'We have a deal', say US leaders, but vote yet to come

Congressional leaders worked through the day and night on Saturday and emerged shortly after midnight to announce they had a tentative draft deal to approve a US Treasury plan to buy up to US$700 billion of toxic mortgage assets from banks. However, the deal has yet to be approved by rank and file Congress members who scuttled an earlier deal last Thursday. The plan is very unpopular with voters, putting pressure on at least half the Congress ahead of their re-election votes in under six weeks time. Congressional Republicans and many Democrats have been very opposed to the plan from the start. The new plan includes a phased roll in of the plan with Congressional approval through the phases, with US$250 billion up front, another US$100 billion available if needed and the final US$350 billion only available with express approval of Congress. The plan also includes limits on executive pay, the ability for the government to own stakes in banks and independent oversight. Here is the draft plan below in full from Speaker of the House Nancy Pelosi.

REINVEST, REIMBURSE, REFORM IMPROVING THE FINANCIAL RESCUE LEGISLATION Significant bipartisan work has built consensus around dramatic improvements to the original Bush-Paulson plan to stabilize American financial markets -- including cutting in half the Administration's initial request for $700 billion and requiring Congressional review for any future commitment of taxpayers' funds. If the government loses money, the financial industry will pay back the taxpayers. 3 Phases of a Financial Rescue with Strong Taxpayer Protections  

• Reinvest in the troubled financial markets "¦ to stabilize our economy and insulate Main Street from Wall Street
• Reimburse the taxpayer "¦ through ownership of shares and appreciation in the value of purchased assets
• Reform business-as-usual on Wall Street "¦ strong Congressional oversight and no golden parachutes

  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 will be included in the legislation
• Protection for taxpayers, ensuring THEY share IN ANY profits
• Cuts the payment of $700 billion in half and conditions future payments on Congressional review
• Gives taxpayers an ownership stake and profit-making opportunities with participating companies
• Puts taxpayers first in line to recover assets if participating company fails
• Guarantees taxpayers are repaid in full -- if other protections have not actually produced a profit
• Allows the government to 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
• New restrictions on CEO and executive compensation for participating companies: No multi-million dollar golden parachutes
• Limits CEO compensation that encourages unnecessary risk-taking
• Recovers bonuses paid based on promised gains that later turn out to be false or inaccurate
• Strong independent oversight and transparency
• Four separate independent oversight entities or processes to protect the taxpayer
• A strong oversight board appointed by bipartisan leaders of Congress A GAO presence at Treasury to oversee the program and conduct audits to ensure strong internal controls, and to prevent waste, fraud, and abuse
• An independent Inspector General to monitor the Treasury Secretary's decisions
• Transparency -- requiring posting of transactions online -- to help jumpstart private sector demand
• Meaningful judicial review of the Treasury Secretary's actions
• Help to prevent home foreclosures crippling the American economy
• The government can use its power as the owner of mortgages and mortgage backed securities to facilitate loan modifications (such as, reduced principal or interest rate, lengthened time to pay back the mortgage) to help reduce the 2 million projected foreclosures in the next year
• Extends provision (passed 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