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Details of The $700bb Bailout Bill (TARP, Troubled Asset Relief Program)
Some color on the bill itself [and a little more (opinion) from the writer]: source: [url]http://www.traderdaily.com/column/1/24216.html[/url] Dear Trader, The Senate met last night to pass the Wall Street handout bill, also known as TARP (Troubled Asset Relief Program). It was a done deal on day 1 in my opinion; so when we witnessed the House defeat the bill, it was really just a dog and pony show for those members on the reelection bubble. Global central banks are ringing the White House phone off the hook to get it done - or else. The Senate version of the TARP bill contains three main sections; the actual stabilization act (division A), the Energy Improvement act (division B), and tax reduction extension (division C). [B]Division A - Emergency Economic Stabilization Act of 2008 [/B] In addition to the TARP, the Senate legislation includes an expansion in deposit insurance as mentioned yesterday. Section 136 would provide for a temporary increase in the amount of deposits insured by the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA), raising the limit for each insured account from $100,000 to $250,000 through December 31, 2009. The bill would appropriate such sums ($700 billion) as are necessary, for as many years as necessary, to enable the (unelected) Secretary to purchase or insure (ANY) troubled assets and to cover all administrative expenses of purchasing, insuring, holding, and selling those assets. The purchase price of all such assets outstanding at any one time could not exceed $700 billion (though cumulative gross purchases could exceed $700 billion as previously purchased assets are sold). This truly is a blank check. In Division A the Treasury has the authority to (read: will be) buy troubled assets from banks other than mortgages such as; auto loans, credit card loan portfolio's, and school loan portfolio's. Question: Is the government giving YOU relief on your credit card, auto, or college loan payments? I didn't think so. As one must expect from the circus clowns in Congress, what they say is only a small portion of what will be done: it's always bait-and-switch with them. The Treasury will also be using your money to bail out foreign commercial and central banks. In the words of Representative Brad Sherman on CNBC speaking to Larry Kudlow - It provides hundreds of billions of dollars of bailouts to foreign investors. It provides no real control of Paulson's power. There is a critique board but not really a board that can step in and change what he does. It's a $700 billion program run by a part-time temporary employee and there is no limit on million dollar a month salaries. Larry you have to read the bill. It's very clear. The Bank of Shanghai can transfer all of its toxic assets to the Bank of Shanghai of Los Angeles which can then sell them the next day to the Treasury. I had a provision to say if it wasn't owned by an American entity even a subsidiary, but at least an entity in the US , the Treasury can't buy it. It was rejected. The bill is very clear. Assets now held in China and London can be sold to US entities on Monday and then sold to the Treasury on Tuesday. Paulson has made it clear he will recommend a veto of any bill that contained a clear provision that said if Americans did not own the asset on September 20th that it can't be sold to the Treasury. Hundreds of billions of dollars are going to bail out foreign investors. They know it; they demanded it and the bill has been carefully written to make sure that can happen. (As I said, this was a done deal a LONG time ago.) [B]Division B - Energy Improvement and Extension Act of 2008 [/B] Division B of the bill would provide a number of tax incentives related to energy and fuel production and energy conservation. CBO and the Joint Committee on Taxation (JCT) estimate that, over the 2009-2013 period, Division B would reduce revenues by $6.8 billion, increase outlays by about $0.2 billion, and increase projected deficits by about $7 billion. [B]Division C - Tax Extensions and Alternative Minimum Tax Relief [/B] Division C would extend relief from the alternative minimum tax for 2008, extend and modify a number of other expiring tax provisions, provide tax relief for regions of the country affected by severe storms earlier this year, make other changes to tax law, and provide payments to state and local governments for support to rural schools and other county programs. It also would modify the tax treatment of deferred compensation paid by certain foreign entities. CBO and JCT estimate that, over the 2009-2013 period, Division C would reduce revenues by about $105.2 billion, increase outlays by $7.1 billion, and increase projected deficits by about $112.3 billion. Hurricane relief and rural school assistance may be admirable objectives; however, in what way is that related to the TARP? Intergovernmental and Private-Sector Mandates Division C, section 512 would impose a private-sector mandate on group health plans and issuers of group health insurance by prohibiting them from imposing treatment limitations or financial requirements for mental health benefits that differ from those placed on medical and surgical benefits. Mental health benefit increases may be an admirable objective; however, in what way is that related to the TARP? Have you wondered how the government came to the oft-quoted price tag? A Treasury spokeswoman told Forbes.com Tuesday - It's not based on any particular data point. We just wanted to choose a really large number. Ah yes, that's your government in action - making it up as they go along. Trade well and follow the trend, not the so-called experts. Larry Levin 10/2/08
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