The United States is Now in a Recession

[Guest LAW_*]

Washington Mutual Inc. was seized by government regulators and its branches and assets sold to JPMorgan Chase & Co. in the biggest U.S. bank failure in history.

 

Washington Mutual, Inc. (NYSE:WM) announced today that an "Exchange Event" has occurred under the applicable documents governing the following securities (Securities):

 

-- Washington Mutual Preferred (Cayman) I Ltd. 7.25%

Perpetual Non-cumulative Preferred Securities, Series A-1

(to be exchanged into depositary shares representing

Series J Perpetual Non-Cumulative Fixed Rate Preferred

Stock of WMI);

 

-- Washington Mutual Preferred (Cayman) I Ltd. 7.25%

Perpetual Non-cumulative Preferred Securities, Series A-2

(to be exchanged into depositary shares representing

Series J Perpetual Non-Cumulative Fixed Rate Preferred

Stock of WMI);

 

-- Washington Mutual Preferred Funding Trust I

Fixed-to-Floating Rate Perpetual Non-cumulative Trust

Securities (to be exchanged into depositary shares

representing Series I Perpetual Non-Cumulative

Fixed-to-Floating Rate Preferred Stock of WMI);

 

-- Washington Mutual Preferred Funding Trust II

Fixed-to-Floating Rate Perpetual Non-cumulative Trust

Securities (to be exchanged into depositary shares

representing Series L Perpetual Non-Cumulative Fixed Rate

Preferred Stock of WMI);

 

-- Washington Mutual Preferred Funding Trust III

Fixed-to-Floating Rate Perpetual Non-cumulative Trust

Securities (to be exchanged into depositary shares

representing Series M Perpetual Non-Cumulative Fixed Rate

Preferred Stock of WMI); and

 

-- Washington Mutual Preferred Funding Trust IV

Fixed-to-Floating Rate Perpetual Non-cumulative Trust

Securities (to be exchanged into depositary shares

representing Series N Perpetual Non-Cumulative

Fixed-to-Floating Rate Preferred Stock of WMI).

In connection with the Exchange Event, WMI will effect an exchange (Conditional Exchange) of the Securities into depositary shares representing a like amount of preferred stock in WMI, as contemplated by the applicable documents governing the securities.

 

In accordance with the terms of the documents governing the Securities, the Conditional Exchange of the Securities will occur on Friday, September 26, 2008 at 8:00 A.M. New York time. As of the time of the Conditional Exchange, each outstanding Security will be exchanged automatically for a like amount of newly issued Fixed Rate Depositary Shares or newly issued Fixed-to-Floating Rate Depositary Shares, as applicable, each representing a 1/1000th interest in one share of the applicable series of preferred stock of WMI.

 

WMI will mail the notice required under the applicable documents to each holder of record of Securities within 30 days, and WMI will deliver or cause to be delivered to each such holder of record depositary receipts for the Fixed Rate Depositary Shares and Fixed-to-Floating Rate Depositary Shares upon surrender of the Securities. Until such depositary receipts are delivered or in the event such depositary receipts are not delivered, any certificates previously representing Securities will be deemed for all purposes, effective as of 8:00 AM New York time on September 26, 2008, to represent Fixed Rate Depositary Shares or Fixed-to-Floating Rate Depositary Shares, as applicable.

[Guest FDIC]

On September 25, 2008, the banking operations of Washington Mutual, Inc - Washington Mutual Bank, Henderson, NV and Washington Mutual Bank, FSB, Park City, UT (Washington Mutual Bank) were sold in a transaction facilitated by the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC).

 

JPMorgan Chase acquired the banking operations of Washington Mutual Bank in a transaction facilitated by the Federal Deposit Insurance Corporation. All depositors are fully protected and there will be no cost to the Deposit Insurance Fund.

 

"For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks," said FDIC Chairman Sheila C. Bair. "For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning."

 

JPMorgan Chase acquired the assets, assumed the qualified financial contracts and made a payment of $1.9 billion. Claims by equity, subordinated and senior debt holders were not acquired.

 

"WaMu's balance sheet and the payment paid by JPMorgan Chase allowed a transaction in which neither the uninsured depositors nor the insurance fund absorbed any losses," Bair said. All deposit accounts and all loans have been transferred to JPMorgan Chase Bank, National Association, Columbus, Ohio (JPMorgan Chase Bank). All former Washington Mutual Bank will reopen for normal business hours as branches of JPMorgan Chase Bank.

 

Washington Mutual Bank also has a subsidiary, Washington Mutual FSB, Park City, Utah. They have combined assets of $307 billion and total deposits of $188 billion.

 

Loan Customers

 

If you had a loan with Washington Mutual Bank, you should continue to make your payments as usual. The terms of your loan will not change because they are contractually agreed to in your promissory note. Checks should be made payable as usual and sent to the same address until further notice.

For all questions regarding new loans and the lending policies of JPMorgan Chase Bank, please contact your branch office.

 

Banking Services

The Automated Teller Machines (ATM) and on line services will remain available.

You may continue to use the services to which you previously had access, such as, safe deposit boxes, night deposit boxes, wire services, etc, as normally available at each branch.

 

Your checks will be processed as usual. All outstanding checks will be paid against your available balance(s) as if no change had occurred. Your new bank will contact you soon regarding any changes in the terms of your account. If you have a problem with a merchant refusing to accept your check, please contact your branch office. An account representative will clear up any confusion about the validity of your checks.

 

All interest accrued through Thursday, September 25, 2008, will be paid at your same rate. JPMorgan Chase Bank will be reviewing rates and will provide further information soon. You will be notified of any changes.

 

Your automatic direct deposit(s) and/or automatic withdrawal(s) will be transferred automatically to your new bank. If you have any questions or special requests, you may contact a representative of your assuming institution at your branch office.

 

Thursday evening, Washington Mutual was closed by the Office of Thrift Supervision and the FDIC named receiver. WaMu customers with questions should call their normal banking representative, service center, 1-800-788-7000 or visit www.WaMU.com. The FDIC's consumer hotline is 1-877-ASK-FDIC (1-877-275-3342) or visit

 

http://www.fdic.gov.

[Guest FDIC]

On September 25, 2008, the banking operations of Washington Mutual, Inc - Washington Mutual Bank, Henderson, NV and Washington Mutual Bank, FSB, Park City, UT (Washington Mutual Bank) were sold in a transaction facilitated by the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC).

 

JPMorgan Chase acquired the banking operations of Washington Mutual Bank in a transaction facilitated by the Federal Deposit Insurance Corporation. All depositors are fully protected and there will be no cost to the Deposit Insurance Fund.

