The revised bailout package – a summary
02 Oct 2008
If considered by volume then the changes in the $700 billion bailout package are indeed massive. The Treasury Department's initial proposal was just three pages long. The latest version is all of 450 pages.
Treasury secretary Henry Paulson Jr.'s proposal has seen a series of modifications that includes additional oversight, provisions to limit home foreclosures and restrictions on the compensation of executives of institutions that take part in this programme.
Congressional and administration negotiators have also decided to serve out the $700 billion package in installments, starting with a first tranche of $350 billion.
The revised Bill provides for multiple tax breaks, also referred to as sweeteners, which are called extenders by politicians as they renew or extend expiring tax benefits. This is intended to help legislators sell the Bill to a sceptical public which, so far, has looked upon the Bill as a measure intended to bailout the fat cats of the financial markets.
The tax breaks allow legislators to argue that instead of providing a $700 billion bailout to gamblers in the financial markets they have voted for increased protection for deposits at the neighborhood bank, for instance, and income tax relief for middle class taxpayers.
The approximately $150 billion in new tax breaks offers incentives for the use of renewable energy and also frees 24 million households from paying an estimated $65 billion alternative-minimum tax. These payments are due later this year.
Banks will get an open-ended line of credit directly to the Treasury Department, though under US law, the Congressional Budget Office noted Wednesday, they will eventually have to make up any shortfall and repay loans. However, repayments will not begin until at least 2010.
The new plan also determines that in five years the president must present Congress with a plan to make up any losses of tax funds by assessing the financial community.
