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AMENDMENT TO THE SENATE AMENDMENT TO
H.R. 3997
OFFERED BY lllllllll
In lieu of the matter proposed to be inserted by the
amendment of the Senate to the amendment of the
House to the amendment of the Senate, insert the following:
1 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
2 (a) SHORT TITLE.—This Act may be cited as the
3 ‘‘Emergency Economic Stabilization Act of 2008’’.
4 (b) TABLE OF CONTENTS.—The table of contents for
5 this Act is as follows:
Sec. 1. Short title and table of contents.
Sec. 2. Purposes.
Sec. 3. Definitions.
TITLE I—TROUBLED ASSETS RELIEF PROGRAM
Sec. 101. Purchases of troubled assets.
Sec. 102. Insurance of troubled assets.
Sec. 103. Considerations.
Sec. 104. Financial Stability Oversight Board.
Sec. 105. Reports.
Sec. 106. Rights; management; sale of troubled assets; revenues and sale proceeds.
Sec. 107. Contracting procedures.
Sec. 108. Conflicts of interest.
Sec. 109. Foreclosure mitigation efforts.
Sec. 110. Assistance to homeowners.
Sec. 111. Executive compensation and corporate governance.
Sec. 112. Coordination with foreign authorities and central banks.
Sec. 113. Minimization of long-term costs and maximization of benefits for taxpayers.
Sec. 114. Market transparency.
Sec. 115. Graduated authorization to purchase.
Sec. 116. Oversight and audits.
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Sec. 117. Study and report on margin authority.
Sec. 118. Funding.
Sec. 119. Judicial review and related matters.
Sec. 120. Termination of authority.
Sec. 121. Special Inspector General for the Troubled Asset Relief Program.
Sec. 122. Increase in statutory limit on the public debt.
Sec. 123. Credit reform.
Sec. 124. HOPE for Homeowners amendments.
Sec. 125. Congressional Oversight Panel.
Sec. 126. FDIC authority.
Sec. 127. Cooperation with the FBI.
Sec. 128. Acceleration of effective date.
Sec. 129. Disclosures on exercise of loan authority.
Sec. 130. Technical corrections.
Sec. 131. Exchange Stabilization Fund reimbursement.
Sec. 132. Authority to suspend mark-to-market accounting.
Sec. 133. Study on mark-to-market accounting.
Sec. 134. Recoupment.
Sec. 135. Preservation of authority.
TITLE II—BUDGET-RELATED PROVISIONS
Sec. 201. Information for congressional support agencies.
Sec. 202. Reports by the Office of Management and Budget and the Congressional
Budget Office.
Sec. 203. Analysis in President’s Budget.
Sec. 204. Emergency treatment.
TITLE III—TAX PROVISIONS
Sec. 301. Gain or loss from sale or exchange of certain preferred stock.
Sec. 302. Special rules for tax treatment of executive compensation of employers
participating in the troubled assets relief program.
Sec. 303. Extension of exclusion of income from discharge of qualified principal
residence indebtedness.
1 SEC. 2. PURPOSES.
2 The purposes of this Act are—
3 (1) to immediately provide authority and facili4
ties that the Secretary of the Treasury can use to
5 restore liquidity and stability to the financial system
6 of the United States; and
7 (2) to ensure that such authority and such fa8
cilities are used in a manner that—
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1 (A) protects home values, college funds, re2
tirement accounts, and life savings;
3 (B) preserves homeownership and pro4
motes jobs and economic growth;
5 (C) maximizes overall returns to the tax6
payers of the United States; and
7 (D) provides public accountability for the
8 exercise of such authority.
9 SEC. 3. DEFINITIONS.
10 For purposes of this Act, the following definitions
11 shall apply:
12 (1) APPROPRIATE COMMITTEES OF CON13
GRESS.—The term ‘‘appropriate committees of Con14
gress’’ means—
15 (A) the Committee on Banking, Housing,
16 and Urban Affairs, the Committee on Finance,
17 the Committee on the Budget, and the Com18
mittee on Appropriations of the Senate; and
19 (B) the Committee on Financial Services,
20 the Committee on Ways and Means, the Com21
mittee on the Budget, and the Committee on
22 Appropriations of the House of Representatives.
23 (2) BOARD.—The term ‘‘Board’’ means the
24 Board of Governors of the Federal Reserve System.
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1 (3) CONGRESSIONAL SUPPORT AGENCIES.—The
2 term ‘‘congressional support agencies’’ means the
3 Congressional Budget Office and the Joint Com4
mittee on Taxation.