 

"For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks," said FDIC Chairman Sheila C. Bair. "For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning."

 

JPMorgan Chase acquired the assets, assumed the qualified financial contracts and made a payment of $1.9 billion. Claims by equity, subordinated and senior debt holders were not acquired.

 

"WaMu's balance sheet and the payment paid by JPMorgan Chase allowed a transaction in which neither the uninsured depositors nor the insurance fund absorbed any losses," Bair said. All deposit accounts and all loans have been transferred to JPMorgan Chase Bank, National Association, Columbus, Ohio (JPMorgan Chase Bank). All former Washington Mutual Bank will reopen for normal business hours as branches of JPMorgan Chase Bank.

 

Washington Mutual Bank also has a subsidiary, Washington Mutual FSB, Park City, Utah. They have combined assets of $307 billion and total deposits of $188 billion.

 

Loan Customers

 

If you had a loan with Washington Mutual Bank, you should continue to make your payments as usual. The terms of your loan will not change because they are contractually agreed to in your promissory note. Checks should be made payable as usual and sent to the same address until further notice.

For all questions regarding new loans and the lending policies of JPMorgan Chase Bank, please contact your branch office.

 

Banking Services

The Automated Teller Machines (ATM) and on line services will remain available.

You may continue to use the services to which you previously had access, such as, safe deposit boxes, night deposit boxes, wire services, etc, as normally available at each branch.

 

Your checks will be processed as usual. All outstanding checks will be paid against your available balance(s) as if no change had occurred. Your new bank will contact you soon regarding any changes in the terms of your account. If you have a problem with a merchant refusing to accept your check, please contact your branch office. An account representative will clear up any confusion about the validity of your checks.

 

All interest accrued through Thursday, September 25, 2008, will be paid at your same rate. JPMorgan Chase Bank will be reviewing rates and will provide further information soon. You will be notified of any changes.

 

Your automatic direct deposit(s) and/or automatic withdrawal(s) will be transferred automatically to your new bank. If you have any questions or special requests, you may contact a representative of your assuming institution at your branch office.

 

Thursday evening, Washington Mutual was closed by the Office of Thrift Supervision and the FDIC named receiver. WaMu customers with questions should call their normal banking representative, service center, 1-800-788-7000 or visit www.WaMU.com. The FDIC's consumer hotline is 1-877-ASK-FDIC (1-877-275-3342) or visit

 

http://www.fdic.gov.

[Guest Chris_*]

Does anyone know what happens to stock shares in Washington Mutual Bank?

[Guest JPMorgan Chase]

JPMorgan Chase & Co. (NYSE: JPM) tonight announced it has acquired all deposits, assets and certain liabilities of Washington Mutual's banking operations from the Federal Deposit Insurance Corporation (FDIC), effective immediately. Excluded from the transaction are the senior unsecured debt, subordinated debt, and preferred stock of Washington Mutual's banks. JPMorgan Chase will not be acquiring any assets or liabilities of the banks' parent holding company (WM) or the holding company's non-bank subsidiaries. As part of this transaction, JPMorgan Chase will make a payment of approximately $1.9 billion to the FDIC.

 

The acquisition expands Chase's consumer branch network into the attractive states of California, Florida and Washington State and creates the nation's second-largest branch network - with locations reaching 42% of the U.S. population. The combined 5,400 branches in 23 states will also serve as an excellent base to extend the reach of the business banking, commercial banking, credit card, consumer lending and wealth management businesses. The acquisition also extends Chase's retail branch network to additional states, including Georgia, Idaho, Nevada and Oregon.

 

The acquisition of Washington Mutual's banking operations is expected to be immediately accretive to earnings and to add more than 50 cents per share in 2009. JPMorgan Chase expects to incur pretax merger costs of approximately $1.5 billion while achieving annual pretax cost savings of approximately $1.5 billion by 2010, net of significant investments in the business. The bank plans to complete most systems integrations and rebranding by year-end 2010, closing less than 10% of branches in the combined network in overlapping markets.

 

In conjunction with this acquisition, JPMorgan Chase will be marking down the acquired loan portfolio by approximately $31 billion, which primarily represents our estimate of remaining credit losses related to the impaired loans. JPMorgan Chase intends to raise additional capital in connection with this transaction to maintain the company's strong capital position.

 

"This deal makes excellent strategic sense for our company and our shareholders. Our people have worked hard to build a strong franchise and balance sheet - making this compelling transaction possible," said Jamie Dimon, Chairman and CEO. "As we have said in the past, increasing our regional banking presence not only strengthens our Retail business, but also benefits other business lines across our firm, including our commercial banking, business banking, credit card, and asset management groups."

 

"JPMorgan Chase is strongly committed to both a strong banking system and our responsibility as a good corporate citizen. We are active in the states and local communities where we do business," Dimon said. In July, the bank earned an outstanding rating from the Officer of the Comptroller of the Currency for the company's work helping families buy homes, financing small businesses and making its communities better.

 

"We look forward to welcoming Washington Mutual's employees to JPMorgan Chase and working with them as we build a great company together," Dimon added.

 

"This acquisition makes us more convenient and valuable to our customers and meets our strategic goal of broadening our footprint to serve our current and future customers better," said Charlie Scharf, head of Chase's Retail business. He added, "Following a transition, Washington Mutual customers will be able to take advantage of Chase's broader network and a wider product range - all backed by the strength and security of JPMorgan Chase." Over time, Chase will provide more personal bankers, business bankers, loan officers and investment advisers to serve the needs of Washington Mutual customers and to expand their relationship with Chase.

 

Customers of both companies may continue banking as usual, and feel confident that their deposits are secure, now backed by the strength and security of JPMorgan Chase. Employees and vendors should continue to operate business as usual.

 

Chase expects to convert Washington Mutual's consumer banking, home lending and credit card businesses to the Chase brand and technology platforms over the next two years. Chase and Washington Mutual customers should be able to access the combined network of 14,000 ATMs without fees in the coming months.

 

About JPMorgan Chase

 

JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm with assets of $2.0 trillion and operations in more than 60 countries. The firm is a leader in investment banking, financial services for consumers, small business and commercial banking, financial transaction processing, asset management, and private equity. A component of the Dow Jones Industrial Average, JPMorgan Chase serves millions of consumers in the United States and many of the world's most prominent corporate, institutional and government clients under its JPMorgan and Chase brands. Information about the firm is available at www.jpmorganchase.com.

