Proposed Rescue Plan

By Ryan Rice

In the past week and a half, talk of the proposed rescue plan to lighten the detrimental effects of the recent financial crisis has flooded the news. Many plans have been suggested but as of September 21, 2008, only one has been proposed to Congress. This proposed rescue plan involves the purchasing of “troubled assets from financial institutions in order to promote market stability, and help protect American families and the U.S. economy”(MarketWatch).
The first plan of action in this rescue plan involves the swift timing in purchasing these troubled financial assets. The plan calls for the Treasury to have the authority of issuing $700 billion of securities to purchase the assets. In order to fund this large amount of securities, the Treasury is requesting the funds from its general fund (MarketWatch). These assets that the Treasury plans to purchase are “residential and commercial mortgage-related assets, which may include mortgage-backed securities and whole loans” (MarketWatch). Furthermore, if the Treasury deems it necessary, it will also have the right to procure other assets as need be. After the purchase of these troubled assets, the Treasury will then personally manage these assets to its own discretion. According to this plan, the Treasury holds the right to do as it pleases with these troubled assets whether it is selling the assets, holding them until “maturity,” or liquidating them. But, only certain financial assets constitute as eligible for the Treasury to procure and manage. Requirements for eligibility include: [One: the assets] must have been originated or issued on or before September 17, 2008. [And two,] participating financial institutions must have significant operations in the U.S., unless the Secretary makes a determination, in consultation with the Chairman of the Federal Reserve, that broader is necessary to effectively stabilize financial markets.”(MarketWatch)
Because the funding for this operation is fueled by taxpayer’s money, government plans to compensate the people. As compensation for the purchase of these assets, the government will receive stock warrants, which will give taxpayers the possibility to obtain future profits from the saved companies and assets (Yahoo Finance).
Summarized, the proposed rescue plan “decisively address[es] the troubled assets now clogging the financial system, helps lenders resume the flow of credit to consumers and businesses, and allows the American economy to get moving again”(WhiteHouse News). On October 3, 2008, congress voted and passed the proposed rescue plan 263 to 171.
Bibliography
Davis, Julie H. "$700B rescue plan finalized; House to vote Monday." Yahoo Finance. 28 Sept. 2008. 6 Oct. 2008
MarketWatch, ed. "Treasury Fact Sheet on Rescue Plan." Www.marketwatch.com. 21 Sept. 2008. The Wall Street Journal. 2 Oct. 2008
"President Bush Discusses Economic Rescue Plan." Whitehouse News. 30 Sept. 2008. 6 Oct. 2008 .