(Reuters) - The Bush administration has proposed sweeping authority for the U.S. Treasury to buy up to $700 billion of illiquid assets in a bid to end a financial market crisis.
Below are key elements of the powers that would be granted to the Treasury secretary under the administration’s plan, which is primarily aimed at mortgage-related debt. In addition are emerging details from counterproposals from Democrats who control Congress.
* Would allow up to $700 billion in mortgage assets to be held by Treasury at any one time.
* Allows the Treasury to buy any mortgage-related assets, both residential and commercial, for a two-year period. The plan does not detail the types of mortgage assets this could cover and or how long the government could hold them, and does not establish how they would be valued. However, if deemed needed to promote financial market stability, any type of financial instrument could be bought.
* Assets must have been originated or issued before September 17, 2008, by a financial institution having “significant operations” in the United States. This provision could also be waived if deemed needed to promote financial stability.
* Assets could be bought from any financial institution, including but not limited to banks, thrifts, credit unions, broker-dealers and insurance companies. If deemed need to promote financial stability, however, assets could be purchased from non-financial companies.
* Grants the Treasury broad authority to decide how to purchase, manage and dispose of the assets, including setting up a special fund and naming financial institutions to work for the Treasury Department.
* The Treasury secretary would be given these powers to ensure stability or prevent disruption of financial markets and to protect the taxpayer.
* No court or government agency could review the secretary’s decisions. The secretary would report to Congress within the first three months and then twice yearly.
* The U.S. debt limit would be increased by $700 billion to fund the plan, to $11.315 trillion from $10.615 trillion.
SENATE DEMOCRAT‘S COUNTERPROPOSAL
* Calls for Treasury to get ‘contingent shares’ in companies selling assets. These can be shares of the financial institution, its parent company, its holding company or any of its subsidiaries.
* Calls for monitoring the bailout plan by establishing an emergency oversight board which will include the chairmen of U.S. Federal Reserve, Federal Deposit Insurance Corp, Securities and Exchange Commission and others. Also allows oversight board to review the appointment of “financial agents” running the funds.
* Calls for a portion of any proceeds to provide assistance to homeowners, localities to prevent foreclosures.
* Calls for limits on executive compensation for entities selling assets in bailout.
* Says Treasury secretary’s decisions subject to review.
* Gives the government the authority to “claw-back” executive pay that based on information such as earnings that later proves to be inaccurate
HOUSE DEMOCRATS’ COUNTERPROPOSAL
* House Speaker Rep. Nancy Pelosi said she wants efforts to protect taxpayers, establish independent oversight, and put in place protections for homeowners and constraints on the compensation for executives from participating companies.
* In counterproposal from House Financial Services Committee, Democrats asked for executive pay limits and foreclosure mitigation efforts to be added to bill.
* House Financial Services Committee proposal would also give the U.S. comptroller general, the government’s main auditor, oversight over the program.
Editing by Tom Hals