 

JPMorgan Chase will host a conference call at 9:15 p.m. (Eastern Time) tonight, September 25, 2008. You may access the conference call by dialing 1-877-238-4671 (U.S. and Canada)

/ 1-719-785-5594 (International) - access code: 814030 or via live audio webcast at the jpmorganchase.com website under Investor Relations/Investor Presentations. Materials and further communication will be available on this website at the time of the call.

 

A replay of the conference call will be available beginning at approximately 1:00 a.m. on September 26 through midnight, Thursday, October 9 by telephone at (888) 348-4629 (U.S. and Canada); access code: 942856 or (719) 884-8882 (International). The replay will also be available via webcast on www.jpmorganchase.com under Investor Relations, Investor Presentations.

[Guest LAW_*]

Does anyone know what happens to stock shares in Washington Mutual Bank?

 

According to the FDIC stockholders have a claim against the receivership; however, they have the lowest priority of claim. You should discuss this with an accountant and/or the IRS concerning the exact requirements necessary to recognize the investment as a loss for tax purposes.

 

Senior notes/subordinated debenture notes: The owners will be treated as claimants of the receivership and additional information will be sent by mail to the owners of these obligations by the FDIC

[Guest Fed Up]

The full cost to J.P. Morgan will be much higher, because it plans to write down about $31 billion of the bad loans and raise $8 billion in new capital.

[Luke_Wilbur]

I hope this crisis teaches people all over the world that we all need to develop ethical principles that guide market competition. We must realize that stocks, bonds, and commodities can be come objects of greed. We sometimes forget their real value is dependent on social trust that people are able to do business with each other.

 

When trust is gone value is nothing.

 

The virtue of greed has taken over Wall Street and Government. In the past their tool has been the mainstream media. Now the Internet is the media tool of the people. We have been given the ability to conceptualize ideas from many sources. Americans from across nation are talking in forums like this one about what really is going on.

 

I see leaders on both sides playing the blame game to the main stream media. But, I hope they realize the same principle can be applied to political power. The American People are watching.

[Guest The White House]

THE PRESIDENT: Good morning. This is an extraordinary period for America's economy. Many Americans are anxious about their finances and their future. On Wednesday, I spoke to the Nation, and thanked Congress for working with my Administration to address the instability in our financial system. On Thursday, I hosted Senator McCain, Senator Obama, and congressional leaders from both parties at the White House to discuss the urgency of passing a bipartisan rescue package for our economy.

 

The problems in our economy are extremely complex, but at their core is uncertainty over "mortgage-backed securities." Many of these financial assets relate to home mortgages that have lost value during the housing decline. In turn, the banks holding these assets have restricted credit, and businesses and consumers have found it more difficult to obtain affordable loans. As a result, our entire economy is in danger. So I proposed that the Federal government reduce the risk posed by these troubled assets, and supply urgently needed money to help banks and other financial institutions avoid collapse and resume lending.

 

I know many of you listening this morning are frustrated with the situation. You make sacrifices every day to meet your mortgage payments and keep up with your bills. When the government asks you to pay for mistakes on Wall Street, it does not seem fair. And I understand that. And if it were possible to let every irresponsible firm on Wall Street fail without affecting you and your family, I would do it. But that is not possible. The failure of the financial system would mean financial hardship for many of you.

The failure of the financial system would cause banks to stop lending money to one another and to businesses and consumers. That would make it harder for you to take out a loan or borrow money to expand a business. The result would be less economic growth and more American jobs lost. And that would put our economy on the path toward a deep and painful recession.

 

The rescue effort we're negotiating is not aimed at Wall Street -- it is aimed at your street. And there is now widespread agreement on the major principles. We must free up the flow of credit to consumers and businesses by reducing the risk posed by troubled assets. We must ensure that taxpayers are protected, that failed executives do not receive a windfall from your tax dollars, and that there is a bipartisan board to oversee these efforts.

 

Under the proposal my Administration sent to Congress, the government would spend up to $700 billion to buy troubled assets from banks and other financial institutions. I know many Americans understand the urgency of this action, but are concerned about such a high price tag. Well, let me address this directly:

 

The final cost of this plan will be far less than $700 billion. And here's why: As fear and uncertainty have gripped the market for mortgage-related assets, their price has dropped sharply. Yet many of these assets still have significant underlying value, because the vast majority of people will eventually pay off their mortgages. In other words, many of the assets the government would buy are likely to go up in price over time. This means that the government will be able to recoup much, if not all, of the original expenditure.

 

Members of Congress from both sides of the aisle have contributed constructive proposals that have improved this plan. I appreciate the efforts of House and Senate Democratic and Republican leaders to bring a spirit of bipartisan cooperation to these discussions. Our Nation's economic well-being is an issue that transcends partisanship. Republicans and Democrats must continue to address it together. And I am confident that we will pass a bill to protect the financial security of every American very soon.

[Guest Bank of England]

Central banks have been employing co-ordinated measures designed to address the pressures in global money markets. Most recently, central banks have acted together to inject dollars into the overnight markets. Using reciprocal currency arrangements (swap lines) with the Federal Reserve, the Bank of England, the European Central Bank (ECB), and the Swiss National Bank today are announcing the introduction of operations to provide U.S. dollar liquidity with a one-week maturity. These operations are intended to address funding pressures over quarter end. Central banks continue to work together closely and are prepared to take further steps as needed to address the ongoing pressures in funding markets.

 

The Bank of England will increase the term of its existing operations to lend US dollar funds against collateral eligible in the Bank’s short-term repos and US Treasuries. An operation to lend $30bn of funds for one week will take place today, alongside an operation to lend funds overnight. The size of the Bank’s overnight dollar repo operation will be $10bn today.

[Guest Max_*]

I am really pissed that the United States is bailing out the rest of the world.

[Guest LAW_*]

Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC) discussed the 700 billion dollar bailout package, Liu said, it would boost market confidence, but not enough for a cure.

 

He compared the proposed rescue plan to convenient "fast food", and said "slow and fine-cooked food" was what the world needs.

 

According to William R. Rhodes, Senior Vice-Chairman of Citigroup, the People's Bank of China, the country's central bank, was working closely with the U.S. Federal Reserve on a series of measures to contain the impact of financial crisis. CBRC was also in close consultation with the Fed.

[Guest Speaker Nancy Pelosi]

Speaker Nancy Pelosi and Congressional leaders held a press availability in the Capitol this evening following negotiations on bipartisan legislation to address the financial crisis. Below are her remarks:

 

“Good Evening. For the last several hours, the Chairs of our committees, Mr. Frank and Mr. Dodd, as well as Senator Judd Gregg, and Mr. Blunt, representing the House Republicans, have worked with Secretary Paulson and others from the Administration to resolve our differences so that we can go forward with a package to stabilize the markets, and most importantly, to protect the U.S. taxpayers.