5 (4) CORPORATION.—The term ‘‘Corporation’’
6 means the Federal Deposit Insurance Corporation.
7 (5) FINANCIAL INSTITUTION.—The term ‘‘fi8
nancial institution’’ means any institution, including,
9 but not limited to, any bank, savings association,
10 credit union, security broker or dealer, or insurance
11 company, established and regulated under the laws
12 of the United States or any State, territory, or pos13
session of the United States, the District of Colum14
bia, Commonwealth of Puerto Rico, Commonwealth
15 of Northern Mariana Islands, Guam, American
16 Samoa, or the United States Virgin Islands, and
17 having significant operations in the United States,
18 but excluding any central bank of, or institution
19 owned by, a foreign government.
20 (6) FUND.—The term ‘‘Fund’’ means the Trou21
bled Assets Insurance Financing Fund established
22 under section 102.
23 (7) SECRETARY.—The term ‘‘Secretary’’ means
24 the Secretary of the Treasury.
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1 (8) TARP.—The term ‘‘TARP’’ means the
2 Troubled Asset Relief Program established under
3 section 101.
4 (9) TROUBLED ASSETS.—The term ‘‘troubled
5 assets’’ means—
6 (A) residential or commercial mortgages
7 and any securities, obligations, or other instru8
ments that are based on or related to such
9 mortgages, that in each case was originated or
10 issued on or before March 14, 2008, the pur11
chase of which the Secretary determines pro12
motes financial market stability; and
13 (B) any other financial instrument that the
14 Secretary, after consultation with the Chairman
15 of the Board of Governors of the Federal Re16
serve System, determines the purchase of which
17 is necessary to promote financial market sta18
bility, but only upon transmittal of such deter19
mination, in writing, to the appropriate commit20
tees of Congress.
21 TITLE I—TROUBLED ASSETS
22 RELIEF PROGRAM
23 SEC. 101. PURCHASES OF TROUBLED ASSETS.
24 (a) OFFICES; AUTHORITY.—
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1 (1) AUTHORITY.—The Secretary is authorized
2 to establish the Troubled Asset Relief Program (or
3 ‘‘TARP’’) to purchase, and to make and fund com4
mitments to purchase, troubled assets from any fi5
nancial institution, on such terms and conditions as
6 are determined by the Secretary, and in accordance
7 with this Act and the policies and procedures devel8
oped and published by the Secretary.
9 (2) COMMENCEMENT OF PROGRAM.—Establish10
ment of the policies and procedures and other simi11
lar administrative requirements imposed on the Sec12
retary by this Act are not intended to delay the com13
mencement of the TARP.
14 (3) ESTABLISHMENT OF TREASURY OFFICE.—
15 (A) IN GENERAL.—The Secretary shall im16
plement any program under paragraph (1)
17 through an Office of Financial Stability, estab18
lished for such purpose within the Office of Do19
mestic Finance of the Department of the Treas20
ury, which office shall be headed by an Assist21
ant Secretary of the Treasury, appointed by the
22 President, by and with the advice and consent
23 of the Senate, except that an interim Assistant
24 Secretary may be appointed by the Secretary.
25 (B) CLERICAL AMENDMENTS.—
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1 (i) TITLE 5.—Section 5315 of title 5,
2 United States Code, is amended in the
3 item relating to Assistant Secretaries of
4 the Treasury, by striking ‘‘(9)’’ and insert5
ing ‘‘(10)’’.
6 (ii) TITLE 31.—Section 301(e) of title
7 31, United States Code, is amended by
8 striking ‘‘9’’ and inserting ‘‘10’’.
9 (b) CONSULTATION.—In exercising the authority
10 under this section, the Secretary shall consult with the
11 Board, the Corporation, the Comptroller of the Currency,
12 the Director of the Office of Thrift Supervision, and the
13 Secretary of Housing and Urban Development.
14 (c) NECESSARY ACTIONS.—The Secretary is author15
ized to take such actions as the Secretary deems necessary
16 to carry out the authorities in this Act, including, without
17 limitation, the following:
18 (1) The Secretary shall have direct hiring au19
thority with respect to the appointment of employees
20 to administer this Act.
