CCH issues white paper on financial rescue plan

CCH, part of Wolters Kluwer Law & Business, has published a white paper, The Economic Bailout: An Analysis of the Economic Emergency Stabilization Act, by CCH banking law analysts Katalina M. Bianco, JD and John M. Pachkowski, JD. Wolters Kluwer Law & Business is a leading provider of research information and software solutions in key specialty areas for legal and business professionals.

President Bush signed the Emergency Economic Stabilization Act of 2008, or EESA, into law within two hours of its final passage in the House of Representatives on October 3, 2008, and declared that the legislation was “essential to helping America’s economy weather this financial crisis.”

The law provides the Treasury Department up to $700 billion to purchase, manage and sell assets held by financial institutions that are considered to be “troubled” or “toxic,” under a program known as the Troubled Asset Relief Program, or TARP.

The CCH white paper includes a compelling timeline, counting down key events from the takeover of Fannie Mae and Freddie Mac on September 7 to the original “bailout” plan by Treasury Secretary Paulson put forward on September 23.

The original plan was extensively elaborated and modified as it was cast into legislative language, then rejected by the House on September 29 and finally, after being packaged with an array of tax provisions and a raising of the FDIC insurance limits, was passed into law.

White Paper Details Taxpayer Protection, Oversight
The white paper details the many layers of taxpayer protection in the TARP program, including prohibitions on unjust enrichment and obtaining maximum return for the federal government. The Treasury Secretary will be required to protect taxpayers by using market mechanisms, namely purchasing assets at the lowest price and using auctions or reverse auctions to maximize taxpayer resources.

Multiple layers of oversight are also called for in the law. It establishes a Financial Stability Oversight Board and a Congressional Oversight Panel. The Treasury Secretary is required to disclose descriptions, amounts and pricing of assets acquired under the TARP and judicial review of the program is authorized.

“This is quite a change from the first Treasury Department proposal, in which the asset purchase program had no oversight provisions,” white paper co-author Pachkowski noted.

The white paper also examines a number of compensation-related provisions in the new law, involving incentive compensation, claw-back provisions and golden parachutes.

The white paper concludes by looking at some of the potential difficulties facing the program.

“The complexity of some of the securities, and the difficulty of accurately valuing them, could be a stumbling block to the law’s intended goal of stabilizing the economy,” white paper co-author Bianco observed.

Click here for the white paper.