 

“We had agreed in principle, a number of days ago, on issues that related to oversight, related to, again, protecting the taxpayers by having equity in the upside whenever transactions took place, by having forbearance in terms of mortgage foreclosures, and by addressing the issue of executive compensation. All this is done in a way to insulate Main Street and everyday Americans from the crisis on Wall Street. And in doing so bring stability to the markets as we try to turn around our economy and protect our taxpayers.

 

“We’ve made great progress, we have to get it committed to paper so that we can formally agree, but I want to congratulate all the negotiators for the great work that they have done. I want to acknowledge Chairman Frank and Rahm Emanuel, who represented House Democrats on the team, and others will acknowledge their representatives as well. I want to particularly thank Secretary Paulson for his endurance, for the knowledge he brings to the subject, and for his determination to get the job done in order to send a good strong message to the markets. With that, I am pleased to yield to the distinguished Majority Leader of the Senate, Senator Reid.”

[Guest Analga]

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.

[Guest LAW_*]

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

 

Section 1. Short Title.

 

“Emergency Economic Stabilization Act of 2008.”

 

Section 2. Purposes.

 

Provides authority to the Treasury Secretary to restore liquidity and stability to the U.S. financial system and to ensure the economic well-being of Americans.

 

Section 3. Definitions.

 

Contains various definitions used under this Act.

 

Title I. Troubled Assets Relief Program.

 

Section 101. Purchases of Troubled Assets.

 

Authorizes the Secretary to establish a Troubled Asset Relief Program (“TARP”) to purchase troubled assets from financial institutions. Establishes an Office of Financial Stability within the Treasury Department to implement the TARP in consultation with the Board of Governors of the Federal Reserve System, the FDIC, the Comptroller of the Currency, the Director of the Office of Thrift Supervision and the Secretary of Housing and Urban Development.

 

Requires the Treasury Secretary to establish guidelines and policies to carry out the purposes of this Act.

 

Includes provisions to prevent unjust enrichment by participants of the program. Section 102. Insurance of Troubled Assets.

 

If the Secretary establishes the TARP program, the Secretary is required to establish a program to guarantee troubled assets of financial institutions.

 

The Secretary is required to establish risk-based premiums for such guarantees sufficient to cover anticipated claims. The Secretary must report to Congress on the establishment of the guarantee program.

 

Section 103. Considerations.

 

In using authority under this Act, the Treasury Secretary is required to take a number of considerations into account, including the interests of taxpayers, minimizing the impact on the national debt, providing stability to the financial markets, preserving homeownership, the needs of all financial institutions regardless of size or other characteristics, and the needs of local communities. Requires the Secretary to examine the long-term viability of an institution in determining whether to directly purchase assets under the TARP.

 

Section 104. Financial Stability Oversight Board.

 

This section establishes the Financial Stability Oversight Board to review and make recommendations regarding the exercise of authority under this Act. In addition, the Board must ensure that the policies implemented by the Secretary protect taxpayers, are in the economic interests of the United States, and are in accordance with this Act. The Board is comprised of the Chairman of the Board of Governors of the Federal Reserve System, the Secretary of the Treasury, the Director of the Federal Home Finance Agency, the Chairman of the Securities and Exchange Commission and the Secretary of the Department of Housing and Urban Development.

 

Section 105. Reports.

 

Monthly Reports: Within 60 days of the first exercise of authority under this Act and every month thereafter, the Secretary is required to report to Congress its activities under TARP, including detailed financial statements.

 

Tranche Reports: For every $50 billion in assets purchased, the Secretary is required to report to Congress a detailed description of all transactions, a description of the pricing mechanisms used, and justifications for the financial terms of such transactions.

 

Regulatory Modernization Report: Prior to April 30, 2009, the Secretary is required to submit a report to Congress on the current state of the financial markets, the effectiveness of the financial regulatory system, and to provide any recommendations.

 

Section 106. Rights; Management; Sale of Troubled Assets; Revenues and Sale Proceeds.

 

Establishes the right of the Secretary to exercise authorities under this Act at any time. Provides the Secretary with the authority to manage troubled assets, including the ability to determine the terms and conditions associated with the disposition of troubled assets.

 

Requires profits from the sale of troubled assets to be used to pay down the national debt.

 

Section 107. Contracting Procedures.

 

Allows the Secretary to waive provisions of the Federal Acquisition Regulation where compelling circumstances make compliance contrary to the public interest. Such waivers must be reported to Congress within 7 days. If provisions related to minority contracting are waived, the Secretary must develop alternate procedures to ensure the inclusion of minority contractors.

Allows the FDIC to be selected as an asset manager for residential mortgage loans and

 

mortgage-backed securities.

 

Section 108. Conflicts of Interest.

 

The Secretary is required to issue regulations or guidelines to manage or prohibit conflicts of interest in the administration of the program.

 

Section 109. Foreclosure Mitigation Efforts.

 

For mortgages and mortgage-backed securities acquired through TARP, the Secretary must implement a plan to mitigate foreclosures and to encourage servicers of mortgages to modify loans through Hope for Homeowners and other programs. Allows the Secretary to use loan guarantees and credit enhancement to avoid foreclosures. Requires the Secretary to coordinate with other federal entities that hold troubled assets in order to identify opportunities to modify loans, considering net present value to the taxpayer.

 

Section 110. Assistance to Homeowners.

 

Requires federal entities that hold mortgages and mortgage-backed securities, including the Federal Housing Finance Agency, the FDIC, and the Federal Reserve to develop plans to minimize foreclosures. Requires federal entities to work with servicers to encourage loan modifications, considering net present value to the taxpayer.

 

Section 111. Executive Compensation and Corporate Governance.

 

Provides that Treasury will promulgate executive compensation rules governing financial institutions that sell it troubled assets. Where Treasury buys assets directly, the institution must observe standards limiting incentives, allowing clawback and prohibiting golden parachutes. When Treasury buys assets at auction, an institution that has sold more than $300 million in assets is subject to additional taxes, including a 20% excise tax on golden parachute payments triggered by events other than retirement, and tax deduction limits for compensation limits above $500,000.

 

Section 112. Coordination With Foreign Authorities and Central Banks.

