Officials in Washington worked around the clock this past weekend in an effort to draft a bill that Congress is aiming to consider as early as this week to provide Treasury with authority to purchase troubled assets. The text of the most recent draft is pasted-in below.
Certain key provisions continued to evolve, and the current draft will certainly be further revised. For example:
Early drafts of the bill would have authorized Treasury to purchase "mortgage-related assets from any financial institution having its headquarters in the United States", with the term "financial institution" left undefined. In its current form the bill:
- expands the type of assets that Treasury may purchase from "mortgage-related assets" to "Troubled Assets";
- broadens the category of institution from whom assets may be purchased from "any financial institution having its headquarters in the United States" to "any Financial Institution, as those terms are defined in section 12 of the Act";
- defines the term "Financial Institution" -- which had been undefined in earlier drafts -- as "any institution including, but not limited to, banks, thrifts, credit unions, broker-dealers, and insurance companies, having significant operations in the United States; and, upon the Secretary's determination in consultation with the Chairman of the Board of Governors of the Federal Reserve, any other institution he determines necessary to promote financial market stability."
House Majority Leader Steny Hoyer (D-MD) has announced his intention to bring the legislation to the floor for consideration by the full House of Representatives in the coming days, but only after three Congressional Committees -- the House Financial Services Committee, the House Budget Committee and the House Ways and Means Committee -- have had an opportunity to examine the proposal and "make changes necessary to provide accountability, help working Americans and protect the taxpayer's interest." Likely changes to be considered as the bill moves through the legislative process include:
- limits on the compensation of executives of firms that avail themselves of the relief provided under this legislation, if the firms are found to have taken "inappropriate" or "excessive" risks;
- granting bankruptcy judges the authority to change the terms of first mortgages during the course of bankruptcy proceedings.
Once the House completes action on the bill the Senate will then consider the measure, where it is expected to be once again thoroughly scrubbed by, with members of the Senate Banking Committee taking the lead. One element currently lacking from the bill that Senate Banking Committee Chairman Chris Dodd (D-CT) must be included is "relief for millions of American homeowners facing foreclosure".
Only after a majority of the House and a majority of the Senate agree to each and every element of the bill, can it be sent to the President to be signed into law.
As noted above, the text of the most recent draft is pasted-in below and can be viewed below.
LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY TO PURCHASE TROUBLED ASSETS
Section 1. Short Title.
This Act may be cited as ____________________.
Sec. 2. Purchases of Troubled Assets.
(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, Troubled Assets from any Financial Institution, as those terms are defined in section 12 of the Act.
(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:
(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;
(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;
(3) designating Financial Institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;
(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase Troubled Assets and issue obligations; and
(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.
Sec. 3. Considerations.
In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--
(1) providing stability or preventing disruption to the financial markets or banking system;
(2) protecting the taxpayer; and
(3) take appropriate steps to manage any conflicts of interest in the hiring of contractors or advisors. Any regulation issued under this authority shall not be subject to section 553 of title 5, United States Code.
Sec. 4. Reports to Congress.
Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.
Sec. 5. Rights; Management; Sale of Troubled Assets.
(a) Exercise of Rights.--The Secretary may, at any time, exercise any rights received in connection with Troubled Assets purchased under this Act.
(b) Management of Troubled Assets.--The Secretary shall have authority to manage Troubled Assets purchased under this Act, including revenues and portfolio risks therefrom.
(c) Sale of Troubled Assets.--The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.
(d) Application of Sunset to Troubled Assets.--The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.
Sec. 6. Maximum Amount of Authorized Purchases.
The Secretary's authority to purchase Troubled Assets under this Act shall be limited to $700,000,000,000 outstanding at any one time
Sec. 7. Funding.
For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.
Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
Sec. 9. Termination of Authority.
The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.
Sec. 10. Increase in Statutory Limit on the Public Debt.
Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.
Sec. 11. Credit Reform.
The costs of purchases of Troubled Assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.
Sec. 12. Definitions.
For purposes of this Act, the following definitions shall apply:
(1) Financial Institution.--The term "Financial Institutions" means any institution including, but not limited to, banks, thrifts, credit unions, broker-dealers, and insurance companies, having significant operations in the United States; and, upon the Secretary's determination in consultation with the Chairman of the Board of Governors of the Federal Reserve, any other institution he determines necessary to promote financial market stability.
(2) Secretary.--The term "Secretary" means the Secretary of the Treasury.
(3) Troubled Assets.--The term "Troubled Assets" means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008; and, upon the determination of the Secretary in consultation with the Chairman of the Board of Governors of the Federal Reserve, any other financial instrument, as he determines necessary to promote financial market stability.
(4) United States.--The term "United States" means the States, territories, and possessions of the United States and the District of Columbia.