21 (2) Entering into contracts, including contracts
22 for services authorized by section 3109 of title 5,
23 United States Code.
24 (3) Designating financial institutions as finan25
cial agents of the Federal Government, and such in-
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1 stitutions shall perform all such reasonable duties
2 related to this Act as financial agents of the Federal
3 Government as may be required.
4 (4) In order to provide the Secretary with the
5 flexibility to manage troubled assets in a manner de6
signed to minimize cost to the taxpayers, estab7
lishing vehicles that are authorized, subject to super8
vision by the Secretary, to purchase, hold, and sell
9 troubled assets and issue obligations.
10 (5) Issuing such regulations and other guidance
11 as may be necessary or appropriate to define terms
12 or carry out the authorities or purposes of this Act.
13 (d) PROGRAM GUIDELINES.—Before the earlier of
14 the end of the 2-business-day period beginning on the date
15 of the first purchase of troubled assets pursuant to the
16 authority under this section or the end of the 45-day pe17
riod beginning on the date of enactment of this Act, the
18 Secretary shall publish program guidelines, including the
19 following:
20 (1) Mechanisms for purchasing troubled assets.
21 (2) Methods for pricing and valuing troubled
22 assets.
23 (3) Procedures for selecting asset managers.
24 (4) Criteria for identifying troubled assets for
25 purchase.
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1 (e) PREVENTING UNJUST ENRICHMENT.—In making
2 purchases under the authority of this Act, the Secretary
3 shall take such steps as may be necessary to prevent un4
just enrichment of financial institutions participating in
5 a program established under this section, including by pre6
venting the sale of a troubled asset to the Secretary at
7 a higher price than what the seller paid to purchase the
8 asset. This subsection does not apply to troubled assets
9 acquired in a merger or acquisition, or a purchase of as10
sets from a financial institution in conservatorship or re11
ceivership, or that has initiated bankruptcy proceedings
12 under title 11, United States Code.
13 SEC. 102. INSURANCE OF TROUBLED ASSETS.
14 (a) AUTHORITY.—
15 (1) IN GENERAL.—If the Secretary establishes
16 the program authorized under section 101, then the
17 Secretary shall establish a program to guarantee
18 troubled assets originated or issued prior to March
19 14, 2008, including mortgage-backed securities.
20 (2) GUARANTEES.—In establishing any pro21
gram under this subsection, the Secretary may de22
velop guarantees of troubled assets and the associ23
ated premiums for such guarantees. Such guaran24
tees and premiums may be determined by category
25 or class of the troubled assets to be guaranteed.
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1 (3) EXTENT OF GUARANTEE.—Upon request of
2 a financial institution, the Secretary may guarantee
3 the timely payment of principal of, and interest on,
4 troubled assets in amounts not to exceed 100 per5
cent of such payments. Such guarantee may be on
6 such terms and conditions as are determined by the
7 Secretary, provided that such terms and conditions
8 are consistent with the purposes of this Act.
9 (b) REPORTS.—Not later than 90 days after the date
10 of enactment of this Act, the Secretary shall report to the
11 appropriate committees of Congress on the program estab12
lished under subsection (a).
13 (c) PREMIUMS.—
14 (1) IN GENERAL.—The Secretary shall collect
15 premiums from any financial institution partici16
pating in the program established under subsection
17 (a). Such premiums shall be in an amount that the
18 Secretary determines necessary to meet the purposes
19 of this Act and to provide sufficient reserves pursu20
ant to paragraph (3).
21 (2) AUTHORITY TO BASE PREMIUMS ON PROD22
UCT RISK.—In establishing any premium under
23 paragraph (1), the Secretary may provide for vari24
ations in such rates according to the credit risk as25
sociated with the particular troubled asset that is
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1 being guaranteed. The Secretary shall publish the
2 methodology for setting the premium for a class of
3 troubled assets together with an explanation of the
4 appropriateness of the class of assets for participa5
tion in the program established under this section.
6 The methodology shall ensure that the premium is
7 consistent with paragraph (3).
8 (3) MINIMUM LEVEL.—The premiums referred
9 to in paragraph (1) shall be set by the Secretary at
10 a level necessary to create reserves sufficient to meet
11 anticipated claims, based on an actuarial analysis,
12 and to ensure that taxpayers are fully protected.
