Sunday, September 28, 2008

Congressional leaders say bailout deal is near -

Congressional leaders say bailout deal is near -
"Under the tentative deal being finalized, the rescue program would be overseen by a board including the treasury secretary, secretary of commerce, head of the Securities and Exchange Commission and chairman of the Federal Reserve, said Sen. Kent Conrad, R-North Dakota, who heads the Senate Budget Committee.

According to Conrad, $700 billion would be disbursed in stages, with $250 billion made available immediately. In addition, the Treasury would establish an insurance program -- with premiums paid by the industry -- to mitigate taxpayer losses. The bill would also probably include some curbs on the compensation of executives at companies that participate."
In an earlier piece, the WSJ has a good description of what the government will be doing in any of the proposed plans(essentially buying and then trying to resell at a later date):
" -- a key goal is to remove much of those soured mortgage securities from banks' books, possibly through an auction system.

The government -- taxpayers, essentially -- would then hold those assets until they can be sold off in a more normal market once the economy and housing market recover.

and later

"So taxpayers face the risk of losing some part of the $700 billion -- but could also turn a profit if the U.S. ends up selling those holdings for more than the purchase price."

and as the WSJ points out, previous deals such as Bear and AIG are structureed similarly, which means that while taxpayers do have a great deal invested, the actual cost of the deals is not known. Indeed, they could make a profit (which is unlikely given government track record of selling securities, but possible).

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