EMERGENCY ECONOMIC STABILIZATION ACT OF 2008

SUMMARY OF THE “EMERGENCY ECONOMIC STABILIZATION ACT OF 2008”

I. Stabilizing the Economy
The Emergency Economic Stabilization Act of 2008 (EESA) provides up to $700 billion
to the Secretary of the Treasury to buy mortgages and other assets that are clogging the
balance sheets of financial institutions and making it difficult for working families, small
businesses, and other companies to access credit, which is vital to a strong and stable
economy. EESA also establishes a program that would allow companies to insure their
troubled assets.

II. Homeownership Preservation
EESA requires the Treasury to modify troubled loans – many the result of predatory
lending practices – wherever possible to help American families keep their homes. It
also directs other federal agencies to modify loans that they own or control. Finally, it
improves the HOPE for Homeowners program by expanding eligibility and increasing
the tools available to the Department of Housing and Urban Development to help more
families keep their homes.

III. Taxpayer Protection
Taxpayers should not be expected to pay for Wall Street’s mistakes. The legislation
requires companies that sell some of their bad assets to the government to provide
warrants so that taxpayers will benefit from any future growth these companies may
experience as a result of participation in this program. The legislation also requires the
President to submit legislation that would cover any losses to taxpayers resulting from
this program from financial institutions.

IV. No Windfalls for Executives
Executives who made bad decisions should not be allowed to dump their bad assets on
the government, and then walk away with millions of dollars in bonuses. In order to
participate in this program, companies will lose certain tax benefits and, in some cases,
must limit executive pay. In addition, the bill limits “golden parachutes” and requires
that unearned bonuses be returned.

V. Strong Oversight
Rather than giving the Treasury all the funds at once, the legislation gives the Treasury
$250 billion immediately, then requires the President to certify that additional funds are
needed ($100 billion, then $350 billion subject to Congressional disapproval). The
Treasury must report on the use of the funds and the progress in addressing the crisis.
EESA also establishes an Oversight Board so that the Treasury cannot act in an arbitrary
manner. It also establishes a special inspector general to protect against waste, fraud and
abuse

Source

Update: The Bill did not pass the Senate