So. The Big Bailout. The Rescue. The Emergency Economic Stabilization Act of 2008. (That’s what we are calling it now you know.) So much has happened! It’s been not even three weeks since we first heard of this thing, and we have all aged years. Let’s recap.
Treasury Secretary Hank Paulson wrote a two-page bill asking for a lot of money to buy bad mortgage-related assets from weakened financial companies so they can raise fresh capital and resume normal lending operations.
Shirtless wanted $700 billion, to be exact. Although it wasn’t exact — he just picked that number because it was “a really large number.” Naturally, many people were like, “That’s crazy! Hell to the no, we’re not giving those dang fools on Wall Street any more of our money to throw around!” But then Dow plunged, and a lot of people were like, “Oh no? Maybe we should give Paulson that $700 billion? But let’s add just a few checks and balances.”
Everyone on Capitol Hill went nuts deciding what to add. And finally, they came up with a bill. They proudly sent it to the House this past Monday. But the House was oddly stuck on the first point, which is that as far as they could see, they were still signing their constituents’ hard-earned paychecks over to Wall Street. And so they voted against the bill. Then the market really tanked. So the Senate took the package back to fix it up for the House, meaning they added some items to it that they specifically thought would win votes.
1. A provision raising the limits on bank deposits insured by the Federal Deposit Insurance Corporation, from the current $100,000 to $250,000.
2. $150.5 billion in tax cuts and breaks, including: incentives for clean energy; tax breaks for businesses and individuals affected by natural disasters like floods and tornadoes; extensions and expansions of expiring tax credits, such as for research and development and small businesses; and lifting the income threshold at which people are affected by the Alternative Minimum Tax, which is supposed to be only for rich people who can afford it.
3. A suggestion that the Securities and Exchange Commission should suspend mark-to-market accounting, a technical accounting rule that pegs the value of assets to their current market price rather than to the price paid for them. (Banks have been complaining that the strict application of mark-to-market rules have forced them to write down billions’ worth of mortgage-related securities for which there are no buyers.)
4. Oh, and they also snuck in the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, a mental-health bill that requires mid-sized and large businesses to provide mental-health benefits comparable to the benefits they provide for physical ailments.
But will any of this sway the very literal naysayers voting in the House tomorrow? Who knows. They are, let’s face it, a mixed bag, with many loons and crackpots bumping around in there, and there’s no telling what they’ll do. Some fiscally conservative Democrats will have enough of a problem with the tax breaks. A group of Republicans has already said they are seeking an amendment that will lower the amount the Treasury Department could spend on the bailout to $250 billion. And some just think the whole thing is immoral.
And then there’s the nagging question of whether, after all this, the thing will even work. “I suspect it’s not going to solve our problem,” Charles Jones, a finance professor at Columbia University, told MSNBC. Henry Blodget has a list of reasons why he’s not convinced. Which all add up to what Henry Lee, the managing director of a Hong Kong–based investment advisory firm, told the Times today. “It’s a short-term Band-Aid, it doesn’t solve the root of the issue.”
Well. Good thing they put that mental health bill in there, then. Because we’re probably going to need some help after this.