 

Requires the Secretary to coordinate with foreign authorities and central banks to establish programs similar to TARP. Section 113. Minimization of Long-Term Costs and Maximization of Benefits for

Taxpayers. In order to cover losses and administrative costs, as well as to allow taxpayers to share in equity appreciation, requires that the Treasury receive non-voting warrants from participating financial institutions.

 

Section 114. Market Transparency.

 

48-hour Reporting Requirement: The Secretary is required, within 2 business days of exercising authority under this Act, to publicly disclose the details of any transaction.

 

Section 115. Graduated Authorization to Purchase.

 

Authorizes the full $700 billion as requested by the Treasury Secretary for implementation of TARP. Allows the Secretary to immediately use up to $250 billion in authority under this Act. Upon a Presidential certification of need, the Secretary may access an additional $100 billion. The final $350 billion may be accessed if the President transmits a written report to Congress requesting such authority. The Secretary may use this additional authority unless within 15 days Congress passes a joint resolution of disapproval which may be considered on an expedited basis.

 

Section 116. Oversight and Audits.

 

Requires the Comptroller General of the United States to conduct ongoing oversight of the activities and performance of TARP, and to report every 60 days to Congress. The Comptroller General is required to conduct an annual audit of TARP. In addition, TARP is required to establish and maintain an effective system of internal controls.

 

Section 117. Study and Report on Margin Authority.

 

Directs the Comptroller General to conduct a study and report back to Congress on the role in which leverage and sudden deleveraging of financial institutions was a factor behind the current financial crisis.

 

Section 118. Funding.

 

Provides for the authorization and appropriation of funds consistent with Section 115.

 

Section 119. Judicial Review and Related Matters.

 

Provides standards for judicial review, including injunctive and other relief, to ensure that the actions of the Secretary are not arbitrary, capricious, or not in accordance with law.

 

Section 120. Termination of Authority.

 

Provides that the authorities to purchase and guarantee assets terminate on December 31, 2009. The Secretary may extend the authority for an additional year upon certification of need to Congress.

 

Section 121. Special Inspector General for the Troubled Asset Relief Program.

 

Establishes the Office of the Special Inspector General for the Troubled Asset Relief Program to conduct, supervise, and coordinate audits and investigations of the actions undertaken by the Secretary under this Act. The Special Inspector General is required to submit a quarterly report to Congress summarizing its activities and the activities of the Secretary under this Act.

 

Section 122. Increase in the Statutory Limit on the Public Debt.

 

Raises the debt ceiling from $10 trillion to $11.3 trillion.

 

Section 123. Credit Reform.

 

Details the manner in which the legislation will be treated for budgetary purposes under the Federal Credit Reform Act.

 

Section 124. Hope for Homeowners Amendments.

 

Strengthens the Hope for Homeowners program to increase eligibility and improve the tools available to prevent foreclosures.

 

Section 125. Congressional Oversight Panel.

 

Establishes a Congressional Oversight Panel to review the state of the financial markets, the regulatory system, and the use of authority under TARP. The panel is required to report to Congress every 30 days and to submit a special report on regulatory reform prior to January 20, 2009. The panel will consist of 5 outside experts appointed by the House and Senate Minority and Majority leadership.

 

Section 126. FDIC Enforcement Enhancement.

 

Prohibits the misuse of the FDIC logo and name to falsely represent that deposits are insured. Strengthens enforcement by appropriate federal banking agencies, and allows the FDIC to take enforcement action against any person or institution where the banking agency has not acted.

 

Section 127. Cooperation With the FBI.

 

Requires any federal financial regulatory agency to cooperate with the FBI and other law enforcement agencies investigating fraud, misrepresentation, and malfeasance with respect to development, advertising, and sale of financial products.

 

Section 128. Acceleration of Effective Date.

 

Provides the Federal Reserve with the ability to pay interest on reserves.

 

Section 129. Disclosures on Exercise of Loan Authority.

 

Requires the Federal Reserve to provide a detailed report to Congress, in an expedited manner, upon the use of its emergency lending authority under Section 13(3) of the Federal Reserve Act.

 

Section 130. Technical Corrections.

 

Makes technical corrections to the Truth in Lending Act.

 

Section 131. Exchange Stabilization Fund Reimbursement.

 

Protects the Exchange Stabilization Fund from incurring any losses due to the temporary money market mutual fund guarantee by requiring the program created in this Act to reimburse the Fund. Prohibits any future use of the Fund for any guarantee program for the money market mutual fund industry.

 

Section 132. Authority to Suspend Mark-to-Market Accounting.

 

Restates the Securities and Exchange Commission’s authority to suspend the application of Statement Number 157 of the Financial Accounting Standards Board if the SEC determines that it is in the public interest and protects investors.

 

Section 133. Study on Mark-to-Market Accounting.

 

Requires the SEC, in consultation with the Federal Reserve and the Treasury, to conduct a study on mark-to-market accounting standards as provided in FAS 157, including its effects on balance sheets, impact on the quality of financial information, and other matters, and to report to Congress within 90 days on its findings.

 

Section 134. Recoupment.

 

Requires that in 5 years, the President submit to the Congress a proposal that recoups from the financial industry any projected losses to the taxpayer.

 

Section 135. Preservation of Authority.

 

Clarifies that nothing in this Act shall limit the authority of the Secretary or the Federal Reserve under any other provision of law.

 

Title II—Budget-Related Provisions

 

Section 201. Information for Congressional Support Agencies.

 

Requires that information used by the Treasury Secretary in connection with activities under this Act be made available to CBO and JCT.

 

Section 202. Reports by the Office of Management and Budget and the Congressional Budget Office.

 

Requires CBO and OMB to report cost estimates and related information to Congress and the President regarding the authorities that the Secretary of the Treasury has exercised under the Act.

 

Section 203. Analysis in President’s Budget.

 

Requires that the President include in his annual budget submission to the Congress certain analyses and estimates relating to costs incurred as a result of the Act; and

 

Section 204. Emergency Treatment.

 

Specifies scoring of the Act for purposes of budget enforcement.

 

Title III—Tax Provisions

 

Section 301. Gain or Loss From Sale or Exchange of Certain Preferred Stock.

 

Details certain changes in the tax treatment of losses on the preferred stock of certain GSEs for financial institutions.

 

Section 302. Special Rules for Tax Treatment of Executive Compensation of Employers Participating in the Troubled Assets Relief Program.

 

Applies limits on executive compensation and golden parachutes for certain executives of employers who participate in the auction program.

 

Section 303. Extension of Exclusion of Income From Discharge of Qualified Principal Residence Indebtedness.

