House REJECTS Bailout Bill
In a major upset, the US House of Representatives has voted against passage of the $700 billion bailout bill. The vote was 228-205 against. Democrats voted 141-94 in favor of the measure while Republicans voted 131-67 in opposition to the proposal. There are now discussions as to whether or not a new vote sometime later today.
Reacting to the news, the Dow Jones is down by a range of 400-600 points. At one point the drop was over 700 points so it does seem that the market is stabilizing somewhat.
So far Democrats are blaming the Republicans for not delivering a majority of their members while Republicans are blaming Nancy Pelosi for delivering what even Democrats concede was a very partisan attack on the GOP.
(Personally I blame the whole crowd in DC but…)
The bill as proposed provides for $250 billion in immediate payout with $100 billion available upon Presidential request and the final $ 350 billion needing Congressional approval. Participating companies will be required to share any profits with the government and the Treasury Department has the power to set limits on future executive compensation. Previously-approved golden parachutes will not be altered though.
The Treasury Department will also develop a plan to encourage mortgage lenders to work with lenders to refinance loans prior to foreclosure (good luck on that one). There will be an oversight board to review the plan’s effectiveness as well as a new panel to review the current regulatory system.
There will be an insurance program for companies to cover their losses in mortgage-backed securities and a buyout program for the securities, provided they were created prior to March 14, 2008. The government will hold these securities for up to 5 years before resale at a profit.