Bill Statistics
The Middle Class Position
How They Voted
Grades
The Senate receives a grade of F for its support of the middle class on this piece of legislation.
25 Senators voted for the middle-class position; 74 voted against.
The House receives a grade of F for its support of the middle class on this piece of legislation.
171 Representatives voted for the middle-class position; 263 voted against.
See how each member voted on this bill:
Emergency Economic Stabilization Act of 2008
- Alternative minimum tax
- Child tax credit
- Consumers
- Corporate Accountability
- Debt & Bankruptcy
- Efficient technology
- Energy & Environment
- Energy conservation
- Executive compensation
- Green buildings
- Home mortgage deduction
- Housing
- Mortgage lending
- Natural gas
- Personal bankruptcy
- Pollution
- Renewable fuels
- Tax Fairness
03.09.2007 [House]
Rep. Patrick Kennedy [D-RI]
The Emergency Economic Stabilization Act of 2008 authorizes the Treasury Secretary to use $700 billion for the purchase of troubled financial assets, including mortgage-backed securities. The Troubled Asset Relief Program (TARP) permits the Treasury to buy assets if the Secretary determines that the purchase is necessary to promote stability in financial markets. In promoting stability, the legislation also requires the Secretary to maximize taxpayer returns on assets, minimize the impact on national debt, and consider the need to help families keep their homes.
The bill immediately provides $250 billion for the Secretary to initiate TARP. It then authorizes an additional $100 billion if the President certifies that the funds are necessary and a final $350 billion if the President requests such authority from Congress without a joint congressional resolution of disapproval. The Secretary is authorized to manage the assets, including through outside asset managers, and to sell them at a time and price that maximizes their value to taxpayers. The Secretary must issue regulations to avoid conflicts of interest in administering the program. The Act restricts some executive compensation for companies that benefit from the program, including limits on bonuses based on company earnings proven to be inaccurate, on the “golden parachute” payments that executives receive upon termination or bankruptcy, and on available tax deductions.
The Emergency Economic Stabilization Act permits the Secretary to purchase troubled assets only if the Treasury is granted the right to receive nonvoting stock in the selling institution. This gives the Treasury a stake in the performance of every institution from which the Secretary purchases stock. Proceeds from the sale of troubled assets and stock are to be used for the reduction of the public debt. Furthermore, the bill requires the Secretary to assist homeowners by implementing a plan that encourages mortgage servicers to participate in the HOPE for Homeowners Program, which permits certain homeowners to refinance their mortgages to 30-year terms with fixed rates. The Treasury Secretary is directed to work with other government agencies to acquire the specific troubled assets (and groups of assets) that will enable the Treasury Department to modify home loans and allow existing tenants to remain in rental properties in danger of foreclosure.
The Act includes several oversight provisions. It permits judicial review of the Secretary’s actions and creates the Financial Stability Oversight Board that will consist of the Federal Reserve Chairman, the Treasury Secretary, and the Secretary of Housing and Urban Development; a special inspector general for the Troubled Asset Relief Program; and an oversight panel appointed by Congress. Among other oversight documents, the Treasury Secretary must publish reports every 30 days on actions taken under TARP along with a financial statement that outlines the program’s fulfillment of its obligations to promote financial stability, minimize impact on the national debt, and consider the need to help families keep their homes. After five years, the President must submit a legislative proposal to Congress to recoup from the financial industry any shortfall that results from TARP.
The bill temporarily raises the amount of bank deposits that are insured by the Federal Deposit Insurance Company (FDIC) from $100,000 to $250,000 and includes a provision to assist banks that lost money when the government took over Fannie Mae and Freddie Mac. The legislation extends a tax provision that ensures that cancelled mortgage debt is not taxed as income.
The Act requires that, if the Troubled Asset Relief Program is established, the Secretary create a program to insure troubled assets. The Troubled Assets Insurance Financing Fund would collect premiums based on the risk of the investment in order to guarantee principal and interest on the troubled assets of participating institutions.
Attached to the Emergency Economic Stabilization Act are each of the components that made up the Renewable Energy and Job Creation Act of 2008, which passed the Senate in September. This bill extends and expands tax credits for renewable energy and businesses and provides temporary relief from the Alternative Minimum Tax. It also prohibits health insurers from placing firmer restrictions on mental health benefits than on medical benefits.
Middle Class Opposes. Middle-class Americans, no matter how far removed from Wall Street, will be adversely affected by the crisis in finance and credit that now grips our economy. After a prolonged period of stagnant wages and economic growth that benefited primarily the wealthiest, middle-class Americans rely heavily on credit to purchase everyday necessities, pay medical bills, and fund college educations. Epic stock market declines have eaten away at the retirement savings of senior citizens who have no other source of income. If the government does not act to make more credit available, credit for the loans that finance payrolls and state and local government operations will dry up, increasing unemployment. Government action is absolutely necessary to ensure that middle-class Americans’ standard of living does not suffer gravely from the credit crisis.
