Key facts on the bailout

All right, we know that a lot of people are nervous about this bailout, despite the fact that, deep down inside, you all know it has to happen. We can't afford to let anymore banks go under (Wachovia went down today, and was bought up by Citigroup). Bank failures are what led to the Great Depression. Captain Ed got a myth/fact memo from a House staffer that puts the kibosh to the senseless, viral, hyperventilating e-mails flying around this morning. (I had about 40 of those nutter e-mails sitting in my inbox, and thank God someone took the time to shut these nutters up.)

Myth: Windfall for ACORN.

Fact: The Frank-Dodd proposal created an affordable housing slush fund and directed 20 percent of net benefits from the program to be directed to ACORN-type organizations. The proposed compromise does not include any affordable housing slush fund and directs all net benefits back to the Treasury to pay down the national debt.

Myth: Tax increase on financial industry.

Fact: The proposed compromise imposes NO tax on the financial services industry. The proposed compromise simply requires a proposal from the Administration to recoup any losses after five years.

Fact: The proposed compromise includes tax cuts for struggling community banks.

Myth: Blank check for $700 billion with little accountability.

Fact: In general, the Treasury Secretary is limited to purchasing up to $250 billion outstanding at any one time. If the Treasury needs to use another $100 billion, the President must certify this action and report to Congress. Further spending requires Congressional action.

Myth: Treasury plan is the only option available.

Fact: Treasury is given multiple options to deal with the current economic crisis, including insurance, public/private auctions, loan guarantees, and direct support to financial institutions.

Fact: Further, Treasury is MANDATED to create an insurance program (Section 102) that protects the taxpayers and requires companies that wish to participate in this program to have some skin in the game by paying risk-based premiums.

Myth: The taxpayer is not adequately protected.

Fact: The proposed compromise includes strong taxpayer protections. Treasury’s proposal had minimal oversight to protect taxpayer dollars. The proposed compromise enhanced the oversight structure by creating a Financial Stability Oversight Board, a Special Inspector General, and a Congressional Oversight Panel.

All AIG-type deals require mandatory equity interest in order to provide taxpayers with potential future benefits. All auctions require a percentage of equity interest based on participation in the program.

Requires the Secretary to develop regulations/guidelines necessary to prohibit or, in specific cases, manage any conflicts of interest with respect to contractors, advisors, and asset managers.

Myth: The taxpayer does not benefit from Treasury bailouts.

Fact: The proposed compromise (Section 113) requires mandatory equity interest in scenarios like AIG. The proposed compromise also allows Treasury to take an equity interest in the program generally.

Myth: Treasury will never use the insurance option.

Fact: Treasury is mandated (Section 102) to establish an insurance program and set risk-based premiums. This will protect taxpayers by requiring the beneficiaries of the insurance program to pay risk-based premiums. Treasury further shall collect premiums mandatory equity interest in scenarios like AIG. The proposed compromise also allows Treasury to take an equity interest in the program generally.

Will this quell fears? No, and there's even a few e-mails I received telling me not to believe the lies about ACORN not getting it's "due." Um, ACORN isn't int the bill, anywhere. No one can find it. I've already spoken with Sen. John Kyl's office, and they say they can't find it there, either. So you guys should really drop the meme because it's not even a posited hypothesis. It's an outright lie; a conspiracy theory at best.

The ACORN garbage was one of our concerns. The other was that the check would be cut with no accountability; that it would be a free-for-all grab-bag. We had heard last week that Democrats were trying to throw car loans, student loans, and credit card debt into the bill. That irritated us because those weren't what contributed to the financial problems. That rumor has been debunked because there is accountability over the spending of the money.

The other concern that we had on this was what would be done should there be any benefit off this bailout. The slush fund was what we kept hearing, and we all know that if such a fund were created, those in Congress would raid it for their little pet projects. Now we're a little more at ease with those proposed benefits going directly to the national debt.

Let's face it. It's hard to find a silver lining with this bailout. The only one we can find is that it will (hopefully) stabilize the financial industry.

Publius II