13 (4) ADJUSTMENT TO PURCHASE AUTHORITY.—
14 The purchase authority limit in section 115 shall be
15 reduced by an amount equal to the difference be16
tween the total of the outstanding guaranteed obli17
gations and the balance in the Troubled Assets In18
surance Financing Fund.
19 (d) TROUBLED ASSETS INSURANCE FINANCING
20 FUND.—
21 (1) DEPOSITS.—The Secretary shall deposit
22 fees collected under this section into the Fund estab23
lished under paragraph (2).
24 (2) ESTABLISHMENT.—There is established a
25 Troubled Assets Insurance Financing Fund that
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1 shall consist of the amounts collected pursuant to
2 paragraph (1), and any balance in such fund shall
3 be invested by the Secretary in United States Treas4
ury securities, or kept in cash on hand or on deposit,
5 as necessary.
6 (3) PAYMENTS FROM FUND.—The Secretary
7 shall make payments from amounts deposited in the
8 Fund to fulfill obligations of the guarantees provided
9 to financial institutions under subsection (a).
10 SEC. 103. CONSIDERATIONS.
11 In exercising the authorities granted in this Act, the
12 Secretary shall take into consideration—
13 (1) protecting the interests of taxpayers by
14 maximizing overall returns and minimizing the im15
pact on the national debt;
16 (2) providing stability and preventing disrup17
tion to financial markets in order to limit the impact
18 on the economy and protect American jobs, savings,
19 and retirement security;
20 (3) the need to help families keep their homes
21 and to stabilize communities;
22 (4) in determining whether to engage in a di23
rect purchase from an individual financial institu24
tion, the long-term viability of the financial institu-
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1 tion in determining whether the purchase represents
2 the most efficient use of funds under this Act;
3 (5) ensuring that all financial institutions are
4 eligible to participate in the program, without dis5
crimination based on size, geography, form of orga6
nization, or the size, type, and number of assets eli7
gible for purchase under this Act;
8 (6) providing financial assistance to financial
9 institutions, including those serving low- and mod10
erate-income populations and other underserved
11 communities, and that have assets less than
12 $1,000,000,000, that were well or adequately cap13
italized as of June 30, 2008, and that as a result
14 of the devaluation of the preferred government-spon15
sored enterprises stock will drop one or more capital
16 levels, in a manner sufficient to restore the financial
17 institutions to at least an adequately capitalized
18 level;
19 (7) the need to ensure stability for United
20 States public instrumentalities, such as counties and
21 cities, that may have suffered significant increased
22 costs or losses in the current market turmoil;
23 (8) protecting the retirement security of Ameri24
cans by purchasing troubled assets held by or on be25
half of an eligible retirement plan described in clause
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1 (iii), (iv), (v), or (vi) of section 402(c)(8)(B) of the
2 Internal Revenue Code of 1986, except that such au3
thority shall not extend to any compensation ar4
rangements subject to section 409A of such Code;
5 and
6 (9) the utility of purchasing other real estate
7 owned and instruments backed by mortgages on
8 multifamily properties.
9 SEC. 104. FINANCIAL STABILITY OVERSIGHT BOARD.
10 (a) ESTABLISHMENT.—There is established the Fi11
nancial Stability Oversight Board, which shall be respon12
sible for—
13 (1) reviewing the exercise of authority under a
14 program developed in accordance with this Act, in15
cluding—
16 (A) policies implemented by the Secretary
17 and the Office of Financial Stability created
18 under sections 101 and 102, including the ap19
pointment of financial agents, the designation
20 of asset classes to be purchased, and plans for
21 the structure of vehicles used to purchase trou22
bled assets; and
23 (B) the effect of such actions in assisting
24 American families in preserving home owner-
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1 ship, stabilizing financial markets, and pro2
tecting taxpayers;
3 (2) making recommendations, as appropriate, to
4 the Secretary regarding use of the authority under
5 this Act; and
6 (3) reporting any suspected fraud, misrepresen7
tation, or malfeasance to the Special Inspector Gen8
eral for the Troubled Assets Relief Program or the
9 Attorney General of the United States, consistent
10 with section 535(b) of title 28, United States Code.
