The Nuts and Bolts of the Bailout Bill

  • SumoMe


We have been talking about the $700 Billion Bailout Bill for quite a while now and still we have no progress. Senate is scheduled to vote on its version of the Bailout Plan tonight, and though everyone including our presidential candidates are pushing for a resolution, it seems unlikely that this will happen tonight.

Why can’t we figure this out?

First and foremost it’s PANIC, we hear $700 billion with an already $800 billion spent and crippling fear takes over. So let’s put this into perspective. So far jobs have been lost, businesses have gone under, banks have closed, homes have foreclosed, consumers have been cut off from needed financing and this will continue until we stop the hemorrhaging. On top of that the stock market has had major losses, in one instance the market lost over a trillion dollars in value over night and this will continue until we step in. 700 billion is a large number but when you start to add up what has happened, what is happening, and what will continue to happen that 700 billion will be a drop in the bucket.

Don’t get me wrong, we should not jump into this “rescue” without a well devised plan but we also should not turn it down out of hand. Our representatives are saying that Main Street, that is you and I, do not want to bailout Wall Street. So they cannot and will not vote for this plan.

I think part of the reason “Main Street” does not want this bill to pass is because they do not understand it. The media has been discussing golden parachutes for CEO’s, bank bailouts, no accountability, and lack of transparency as opposed to the actual nuts and bolts of what the bill will accomplish.

This rescue HAS TO happen, it is not a matter of doing it or not doing it, it is how are we going to do it? This plan needs to be smart, flexible, and beneficial for everyone. Part of the problem with every strategy thus far is that they have been touted as the FIX for our Credit Crisis, Mortgage Meltdown, and Housing Crash. In a global interconnected economy you cannot see exactly what is going to happen a mile down the road, but what you can do is create a safety net in case something unexpected does happen.

What is the plan?

It took me a while to find some details on the Bailout Bill, but here are some of the details I could find and as you can see it is being structured to help big business and the average person. The changes that are being made to the original bill look to be very positive and one can only hope beneficial enough to send us into a resolution.

Senate Changes to the Plan

Raising the Federal Deposit Insurance Corp caps on bank deposits to $250,000 from $100,000. This will protect consumer assets.

The move to add a tax legislation, including a set of popular business tax breaks but they are also adding legislation to prevent more than 20 million middle-class taxpayers from feeling the bite of the AMT, Alternative Minimum Tax. This portion will help big business and the consumer.

Mark to Market which will require banks and other financial institutions to adjust the value of their assets to reflect current market prices, even if they plan to hold the assets for years. This helps the investor know exactly what they are investing in.

Both Plans Include

Both the House and Senate versions of the tax bill would extend for one year production tax credits for wind energy, with an eight-year extension for investment tax credits for solar energy projects. Both provide tax credits for purchasing plug-in electric vehicles, though at different amounts.

The bills also provide incentives for the use of biodiesel. Critics of this subsidy say it promotes a “splash and dash” loophole where companies mix foreign biofuels with U.S. biodiesel to receive the U.S. subsidy, which they then sell at a discount abroad.

The Most Important Component to the Plan

The Treasury may be buying up failed mortgage-backed securities but they will also be selling them and they are not letting the banks off the hook.

Treasury Department to guarantee, at up to 100 percent, bank losses resulting from failed mortgage-backed securities originated prior to the plan’s enactment. Such insurance, supporters say, would provide immediate value to the securities and a foundation for which they could then be sold. The Treasury Department would finance that insurance by assessing a premium on outstanding mortgage-backed securities.

Knowledge is Power.

My advice is to focus on the details of this rescue plan, and not the hype. What are we doing, how will we get our money back, and is there a way to turn this into a profitable endeavor at some point?

The more we discuss this in positive, educated,  and open forums the faster we will get to a resolution and be able to move away from rescue to rebuild.

A couple of bloggers I have enjoyed reading on this subject are:



I welcome your feedback.

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Bridget is President of The Get Smart Web Consulting Group, a web presence and digital strategy firm with offices in San Diego County California and Collier County Florida. But more importantly she is a web, tech, and Twitter addict!