Monday, September 29, 2008

The Progress Report on the Bailout bill

From the Progress Report.
BETTER THAN THE ALTERNATIVES: New York Times columnist Paul Krugman writes today, "The bailout plan released yesterday is a lot better than the proposal Henry Paulson first put out -- sufficiently so to be worth passing. But it's not what you'd actually call a good plan, and it won't end the crisis." Indeed, the bill does provide some important improvements over prior proposals. Instead of giving $700 billion to the Treasury all at once, the money will be doled out in three installments: an initial $250 billion, another $100 billion "upon a Presidential certification of need," and the final $350 billion if the President submits a written request to Congress, which Congress can deny within 15 days. The bill also establishes a Financial Stability Oversight Board "to review and make recommendations regarding the exercise of authority" and "ensure that the policies implemented by the [Treasury] Secretary protect taxpayers." By contrast, the initial Bush administration proposal included no oversight mechanism. The bill also includes provisions limiting compensation for senior executives, "with especially severe limits on 'golden parachutes' at failing firms." It allows the Treasury to conduct reverse auctions of securities, which means "firms that can afford to will dump their toxic waste at low prices, the way some already have on the private market, and taxpayers may end up making money in the end." The proposal does not include some of the more radical ideas put forward by the Republican Study Committee -- and backed by former Speaker of the House Newt Gingrich -- like removing the capital gains tax, which favors wealthy investors while doing nothing to correct the financial crisis.

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