 

Extends current law tax forgiveness on the cancellation of mortgage debt.

[Guest Department of Treasury]

Treasury issued the following statement by Secretary Henry M. Paulson, Jr. on the Emergency Economic Stabilization Act of 2008:

 

I thank my colleagues on both sides of the aisle for their hard work over a very short time period to craft strong legislation that will enable us to strengthen our financial markets and promote the flow of credit to businesses and consumers that is so vital to our economic growth and prosperity. This bill provides the necessary tools to deploy up to $700 billion to address the urgent needs in our financial system, whether that be by purchasing troubled assets broadly, insuring troubled assets, or averting the potential systemic risk from the disorderly failure of a large financial institution. I am confident this legislation gives us the flexibility to unclog our financial markets and increase the ability of our financial institutions to deliver the credit that will help create jobs. We are taking the steps needed to be ready to begin implementing this legislation as soon as it is signed.

 

Members on both sides were focused on the right things – creating an effective program that can be implemented quickly and effectively, and doing everything possible to protect the taxpayers.

 

Quick, effective and bipartisan action sends a signal to investors large and small, here and abroad, that we are committed to taking the necessary actions to protect our financial system and our economy. The American people will recognize the leadership you have all shown to protect them – to preserve their access to credit, and preserve jobs.

[Guest August]

Senior Republican lawmakers gathered Sunday evening in Washington for a closed-door meeting to discuss the measure. House Minority Leader John Boehner said many do not want to support the bill, but he is encouraging every member to do so.

[Guest American for Progress]

This is Osama bin Laden's very strategy: entangling the United States abroad and plunging the country into economic turmoil. In 2004, he remarked that his "bleed-until-bankruptcy" plan was seeing "evidence of the success." "And it all shows that the real loser is...you. It's the American people and their economy," he added.

[Guest Mary Eshet]

Wachovia today announced intentions to sell its retail bank, corporate and investment bank and wealth management businesses to Citigroup. Wachovia Corporation will remain a public company with two main operating subsidiaries: Wachovia Securities, the nation's third largest brokerage firm, and Evergreen Asset Management, a leading provider of asset management services.

 

 

"During recent weeks, the financial landscape has changed significantly and presented us with unprecedented challenges," said Robert K. Steel, CEO and President of Wachovia. "Today's announcement is the best alternative for the company, enabling a resolution on the Golden West portfolio."

 

Under terms of the transaction, Citigroup will pay $2.1 billion to Wachovia and assume the senior and subordinated debt of Wachovia Corporation.

 

The transaction is expected to close before year-end. It has been approved by directors of both companies and is subject to shareholder approval of Wachovia and the appropriate regulatory approvals.

 

Customers of both companies should continue banking as usual, and feel confident that their deposits are secure. Also, employees and vendors should continue to operate business as usual.

 

At this time, there are no changes to Wachovia's board of directors and two Wachovia directors will join Citigroup's board.

 

Wachovia Corp. will remain headquartered in Charlotte, NC. Wachovia Securities will continue to be headquartered in St. Louis, MO. Citigroup will headquarter the retail bank in Charlotte and the investment bank in New York.

 

Wachovia's investment bankers were Goldman Sachs, Perella Weinberg Partners and Wachovia Securities, and its legal advisors are Sullivan & Cromwell and Simpson Thacher & Bartlett.

 

About Wachovia

Wachovia Corporation (NYSE:WB) is one of the nation's largest diversified financial services companies, with assets of $812.4 billion and market capitalization of $33.5 billion at June 30, 2008. Wachovia provides a broad range of retail banking and brokerage, asset and wealth management, and corporate and investment banking products and services to customers through 3,300 retail financial centers in 21 states from Connecticut to Florida and west to Texas and California, and nationwide retail brokerage, mortgage lending and auto finance businesses. Globally, clients are served in selected corporate and institutional sectors and through more than 40 international offices. Our retail brokerage operations under the Wachovia Securities brand name manage more than $1.1 trillion in client assets through 14,600 financial advisors in 1,500 offices nationwide. Online banking is available at wachovia.com; online brokerage products and services at wachoviasec.com; and investment products and services at evergreeninvestments.com.

[Guest FDIC]

"For Wachovia customers, today's action will ensure seamless continuity of service from their bank and full protection for all of their deposits." said FDIC Chairman Sheila C. Bair. "There will be no interruption in services and bank customers should expect business as usual."

 

Citigroup Inc. will acquire the bulk of Wachovia's assets and liabilities, including five depository institutions and assume senior and subordinated debt of Wachovia Corp. Wachovia Corporation will continue to own AG Edwards and Evergreen. The FDIC has entered into a loss sharing arrangement on a pre-identified pool of loans. Under the agreement, Citigroup Inc. will absorb up to $42 billion of losses on a $312 billion pool of loans. The FDIC will absorb losses beyond that. Citigroup has granted the FDIC $12 billion in preferred stock and warrants to compensate the FDIC for bearing this risk.

 

In consultation with the President, the Secretary of the Treasury on the recommendation of the Federal Reserve and FDIC determined that open bank assistance was necessary to avoid serious adverse effects on economic conditions and financial stability.

 

"On the whole, the commercial banking system in the United States remains well capitalized. This morning's decision was made under extraordinary circumstances with significant consultation among the regulators and Treasury," Bair said. "This action was necessary to maintain confidence in the banking industry given current financial market conditions."

 

Wachovia customers with questions should call their normal banking representative, service center, 1-800-922-4684 or visit www.wachovia.com. The FDIC's consumer hotline is 1-877-ASK-FDIC (1-877-275-3342) or visit www.fdic.gov.

[Guest Citigroup Inc.]

Citi (NYSE: C) today announced it has reached an agreement–in-principle to acquire all of the banking subsidiaries of Wachovia Corporation (NYSE: WB), creating the largest U.S. bank by total deposits.

 

Wachovia will remain a public company and retain its asset management, retail brokerage, and certain select parts of its wealth management businesses, including the Evergreen and Wachovia Securities franchises. Going forward, Wachovia expects to have adequate capital to support its remaining businesses, an appropriate allocation of tangible equity, and certain tax assets that will be recognized immediately.

 

Under the terms of the agreement-in-principle, Citi will pay Wachovia approximately $2.16 billion in stock and assume Wachovia senior and subordinated debt, totaling approximately $53 billion.

