all transactions completed, the type of assets owned, the projected costs and liabilities, how stuff was priced, and how stuff was bought.

There also needs to be a review and of how regulations are working and a suggestion to improve the regulations.

There will be a Special Inspector General created to work with the TARP to manage it and supervise. (not the same as the Comptroller's supervision).

Interesting note: Because of the "urgent and compelling circumstances" the Secretary can avoid the Federal requirements for maximum minority and woman owned companies/contractors. They can actually hire the best people not just the most diverse.

MAIN STREET: (Joe Sixpack and Jane Winebox)
When the Secretary buys mortgages and mortgage backed securities he needs to maximize assistance to homeowners and can make guarantees to avoid "preventable" foreclosures. -The Fed can pay your mortgage! Wahooo!
They also can restructure your loans to reduce the principle or the interest payments. (or "other" measures that help avoid foreclosures, whatever those may be)

And in cases of apartments where good paying tenants live but the owner is foreclosed the government will let you stay and guarantee the mortgage as well as doing repairs to the apartment buildings to ensure safety. -The government becomes your landlord, Nice!

WALL STREET:(That mean Henry F. Potter)
Any bank that asks the Fed for help has some restrictions imposed on it regarding CEO pay. The five highest paid people at a company cannot be rewarded for taking "unnecessary and excessive" risks. Any bonus pay made on false gains will be given back, and no "golden parachutes" - although what a golden parachute is exactly is never explained. And the executives of these companies cannot take any tax deductions that exceed $500,000.
GLOBAL STREET:(everyone else)
The Secretary can co-ordinate with foreign authorities and banks to work towards similar goals, and can even hold troubled assets of foreign institutions that have defaulted on payments.
METHODS:
The Secretary also needs to hold assets as long as deemed necessary to maximize taxpayer return, needs to encourage the private sector to buy these assets itself, and needs to buy assets as cheaply as possible. In order to purchase as cheaply as possible the Fed can bypass the market system and just buy directly from banks.

And when the Fed buys these troubled assets it needs to get stock from the companies (non-voting) or "senior debt investments" if the company is not publicly traded, equal to the value of the purchases. The Fed will own large shares of companies.
Restrictions: no more than $100 million can be spent on a single company. (That's $100,000,000.00) And two days after purchasing anything the transaction needs to be made publicly available.

Other restrictions include: only using $250 billion at a given time, unless the President (on behalf of the Secretary) petitions Congress - then up to $350 billion can be spent. And if things really get bad the President can petition further for up to $700 billion - so $700,000,000,000.00 is really the worst case not the initial investment.

And the Secretary can only buy with the money he has available - he cannot go into debt to buy more.

SYSTEM IMPROVEMENTS (BLAME GAME):
There needs to be research done on the effect of leverage and deleveraging caused this crisis. The role of the SEC, the Secretary Treasury, and the Federal Banking Agencies in creating this disaster needs to be looked out. Changes to prevent this in the future can be made to any of those organizations and any regulations. -Who caused this mess and what can we change to clean it up?
LEGALITY:
A company asking for help cannot sue the government after the assets are bought.

TERMINATION:
All these authorities and programs end on December 31st, 2009 unless an extension is asked for and then it will only be granted for two years after the bill was enacted, so October 3rd, 2010.

OTHER STUFF:
The public debt has been increased to the limit of $11,315,000,000,000.00, or $11.315 TRILLION dollars. But it can't go higher than that - at least not until the next bill extending the debt is passed. Don't forget, add in all our unfunded entitlement liabilities and the debt balloons to over $53 trillion.
OLD PROGRAMS CHANGED:
The HOPE program can now accept short sales - which is a partial payment in lieu of any future payments and a removal of debt for mortgages.

The Congressional Oversight Panel needs to write reports on how many homes are being foreclosed and the effectiveness of this program.

The FDIC will increase insurance from $100,000 to $250,000 but only until December 31st, 2009. And it is now against the law to use the name of the FDIC incorrectly and without permission.

The Financial Services Regulatory Relief Act of 2006 was scheduled to begin in 2011 but is now retroactively starting October 1st, 2008.

The Exchange Stabilization Fund cannot be used to guarantee new stuff, but Money Market Mutual funds are insured 100% for the duration of this program.

Mark to Market Accounting can be suspended after study is completed showing its effect on accounting and balance sheets, the impact on investors, the process of creating new standards, and the modification of standards is passed.
NO NEW DEBT:
If after 5 years this program has not made money and has a deficit the President will allow the fed to cuts its losses, and fund the program so nothing is added to the national debt.

So that's it.
The government has accountability, new programs, research to improve things, and will have the ability to pay/own/sell/buy/hold "troubled assets" including your home mortgage if you are in a subprime loan.

There's a lot of stuff in here, I hope I clarified it for some of you. I know I have a much better appreciation of what is going on after reading this - as painful as it was to actually read. This bailout isn't quite as scary as I once feared, although it is certainly vague and far reaching. The world financial market is in some deep trouble, and something needs to be done. This bill has many scary socialist tendencies that could permanently alter the way America works - there are restrictions in place limiting the new flux of power, but it is also vague and the possibility for an indefinitely long socialist influence is very real.
Comics Sourced from: Last of The Few (PG13 site)

Check out Parts B, and C of the Bailout here:

• Division B: Energy Amendments
• Division C: Tax Extenders and Alternative Minimum Tax Relief