A First Glance at the Bailout Bill

I don’t claim to have read the full 102 page text of the bailout draft proposal yet, but I wanted to share my first reactions after jumping around to some of the sections that caught my interest.

Section 110 – Executive compensation (p. 29)

I like the idea of controls on executive compensation for participating companies, but the regulations here are vague and toothless. For example, the bill prohibits "inappropriate or excessive severance compensation." (110 3b) Considering how much the executives of large companies make, it should specify that there be zero compensation for severance.

Section 114 – Graduated Authorization to Purchase (P. 38)

This section was a pleasant surprise. It appears that it is not settled, but I like the idea of having a tiered approach to how much the Treasury is authorized to spend. The levels here are $250B initially, $350B upon notice from the treasury, and $700B if Congress does not oppose within 15 days the proposal of the treasury for that level of authority. Personally I think there should be an intermediate level of $500B where the treasury must write a proposal and the Congress has 8 days to decline before it takes effect.

Does anyone want to make bets on how long it takes the Treasury to bump its authority from $250B to $350B?

Section 119 – Termination of Authority (p. 55)

This might be my favorite section. I was pleasantly surprised that the authority was only granted until December 31, 2009 – with the option to petition for an extension by describing how extended authority will benefit the taxpayers. Even with a petition the authority is specified to end only two years from the day the bill is originally signed. Of course I won’t hold my breath that it will die in two years or less. I will believe it when it happens.

Section 123 – Minimizing Foreclosures (p. 65)

What I saw of this section suggested an approach that would not cost taxpayers anything – that’s the right aproach. The efforts to minimize foreclosures are directed at restructuring loans by extending their terms where appropriate.

One More Wish

I would like to see a provision, on the outside chance that this program actually generates a profit, that any profit realized by the treasury through this program will be used 100% to pay down the national debt – this should not be used as a windfall by Congress to fund some pet projects.