This past weekend, the White House proposed legislation that would give unprecedented authority to the U.S. Treasury Department to purchase troubled assets from U.S. financial insitutions in order to promote market stability and help homeowners.
Congress has until Friday of this week to pass legislation, or be faced with postponing its election season recess. Representatives of Treasury and the Congress have pledged to cooperate to pass a bill this week, but a number of concerns must be addressed.
The bare-bones proposed legislation would empower Treasury to act essentially with total discretion as follows:
1. Issue securities or obligations up to $700 billion in order to purchase mortgage-related assets (generally, mortgages and securities) that were issued or originated before September 17, 2008, from financial institutions.
2. Manage and sell mortgage-related assets and enter into other types of transactions involving such assets, all on terms Treasury determines.
3. Hire third parties to manage any of the assets purchased by the Treasury.
4. Exercise rights associated with the acquired mortgage-related assets.
5. Make financial institutions agents of the government for purposes of dealing with Treasury's acquired mortgage-related assets.
6. Promulgate appropriate regulations to implement the legislation.
We will provide updates as the proposed legislation works its way to the floor for a vote, which is expected by the end of the week.
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