Tuesday, September 30, 2008

The Alternative "No Bailout" Republican Plan

Via CNBC, we get a look at the proposed plan put forth this afternoon by a group of House Republicans.

Components of the alternative plan including the following, according to
  • Require the Treasury Department to guarantee, at up to 100 percent, bank losses resulting from failed mortgage-backed securities originated prior to the plan's enactment. Such insurance, supporters say, would provide immediate value to the securities and a foundation for which they could then be sold. The Treasury Department would finance that insurance by assessing a premium on outstanding mortgage-backed securities.
  • Allow companies to carry back losses arising in tax years ending in 2007, 2008, or 2009 back five years, generating a tax refund and immediate capital
  • Allow a "repatriation window" for profits earned by U.S. firms overseas. Such repatriation amounts would not be taxed if invested in distressed debt (as defined by Treasury) for at least one year.
  • Allow banks to treat losses on shares of preferred stock in Fannie Mae and Freddie Mac as ordinary losses, not as capital losses
  • Suspend the capital gains tax rate for two years
  • Limit backing of high-risk loans by Fannie Mae and Freddie Mac
  • Schedule Fannie and Freddie for privatization
  • Suspend "mark-to-market" accounting until the SEC can issue new guidelines that will allow firms to mark these assets to their true economic value
  • Stabilize the dollar by repealing the Humphrey-Hawkins Full Employment Act, which alternative bailout supporters say diverts the Federal Reserve's attention from long-term price stability to short-term economic growth
  • Require the Treasury to write rules prohibiting excessive compensation or golden parachutes to executives of failed companies
  • Task the SEC with regular, annual audit reports of entities the federal government has brought under conservatorship or now owns

Here at Daily AntiKos, we fully support the "mark-to-market" and capital gains tax aspects of the above plan. While not perfect, this plan definitely moves us toward a free-market solution to the mess the Democrats have created with Fannie and Freddie.

In Response to: The Alternative "No Bailout" DeFazio Plan

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