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Today, at 1:30 p.m., the U.S. House passed the $700 billion bailout plan. The crucial vote was 263-171, passing by a comfortable bipartisan margin. Most Democrats voted in favor (172 yeas to 63 nays), while a slighter majority of Republicans voted against (91 yeas to 108 nays). Every member of the House voted, and the President will sign it.
The rescue plan allows the Treasury to buy troubled debt from financial firms in an effort to ease a deepening credit crisis that is choking off business and consumer loans, and contributing to a string of bank failures in the United States and Europe. The hope is that clearing the balance sheets of bad debt will keep credit flowing and prevent normal economic activity from stalling.
The final agreement called for the $700 billion to be disbursed in parts: $250 billion at first, to get the program started, followed by $100 billion at the discretion of Mr. Bush and the remaining $350 billion upon request of the Treasury with Congress empowered to block the last installment by acting within 15 days. This version of the bill attached a $150.5 billion package of popular provisions, including tax breaks for the production and use of renewable energy, and protection for millions of American families from paying the alternative minimum tax.
It is impossible to predict the final cost of the bailout but officials insist it will be far less than $700 billion. Because the Treasury will purchase and then resell assets, potentially at a higher price, there is a chance the program will break even or perhaps turn a profit. The deal provides for tight oversight by two boards, including an independent Congressional panel. It requires the government to use its status as a large- scale owner of distressed, mortgage-backed securities to take more aggressive steps to prevent foreclosures. The bill also seeks to limit the pay of executives of some companies that sell bad debt to the government, including restrictions on so-called "golden parachute" retirement plans. It also provides several taxpayer protections, including a mechanism for the government to take an equity stake, in the form of stock warrants, in some of the firms that seek government help, which will give taxpayers a chance to make money should the companies profit in the months and years ahead. And, if the rescue plan has lost money after five years, the bill requires the President to submit a plan to Congress for recouping the losses from the financial industry, perhaps through fees or a tax on securities transactions.
In an ironic twist, the Mental Health Parity bill (officially the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008) was the vehicle by which they passed the $700B plan, thus moving that bill from the bottom of the agenda to one that will bail out American financial markets, and perhaps the world.
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