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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{ read the comments below or add one }

  • MoneyNing says:

    Aaron: I absolutely don’t think it’s fair for us to bailout the financial institutions that made so much money off us in the last few years but I support it because if the housing market keeps worsening, we are in serious, serious trouble as no one will lend money to other businesses and many of them will fall, causing job losses and an even bigger downward spiral.

    Dave: Great info. Thanks so much for the links.

    Dividend Growth Investor: Get a big enough boat and I might join ya. 🙂

  • Dividend Growth Investor says:

    Thanks for summarizing the bailout plan for us. I really hope some sort of bailout gets approved by congress. Or I’d have to learn to hunt and fish 🙂

  • Dave R says:

    Found another blog with even more reasons why the bailout is a bad idea:

    Lots of serious conflicts of interest for advisors on this deal that I wasn’t aware of.

  • Aaron says:

    What’s your take on the plan MoneyNing? Do you support it? I keep hearing that the bailout is necessary to prevent a recession. All the financial elite seem to be supporting it, while the major arguments against it seem to be on an emotional appeal. Although Dave’s link has many good points, the problem is a overly deregulated financial sector fueled by greet imo.

  • MoneyNing says:

    Joe: Wow even worst than I thought. The DOW was down 777 points.

    Calvin: I suspect that they will reopen the votes or do something to get some version of the bill pass based on what it’s happening today.

  • Calvin says:

    Dave: Looks like you are getting your way so far. Congress didn’t pass that plan.

  • Dave R says:

    The bailout plan is a bad idea on so many levels. Government is proposing to intervene in the normal consolidation of the financial services industry; a sector which has had a record run up in recent years.


  • Joe says:

    Geez look at the market today.

    I guess the bailout plan is not helping much.

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