 

Citi will acquire more than $700 billion of assets of Wachovia's banking subsidiaries, and related liabilities. The Federal Deposit Insurance Corporation (FDIC) has agreed to provide loss protection in connection with approximately $312 billion of mortgage-related and other Wachovia assets. Citi is responsible for the first $30 billion of losses on this portfolio, and expects to record these expected losses under purchase accounting upon closing of the transaction. Citi is also responsible for the next $12 billion in losses up to a maximum of $4 billion per year for the next three years. Citi has also agreed to issue to the FDIC preferred stock and warrants with a combined value of approximately $12 billion. The FDIC has agreed to be responsible for any further losses on this portfolio.

 

The transaction, which has been approved by the Boards of Directors of both companies, is subject to: approval by Wachovia's shareholders; to the occurrence of the closing by December 31, 2008; definitive documentation; regulatory approvals; and other customary closing conditions.

 

The deal is expected to be accretive to Citi's earnings from year one excluding a total of $3.7 billion in pre-tax restructuring charges for severance over the next four years, and expected to be fully accretive in 2010.

 

Citi expects to raise $10 billion in common equity in connection with this transaction and reduce its quarterly dividend to 16 cents per share, effective immediately, to maintain the company's strong capital position. On a pro forma basis for the second quarter ended June 30, 2008, Citi's Tier 1 capital ratio is expected to be 8.8% assuming completion of the transaction.

 

"The transaction is extremely attractive from a strategic perspective. It will deliver the combined capabilities of two powerful organizations to our customers and shareholders, providing meaningful EPS accretion and downside loss protection," said Vikram Pandit, Chief Executive Officer, Citi. "It will augment our access to stable funding and liquidity, and will accelerate our efforts to establish Citi as the world's leading global financial institution. Citi will have more than $600 billion in deposits in the U.S., giving us about a 9.8% market share. Our total deposits will be $1.3 trillion globally, $350 billion more than our next largest U.S. competitor, making us one of the world's largest core deposit-funded financial institutions. Moreover, it is essential that Wachovia, a company we deeply respect, maintain a strong presence in Charlotte, N.C."

 

"Our core businesses continue to perform well but amid uncertain markets and a fast-changing industry landscape, we found in Citi a strong partner to preserve the stability and quality of our banking franchise," said Robert Steel, CEO, Wachovia. "We are pleased to meet these key goals, as well as advance our legacy of innovative thinking, best-in-class customer service, and growth opportunities for our colleagues."

 

Wachovia has a strong, attractive customer base, talented employees, and its retail bank footprint is highly complementary with that of Citi, with just 31% of Wachovia branches located in existing Citi markets. The transaction propels Citi to a top three ranking in seven metropolitan statistical areas (MSAs): New York, Miami, Atlanta, Washington D.C., Las Vegas, Charlotte, and San Francisco.

 

At the completion of the transaction, Citi will have: about 4,300 branches in the U.S. and approximately another 3,300 throughout the world; and 28,000 fee-free ATMs in the U.S. As there is little overlap between the two footprints, Citi expects to close less than 5% of the combined branches. In addition, Citi will benefit from Wachovia's leading technology platform, including the opportunity to expand its award-winning online banking platform, and proven integration capabilities.

 

The transaction also brings a strong, highly complementary U.S. cash management platform to Citi's leading international Global Transaction Services business; a strong U.S. mid-market corporate banking franchise; and, a small, successful private banking business that Citi intends to integrate into its existing Global Wealth Management business.

 

In addition, Citi expects to realize more than $3 billion of annualized expense synergies through the consolidation of overlapping functions. Following the closing of the transaction, Citi expects to complete the integration of the retail banking operations by year-end 2010.

[Guest Federal Reserve]

The banking operations of Wachovia Corp., which is headquartered in Charlotte, N.C., are being acquired by Citigroup Inc. The transaction is being facilitated by the Federal Deposit Insurance Corporation and concurred with by the Board of Governors of the Federal Reserve and the Secretary of the Treasury.

 

Citigroup will acquire the bulk of Wachovia's assets and liabilities, including five depository institutions and assume senior and subordinated debt of Wachovia. Wachovia will continue to own AG Edwards and Evergreen.

 

In support of this transition, the Federal Reserve Bank of Richmond stands ready to provide liquidity as needed.

The Federal Reserve Bank of Richmond is one of 12 District Reserve Banks that together with the Board of Governors in Washington, D.C., make up the Federal Reserve System. The Richmond Fed serves the Fifth Federal Reserve District, which encompasses the District of Columbia, Maryland, North Carolina, South Carolina, Virginia, and most of West Virginia.

[Guest American for Progress]

The bill does have serious flaws. One facet of the bill by House Minority Leader John Boehner (R-OH) and Rep. Eric Cantor (R-VA) that remains in the final product requires the Treasury "to establish a new federal insurance program, funded by the banks, that would protect firms against loss from troubled assets." As Time reported, the only way for this plan to work is "for every last one of those $6 trillion in mortgage securities to be insured. Otherwise you'd just get the financial institutions with the [worst] loans on their books choosing to participate--which would amount to a giant bailout of the bad guys by taxpayers." Furthermore, the bill gives the chairman of the Securities and Exchange Commission ability to suspend mark-to-market accounting, which could remove market transparency and allow financial institutions to continue "pretending bad assets are good and in the process dra[g] down our economy." Also, the legislation gives the Treasury the ability to buy assets beyond mortgages -- like student loan debt or credit card debt -- which is "a very bad idea," according to Center for American Progress Vice President Ed Paisley.

[Guest THE WHITE HOUSE]

THE PRESIDENT: Good morning. Yesterday, leaders here in Washington reached an extraordinary agreement to deal with an extraordinary problem in our economy. Working closely with my administration, congressional leaders from both parties produced the Emergency Economic Stabilization Act -- a bold bill that will help keep the crisis in our financial system from spreading throughout our economy.

 

This legislation deals with complex issues, and negotiators were asked to address them in a very short period of time. I appreciate the leadership of members on both sides of the aisle, who came together when our nation was counting on them. Negotiations are sometimes difficult, but their hard work and cooperation paid off.

 

The bipartisan economic rescue plan addresses the root cause of the financial crisis -- the assets related to home mortgages that have lost value during the housing decline. Under the Emergency Economic Stabilization Act, the federal government will be authorized to purchase these assets from banks and other financial institutions, which will help free them to resume lending to businesses and consumers.

 

The bill also includes other important ideas put forward by members of Congress from both parties. For example, the bill requires the establishment of a guarantee program that will insure assets at no cost to the taxpayer. The bill provides strong, bipartisan oversight so Americans can be certain that their tax dollars are used carefully and wisely. The bill ensures that failed executives do not receive a windfall from your tax dollars.

