Details of the $700 Billion Bailout Plan

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Update: Congress did not pass the bailout.. More details to follow.

The $700 billion bailout plan designed to buy toxic mortgage securities has been finalized by the lawmakers and the bush administration over the weekend.  Now that the only hurdle remains a vote on congress, it seems to likely pass.

Here are some of the details that I found about the bailout plan.

  1. $250 billion will be used to immediately buy troubled mortgage securities
  2. An additional $100 billion is available if the president approves its use
  3. $350 billion is set aside and can be used to buy even more troubled mortgage assets if congress approves it.
  4. Companies that take advantage of this bailout plan has to give the government a stake of the company (via stocks) so US taxpayers can potentially profit from future growth of these companies
  5. Top executives earning over $500,000 at companies that sell the assets to the government will have tax restrictions and executive leaving those companies would only have a limited compensation package.
  6. Republicans wanted a way for companies to buy insurance on the troubled assets instead of selling the assets to the government.  This is included in the bailout plan.
  7. Democrats wanted the plan to allow judges the power to change loan terms to help mortgage owners in trouble and also the government to use some of the profits it makes on the purchase to help people facing defaults.  This DID NOT make it on the plan.
  8. The government will only buy investments originated on or before March 18, 2008.
  9. If the government is losing money on the purchases of the assets in 5 years, the president needs to submit a plan to get some of the losses from the companies that sold the asset.

I’m sure more news will follow after congress votes today.  Stay tuned.

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