Yet, the Emergency Economic Stabilization Act of 2008 is not the action middle-class Americans need. Instead of a top-down bailout, credit markets should be stabilized from the bottom up. To the extent that a direct investment in the financial services industry is made, it should fully complement large-scale mortgage restructuring and foreclosure prevention efforts and the re-regulation of the financial services industry. This would not only benefit struggling homeowners, but is widely understood to be part of an effective strategy to aid financial markets through stabilized payment streams.
The nation’s first priority should be to repair the damage done to the housing market and to the lives of working- and middle-class Americans.
- Any proposed remedy for the financial crisis must begin with assistance for struggling homeowners. This should come in the form of a longer-term, government-led commitment to reshape the mortgage landscape of this country. One promising model is the Home Owners’ Loan Corporation (HOLC). Originally established during the New Deal, HOLC made more than 1 million loans to refinance mortgages in distress, which constituted a fifth of all mortgage loans. At present, this would represent about 10 million loans, with the total value of mortgages held by HOLC in 1937 approximately equivalent to the total of all subprime mortgage loans. HOLC helped about 80% of homeowners who refinanced stay in their homes.
- Bankruptcy protection for primary residences is critical. This measure would allow bankruptcy judges to rewrite mortgages on first homes (as is now possible for second homes and yachts) on terms struggling homeowners could afford. The change could prevent as many as 600,000 foreclosures.
- A moratorium on foreclosures would provide an immediate opportunity for homeowners to work out loan modifications with lenders.
The financial crisis is serious and will affect the lives of middle-class Americans immediately and significantly. At the same time, only financial rescue legislation that includes significant assistance for homeowners can initiate a full, long-term recovery from the current crisis.
Despite the inclusion of several special-interest tax breaks in the Act, the tax changes added to the legislation are generally very important to the middle-class. The energy tax credit expansions and extensions are part of a long-term strategy to alleviate high gas and heating costs, make the country more energy efficient, and ensure that the economy retains jobs in renewable energy and technology. Changes to the child tax credit would make 2.9 million additional children eligible for the benefit and would increase the benefit for 10.1 million more. Temporarily raising the Alternative Minimum Tax exemption ensures that middle-class Americans are not overwhelmed by a tax that they were never intended to pay.
Finally, the mental health and “substance use disorder” parity provisions of the Act not only do much to remedy the discriminatory practices of insurers, but will increase access to mental health care services for middle-class Americans already struggling with high health care costs.
While these last-minute additions to the bailout package are positive for the middle class and should become law, they are not relevant to this bill and should be enacted separately. Ultimately, these provisions do not outweigh the substantial shortcomings of the financial bailout.
“The Paulson $700 billion bailout simply will not work to stabilize the economy if it does not address the underlying problem of home foreclosures and falling home prices. As proposed, the bailout has virtually nothing of benefit to middle-class homeowners facing distress...Congress has the power to implement a simple solution to stop the foreclosure epidemic. Today we urge them to finally allow homeowners access to courts, where abusive mortgages could be restructured in a fair and targeted way. Allowing homeowners into the existing legal system would not cost taxpayers anything—not a single dime. So including this solution will help Main Street without taking any piece of the $700 billion dollar pie.”
– Martin Eakes, CEO, Center for Responsible Lending, 9/23/2008
“The main problem in recovering from the recession will be finding ways to boost demand other than household consumption. In the longer run, this will mean reducing imports and increasing exports. In the short-run, we will have to rely on government stimulus to help spur growth and reduce unemployment. The Democratic demands for stimulus were not extraneous to the legitimate goal of a bank bailout bill. Fiscal stimulus must be central to any serious effort to boost the economy. The weakness of the banks contributes to the downturn, but they are not the core of the problem. We would still be facing a recession even if all our banks were flush with cash. Hence the hype about the urgency of the bailout was an invention. It would be good to get our banks in order, but it also would be good to send $100 billion to state and local governments to support infrastructure projects and other spending.”
– Dean Baker, Co-Director, Center for Economic and Policy Research, 9/29/2008
Even if the Emergency Economic Stabilization Act had included significant protections for struggling homeowners, it would be only the beginning of a wider strategy to assist middle-class Americans in the declining economy. A second stimulus package that includes extended unemployment benefits, low-income heating assistance, infrastructure investments, and financial help for state and local governments is critical to assisting out-of-work Americans and stimulating job growth.
Considering the immediate panic being expressed in the capital markets, it would be tempting to dismiss the call for re-regulation and the establishment of new consumer protections as a secondary issue. Yet, it would be unconscionable to discuss a response to the current economic crisis without addressing regulatory oversight of financial institutions and the establishment of national anti-predatory lending provisions.
Economists have long recognized that deregulation – in the form of the repeal of the Glass-Steagall Act, the unfettered ascendancy of mortgage securitizations and abusive broker practices, and the federal government’s encouragement of reckless underwriting practices – as a leading cause of the subprime mortgage crisis. Congress must work toward comprehensive re-regulation of the financial services industry so that the nation's financial system is never again dangerously imperiled.