What’s at Issue
Last week he U.S. Senate and U.S. House of Representatives passed and the President signed the Emergency Economic Stabilization Act, H.R. 1424, which authorizes the federal government to spend $700 billion to rescue the financial markets by purchasing distressed assets from troubled financial institutions. The bill passed the Senate with a vote of 74 to 25, while the House approved the measure with a vote of 263 to 171.
Why It’s Important
The purpose of the bill is to provide the Secretary of the Treasury with the authority to restore liquidity and stability to the American financial system to help protect American families and the US economy. Without government intervention, President Bush and lawmakers warned that the outcome would have been massive job losses, devastated retirement accounts, eroded housing values, as well as the inability to obtain loans for new homes, cars and college tuition.
Major Provisions
- The main provision in the bill allows the Department of the Treasury to buy up to $700 billion in bad mortgage-related securities and other assets.
- Allows the Department of the Treasury to modify mortgage terms to help homeowners avoid foreclosure.
- The government will receive equity in companies it aids and the taxpayers will benefit from future profits.
- Restricts executive pay for companies aided by the program.
- Temporarily increases the cap on the federal insurance for bank deposits from $100,000 to $250,000.
- Provides $149 billion additional in tax breaks for individuals and businesses over the next ten years.
- Two oversight committees will be created; a Financial Stability Board would include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director, the Housing and Urban Development secretary and the Treasury secretary. A congressional oversight panel, to which the Financial Stability Board would report, would have five members appointed by House and Senate leadership from both parties.
Tax extensions were included in the bill which includes:
- $17 billion to promote alternative energy
- $8.3 billion a year for research tax credits
- $62 billion was included to minimize the impact of the alternative minimum tax
- $8 billion for Americans affected by hurricanes and floods
NATA Position
NATA believes that the Emergency Economic Stabilization Act is an important step to restoring the financial markets so that individuals and businesses may continue to seek and grant loans which are vitally important to our economy.
Status
Treasury Secretary Paulson has said that $250 billion will be used immediately to purchase mortgage debt to boost confidence in the credit markets.
Staff Contact: Kristen Moore
Director, Legislative Affairs
kmoore@nata.aero