Okay, kids, this may seem long, but it’s about 107 pages less than the real bill.
The bill is at: http://www.latimes.com/media/acrobat/2008-09/42631254.pdf (PDF). There have been some wild-ass numbers thrown around in other threads, so I’m going to use scientific notation for the large numbers.
The Secretary is given unlimited power to define anything he wants as a “troubled asset,” including mortgages & Mortgage Backed Securities, along with any other asset related to anything else in the universe, and can then buy those assets to prop up whichever company he’s trying to save. However, the US citizens get an equity stake for these purchases. (See “Okay, teeth” below).
**Wishes for ponies:**I always like “you shall wish for a pony” requirements in contracts, because they very explicitly require that we wish for a pony. We don’t need to provide a pony or, in fact, do anything more than type a sentence that says, “We wish for a pony,” to satisfy such requirements.
Such requirements are in the bailout bill: the Secretary shall:[ul][li]Think about HUD requirementsThink about fairness in lendingProduce a report that contains suggestions for creating a list of reccommendations (also wishes for ponies) that Congress might make to him regarding his activitiesShall attempt to coordinate with various groups in an attempt to determine that tenants of any particular mortgage owned by the citizens are actually tenants. Doesn’t even have to coordinate; just has to attempt to coordinate. Just type, “I hereby attempt to coordinate,” and you’re done.Make reports available to Congress. Congress has one authority: to report suspected fraud to the AG. Note that fraud has a very high threshold, and as many politicians and business leaders have shown in the past decade, there’s nothing fraudulent about making very, very bad decisions.Seek to maximize potential return for the taxpayers. Just have to seek; no need to find.Encourage loan modifications. Just say, “Please think about modifying this loan, thanks.”[/ul][/li]
There is an oversight board, and it consists of the Chairman of the Board of Governors of the Fed, the Secretary; the Director of the Federal Home Finance Agency; the Chairman of the SEC and the Secretary of HUD. These are the people who have proven incompetent up to this point, but presumably they’re about to become competent. The oversight board also has only one actual power: to report suspected fraud to the AG, as long as they do it within two weeks of a given crime.
No reporting of any kind is required until seven days after each multiple of $50B ($5e10) has been spent. Any injunction against an action by the Secretary is granted an automatic stay of three days, but I honestly don’t understand the language in that section. The Secretary has the authority to do anything he or she wants in connection to anything he or she purchases, and can obtain money from the Treasury up to the current dollar limits of the float (see below), commit the government to whatever contractual relationships he or she wants with whatever company or individual he or she wants.
They go into great detail about wishes for ponies that Secretary might have regarding any particular mortgage that he purchases for the U.S. citizens, but ultimately, he has no requirement to do anything about any actual mortgage, because he’s got the authority to define anything as being under his authority. So, he can still buy up Citi’s bad credit card debt.
Some baby teeth: for assets the Secretary purchases without bidding by any other companies, the Secretary has the right to seek remuneration from any executive whose compensation is based on fraudulent statements made by that executive. For assets purchased via Dutch Auctions over $300M ($3e8), the Secretary shall prohibit new contracts with senior executives from having golden parachute provisions. (Senior executives == top five execs).
Dentures: The Secretary shall absolutely and without qualification seek to minimize long-term costs to the citizens via various activities, depending on his judgment. He shall also encourage other companies to act likewise. (He can satisfy this by typing the sentence, “I Hope Bank of America Treats Its Customers Nicely.”)
Okay, teeth: The Secretary shall not purchase assets directly unless he receives senior debt or preferred yet nonvoting shares; not sure why they specified non-voting. Basically, here’s the equity-sharing that the citizens get.
Plaque-inducing: However, the Secretary, when subsequently selling such assets, must type the sentence, “I hope the citizens don’t get screwed by this sale.”
The Secretary shall be able to not follow any rules in particular regarding purchases or sales of assets less than $100M ($1e8). So, he can buy a slightly-used lollipop from Citi for $99M ($9.9e7) without even being required to write the sentence, “I hope the citizens aren’t screwed by this.”
The Secretary shall think about whether or not financial institutions need to make public their off-balance-sheet transactions. (Doesn’t even need to share those thoughts with anyone; just think about it).
Total Money in Play at any one time: At any point in time, the Secretary is only allowed to float a total of $250B ($2.5e11). Unless the President says he’s allowed to go up to $350B ($3.5e11). The President can authorize up to $700B ($7e11) at any given time, but Congress can prevent that if they pass a joint resolution disapproving of the action, but they have to start talking about it no later than the third calendar day after the President tells them about it, and have to pass the joint resolution within 15 days.
There are some additional rules about these joint resolutions – (formal) discussion is limited to 5 hours each for the majority & minority leaders, and points of order against it are waived. Then there is a really confusing section that, it seems, requires that the House and Senate vote on the exact same resolutions. I’m not sure of this last one; it’s in Sec 115 (f) (1) (b) (ii) (i.e., page 46, line 20).
Use of Teeth which have historically brought some truth to light: The GAO has the right to any information the Secretary has regarding his transactions, and presumably has the right to talk to Congress.
The bill will expire 12/31/09, unless the Secretary wants to extend it to ~10/15/10.
Also, the US debt ceiling is bumped up to $11T ($1.13e13).
Also, the HOPE legislation no longer requires that modified loans be restricted to 38% (so they can say a loan is officially modified if the LTI is greater than 38%, meaning that).
Truth in Lending Teeth: The APR must be presented as has been the case in the past, except that if it’s inaccurate, the creditor must present an updated truth-in-lending statement when the loan closes. I’m guessing they’re closing a loophole wherein the creditors could technically abide by the truth-in-lending act by screwing over the borrowers, but I’m not clear on the act (and the blankity blank bailout language just describes text editing operations that occur in the TILA).
Toothless: The SEC can eliminate Mark-to-Market accounting requirements. (Meaning, when Deloitte and Touche lies in an audit, they’re no longer lying.)
Total US Debt (assuming 3.5e8 people): $31.4K per person, or $3.14e4.
Total allowable float at any given time: $714 per person, maybe four times that per family.
My issue for debate: Why did Congress have less than two weeks to debate this? More to the point, why did Congress decide not to discuss this until two weeks ago, when Bush finally showed his hand? In very recent public statements, pretty much everyone except Ron Paul said that there was nothing to worry about, until they decided to label it a crisis, at which point they had to produce legislation that no one could have enough time to really discuss.
And, pardon my French, why the f**k didn’t they model this legislation on the deal that Warren Buffet just made? He has a history of making rather intelligent decisions regarding money, and I’m sure he’d have been eager to write the entire thing for them.