 

With this strong and decisive legislation, we will help restart the flow of credit, so American families can meet their daily needs and American businesses can make purchases, ship goods, and meet their payrolls. We'll make clear that the United States is serious about restoring confidence and stability in our financial system.

 

I know many Americans are worried about the cost of the bill, and I understand their concern. This bill commits up to 700 billion taxpayer dollars, because a large amount of money is necessary to have an impact on our financial system. However, both the non-partisan Congressional Budget Office and the Office of Management and Budget expect that the ultimate cost to the taxpayer will be far less than that. In fact, we expect that over time, much -- if not all -- of the tax dollars we invest will be paid back.

 

Now that this legislation has been agreed to by leaders of both parties, it must be passed by houses -- both houses of Congress. And I fully understand that this will be a difficult vote. But with the improvements made to this bill, I'm confident that members of both parties will support it. Congress can send a strong signal to markets at home and abroad by passing this bill promptly. Every member of Congress and every American should keep in mind: A vote for this bill is a vote to prevent economic damage to you and your community.

 

This has been a volatile time for our financial system and our economy. Even with the important steps we're taking to address the current crisis, we will continue to face serious challenges. The impact of the credit crisis and the housing correction will continue to pressure our financial system and impact the growth of our economy for some time. But I'm confident that this rescue plan -- along with other measures taken by the Treasury Department and the Federal Reserve -- will begin to restore strength and stability to America's financial system and overall economy. And I'm confident that in the long run, America will overcome these challenges and remain the most dynamic and productive economy in the world.

[Guest Marc Abizeid]

STEALTH BAILOUTS

 

This weekend, drowned out by the $700 billion Wall Street bailout negotiations, the Senate approved a bloated loan package that released $25 billion in below-market rate loans to the auto industry. The Congressional Budget Office estimates that it will cost taxpayers roughly $7 billion to finance the loans to bailout failing companies with no demands for oversight and accountability. Below is a statement by Ralph Nader, originally published September 17, 2008 on his blog, recounting the tale of Chrysler's 1979 $1.5 billion loan guarantee when the government took steps to ensure it would benefit from the agreement, prior to the transformation of our Congressional leaders into Congressional corporate servants.

 

----

 

Wednesday, September 17, 2008

 

Statement on Auto Industry Bailouts

by Ralph Nader

 

 

The Big Three are in big trouble, and they have themselves to thank for it.

 

Ford and General Motors have reported substantial losses in the second quarter amounting to $15.5 billion, and $8.7 billion, respectively, while Chrysler, which was bought off last year by a private equity firm, Cerberus, refuses to reveal its financial standing.

 

It is no wonder why their lobbyists were spotted schmoozing with members of Congress at the Democratic and Republican National Conventions, liquoring up in their plush suites and private parties while they made their case for direct government loans which, if approved, would likely add to our federal deficit.

 

Last December, Congress approved a $25 billion loan to automakers and their suppliers under the Energy Independence and Security Act, though it has yet to be funded. That bill includes a modest requirement for automakers to increase their average vehicle fuel efficiency to 35 mpg -- a benchmark we should have set decades ago, and would allow the companies to have their way with virtually no oversight or accountability.

 

This corporate Congress cannot be expected to issue serious demands, set tough conditions, or impose strict rules on the auto companies to ensure their workers receive fair pay and benefits, and prevent their fat-cat executives from making off big while leaving their companies in shambles.

 

Such blatant giveaways have become the norm in Washington since the corporate stranglehold of Congress and the White House have smothered the forces seeking worker, consumer and environmental justice.

 

But this recent example should not discount our long history of dealing with corporate failures in more public and effective ways than just ponying up billions on demand at any big corporation's whim.

 

In 1979 when Chrysler was on the verge of bankruptcy, the automaker came crying to Congress for a bailout, which they eventually got, but Congress wasn't as much of a pushover.

 

Back then, at least the corporate chieftains were grilled by Congress and had to agree to give something back for Uncle Sam bailing them out -- good jobs and pensions for their workers, and more efficient cars to reduce reliance on foreign oil and reduce prices at the pump.

 

Now the CEOs don't even have to leave Detroit and they get much more money for almost no return commitment to America, while they outsource jobs and pollute our environment.

 

During discussion on a proposed loan bill to bailout Chrysler in October 1979, Senator William Proxmire (D-WI) who chaired the Senate Banking Committee issued his opposition to Chrysler's request and noted: "We let 7,000 companies fail last year -- we didn't bail them out. Now we are being told that if a company is big enough... we can't let it go under." He went on to call the proposed deal "a terrible precedent."

 

Raising the government's demand for performance standards, President Carter's Treasury Secretary William Miller told Chrysler officials, "it's going to be so awful, you'll wish you never brought the whole thing up."

 

Today, we rarely hear such candid opposition to corporate orders shouted at their congressional servants who lack the fortitude to put serious restraints and conditions on mismanaged, reckless big business and their overpaid CEOs seeking tax-payer salvation.

 

As a part of the Chrysler deal in the late Seventies, the government took out preferred stock warrants and after the company turned itself around and repaid its loan seven years early, the government ended up cashing out, receiving $400 million in the appreciated stock.

 

And Congress made clear to Chrysler that it had specific conditions the company had to meet before receiving the loan guarantee. It forced the company to contribute $162,500,000 into an employee stock ownership trust fund geared to benefit at least 90 percent of its employees, design more fuel efficient autos to help reduce consumption of foreign oil, and prohibit wages and benefits from falling below a level set three months before the legislation was passed.

 

Today, congressional actions to grant multi-billion dollar loans to the corporations lack the reciprocity some in Congress demanded 30 years ago. Before Congress irresponsibly dips into the public piggy bank, this time it would be wise to look back at how the government once dealt with Chrysler's dilemma, require clear benchmarks to deliver on the next generation of green collar jobs, improved fuel efficiency and gain a substantial return on its investment, not just in monetary value, but in the longterm viability of the domestic motor vehicle fleet.

 

Congress needs to call on the auto industry to innovate their way out of this morass into which they've engineered themselves into. A sensible strategy would be to issue stock warrants to the government, like in the 70s, which would create an incentive for Congress to keep pressure on the auto industry to improve. Public Congressional hearings are a must.

 

Will Congress echo its actions of 30 years ago when it scrutinized corporate demands, grilled company executives, and imposed conditions to ensure fair compensation and safety for workers? Or will Congress continue down the road of corporate servitude, refusing to stand up for workers, consumers, taxpayers and the environment in its session-ending stampede and flight away from auto industry accountabilities?