THE BAILOUT PLAN

On Sunday, lawmakers unveiled a bill to rescue the nation’s troubled financial system. The $700 billion bailout is the largest in U.S. history and won support from both presidential candidates. The House will vote on the bill on Monday, and the Senate is expected to vote Wednesday. On Saturday, the Senate approved $25 billion in loan guarantees for the auto industry, which will hopefully be used to spark automotive innovation.

In a statement issued Sunday evening, President Bush said “this is a difficult vote, but with the improvements made to the bill, I am confident Congress will do what is best for our economy by approving this legislation promptly“.

House Minority Leader John Boehner told reporters, “Nobody wants to have to support this bill, but it’s a bill that we believe will avert the crisis that’s out there.”


The $700 billion will be disbursed in stages, with $250 billion made available immediately for the Treasury’s use. Unless Congress grants an extension, authority to use the money would expire Dec. 31, 2009. Taxpayer cost is not expected to be near the amount the Treasury invests because the government plans to buy undervalued assets. If the government overpays, it could be left with a net loss which would require the president proposing legislation to recoup the money from the financial industry if net losses to taxpayers occurs five years following the plan’s enactment. Additionally, the Treasury would be able to take ownership states in participating companies.

The bailout is intended to unfreeze the credit markets caused by bad real estate loans that have led to record foreclosures. In the past few days, Wall Street and the banking world have endured collapses and corporate mergers. With New York’s heavy reliance on the financial sector, Mayor Michael Bloomberg has already warned residents to brace for the worst. He ordered all city agencies to cut spending by a total of $1.5 billion over the next two years, and he even introduced the idea of a 7 percent increase in property taxes.