With the House of Representatives not set to meet again until Thursday, the Senate has stepped in with a revised version of the $700 billion bailout bill, which it hopes will garner greater support in the House of Representatives. Last Monday, the House of Representatives rejected the Emergency Economic Stabilization Act of 2008 (the “Act”) by a vote of 228-205. According to several news reports, the Senate has not changed any of the key provisions of the Act, but rather has included new provisions and attached the Act to other bills that would raise the maximum federally insured deposit limit from $100,000 to $250,000, provide several tax breaks to businesses and provide Alternative Minimum Tax (AMT) relief to more than 20 million middle-class taxpayers. The Senate plans to vote on the Act tonight after sundown when the Jewish holiday of Rosh Hashanah ends. We will update this post with a copy of the complete legislation once it becomes available.

As we previously reported here, the Act would authorize United States Treasury Secretary Henry Paulson to establish a Troubled Asset Relief Program (“TARP”), which would purchase residential and commercial mortgages and other related instruments from financial institutions to restore liquidity and stability to the U.S. financial system. Insurance companies are included in the financial institutions eligible for TARP. Any insurance company that participates in TARP would be required to subject to certain executive compensation and corporate governance requirements. These requirements include limiting incentive compensation for executive offices and prohibiting golden parachutes, and would apply for the duration in which the insurance company participates in TARP.

The Act also requires the Treasury to establish an insurance program for TARP. The Treasury would collect premiums from financial institutions participating in TARP based on the troubled assets’ risk. The premiums would be placed in a Troubled Assets Insurance Financing Fund that could be drawn upon to fulfill obligations of the guarantees provided to the financial institutions under TARP. Financial Institutions would be allowed to request that the Treasury guarantee the timely payment of principal and interest on troubled assets up to 100%. The Treasury would determine the terms and conditions of the guarantees.