Emergency Economic Stabilization Act

From Riski

Jump to: navigation, search

The Emergency Economic Stabilization Act of 2008 (USPL|110|343, Div. A, enacted October, 3, 2008)-->, commonly referred to as a bailout of the U.S. financial system, is a law enacted in response to the subprime mortgage crisis authorizing the US Secretary of the Treasury to spend up to US$ 700 billion to purchase distressed assets, especially mortgage-backed securities, and make capital injections into banks.[1] [2]

Both foreign and domestic banks are included in the bailout. The Federal Reserve also extended help to American Express, whose bank-holding application it recently approved.|date=2008-11-12 The Act was proposed by Treasury Secretary Henry Paulson during the global financial crisis of 2008.

The original proposal was three pages, as submitted to the United States House of Representatives. The purpose of the plan was to purchase bad assets, reduce uncertainty regarding the worth of the remaining assets, and restore confidence in the credit markets.

The text of the proposed law was expanded to 110 pages and was put forward as an amendment to H.R. 3997.

The amendment was rejected via a vote of the House of Representatives on September 29, 2008, by a margin of 228-205.[3]

On October 1, 2008, the United States Senate|Senate]] debated and voted on an amendment to Public Law 110-343|H.R. 1424, which substituted a newly revised version of the Emergency Economic Stabilization Act of 2008 for the language of H.R. 1424.[4] (the amendment being the text of the Emergency Economic Stabilization Act of 2008 along with the Energy Improvement and Extension Act of 2008, and Tax Extenders and Alternative Minimum Tax Relief Act of 2008.)

Senate Committee on Banking, Housing and Urban Affairs (October 1, 2008) [5]

The Senate accepted the amendment and passed the entire amended bill by a vote of 74-25.[6]

Additional unrelated provisions added an estimated $150 billion to the cost of the package and increased the size of the bill to 451 pages.[7]

See Public Law 110-343 for details on the added provisions. The amended version of H.R. 1424 was sent to the House for consideration, and on October 3, the House voted 263-171 to enact the bill into law.[1][2][3] President Bush signed the bill into law within hours of its enactment, creating a $700 billion Troubled Assets Relief Program to purchase failing bank assets.[4]

Supporters of the bailout plan argued that the market intervention called for by the plan was vital to prevent further erosion of confidence in the U.S. credit markets and that failure to act could lead to an economic depression. Opponents objected to the massive cost of the sudden plan, pointing to polls that showed little support among the public for bailing out Wall Street investment banks,[5] and claimed that better alternatives were not considered[6] and that the Senate only tried to force the passage of the unpopular but sweetened version of the bailout through the opposing House and was successful in this attempt.[7][8]

Some opponents of the rescue plan—especially conservative commentators influenced by Euro-Pacific Capital CEO Peter Schiff[9] -- argue that since the problems of the American economy were created by excess credit and debt, a massive infusion of credit and debt into the economy only exacerbates the problems.[10] Schiff's argument is opposed by many supporters of the program.[11][12]


Personal tools