$700 Billion Bailout Bill on its Way to House Vote

The final bill is an amazing work of compromise, swelling from the original two page Treasury proposal to 110 pages of clear tit-for-tat negotiated provisions. A patchwork of political compromise the stabilization bill comes with an even mix of winners and losers. The hope is that the political give and take creates an effective final plan.

Democrats Win, Republicans Lose

Democrats captured this big issue:

• Democrats were also able to limit executive pay in participating institutions and eliminate the "golden parachutes."

Republicans left behind their alternative plan:

• Republicans favored the use of insurance of assets instead of wholesale purchasing of the impaired assets.

Republicans Win, Democrats Lose

Republicans secured a portion of this contentious point:

• Republicans gained an option for Treasury to use an insurance option on the assets, but there is no requirement to use that provision over wholesale purchase of assets.

Democrats gave on this earmark:

• Democrats favored an allocation of 20% of any eventual profits to be placed into ACORN for the purpose of increasing affordable housing. Immediate controversy swirled around this Democrat-leaning organization and their alleged improper voter registration activities.

Both sides of the political aisle seemed to be focused on prudently dispersing the funds and looking for stronger taxpayer protection. Each of these were provided in these elements of the final plan:

• A much stronger framework for oversight of the $700 billion in taxpayer money. Much of the 110 page bill is allocated to the establishment of these oversight structures including an Inspector General to watchdog fraud and graft.
• The $700 billion will also be provided in installments. Each installment will require some level of justification. The first $250 billion will be unlocked for the Treasury immediately, another $100 billion will have to be justified by the White House in a one month report to Congress, and then Congress will have to vote to allocate the remaining $350 billion.
• The opportunity to eventually recuperate losses. If the Treasury program has lost money over a five year period they would be able to charge the financial industry with fees, taxes, or premium on security transactions.

A Brush with Economic Armageddon

None of this is going to win a popularity contest with the American taxpayer that is still wondering how we got here. However, experts are calling it a brush with unprecedented calamity.

Paulson during negotiations stated, "look what happened to Washington Mutual, there are other companies, including large companies which are under stress," reminding Congress of the gravity of the crisis. Washington Mutual's take over by the FDIC on Thursday was the largest lending institution to ever fail in the US.

Republican Senator Judd Gregg (R-NH) further emphasized that, "if this works we will never know how truly close we were to economic disaster."

But, Will it Work?

It all comes down to a vote that is expected to be a nail-biter with both Democrats and Republicans uneasy about handing over $700 billion of the taxpayers money.

Meanwhile, in early Asian market trading the confidence does not seem to have magically returned with a detailed outline of the final plan. Many foreign markets are still shaky on the US economic plan and the new European three-country bailout of Fortis, Belgium's largest retail bank and UK's third largest car insurer.

All seeming to warn us to "stay seated with our seat belts firmly fastened--the ride is not over yet folks."