11 (b) MEMBERSHIP.—The Financial Stability Over12
sight Board shall be comprised of—
13 (1) the Chairman of the Board of Governors of
14 the Federal Reserve System;
15 (2) the Secretary;
16 (3) the Director of the Federal Housing Fi17
nance Agency;
18 (4) the Chairman of the Securities Exchange
19 Commission; and
20 (5) the Secretary of Housing and Urban Devel21
opment.
22 (c) CHAIRPERSON.—The chairperson of the Financial
23 Stability Oversight Board shall be elected by the members
24 of the Board from among the members other than the Sec25
retary.
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1 (d) MEETINGS.—The Financial Stability Oversight
2 Board shall meet 2 weeks after the first exercise of the
3 purchase authority of the Secretary under this Act, and
4 monthly thereafter.
5 (e) ADDITIONAL AUTHORITIES.—In addition to the
6 responsibilities described in subsection (a), the Financial
7 Stability Oversight Board shall have the authority to en8
sure that the policies implemented by the Secretary are—
9 (1) in accordance with the purposes of this Act;
10 (2) in the economic interests of the United
11 States; and
12 (3) consistent with protecting taxpayers, in ac13
cordance with section 113(a).
14 (f) CREDIT REVIEW COMMITTEE.—The Financial
15 Stability Oversight Board may appoint a credit review
16 committee for the purpose of evaluating the exercise of
17 the purchase authority provided under this Act and the
18 assets acquired through the exercise of such authority, as
19 the Financial Stability Oversight Board determines appro20
priate.
21 (g) REPORTS.—The Financial Stability Oversight
22 Board shall report to the appropriate committees of Con23
gress and the Congressional Oversight Panel established
24 under section 125, not less frequently than quarterly, on
25 the matters described under subsection (a)(1).
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1 (h) TERMINATION.—The Financial Stability Over2
sight Board, and its authority under this section, shall ter3
minate on the expiration of the 15-day period beginning
4 upon the later of—
5 (1) the date that the last troubled asset ac6
quired by the Secretary under section 101 has been
7 sold or transferred out of the ownership or control
8 of the Federal Government; or
9 (2) the date of expiration of the last insurance
10 contract issued under section 102.
11 SEC. 105. REPORTS.
12 (a) IN GENERAL.—Before the expiration of the 60-
13 day period beginning on the date of the first exercise of
14 the authority granted in section 101(a), or of the first ex15
ercise of the authority granted in section 102, whichever
16 occurs first, and every 30-day period thereafter, the Sec17
retary shall report to the appropriate committees of Con18
gress, with respect to each such period—
19 (1) an overview of actions taken by the Sec20
retary, including the considerations required by sec21
tion 103 and the efforts under section 109;
22 (2) the actual obligation and expenditure of the
23 funds provided for administrative expenses by sec24
tion 118 during such period and the expected ex-
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1 penditure of such funds in the subsequent period;
2 and
3 (3) a detailed financial statement with respect
4 to the exercise of authority under this Act, includ5
ing—
6 (A) all agreements made or renewed;
7 (B) all insurance contracts entered into
8 pursuant to section 102;
9 (C) all transactions occurring during such
10 period, including the types of parties involved;
11 (D) the nature of the assets purchased;
12 (E) all projected costs and liabilities;
13 (F) operating expenses, including com14
pensation for financial agents;
15 (G) the valuation or pricing method used
16 for each transaction; and
17 (H) a description of the vehicles estab18
lished to exercise such authority.
19 (b) TRANCHE REPORTS TO CONGRESS.—
20 (1) REPORTS.—The Secretary shall provide to
21 the appropriate committees of Congress, at the times
22 specified in paragraph (2), a written report, includ23
ing—
24 (A) a description of all of the transactions
25 made during the reporting period;
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1 (B) a description of the pricing mechanism
2 for the transactions;
3 (C) a justification of the price paid for and
4 other financial terms associated with the trans5
actions;
6 (D) a description of the impact of the exer7
cise of such authority on the financial system,
8 supported, to the extent possible, by specific
9 data;
10 (E) a description of challenges that remain
11 in the financial system, including any bench12
marks yet to be achieved; and
13 (F) an estimate of additional actions under
14 the authority provided under this Act that may
15 be necessary to address such challenges.
16 (2) TIMING.—The report required by this sub17
section shall be submitted not later than 7 days
18 after the date on which commitments to purchase
19 troubled assets under the authorities provided in this
20 Act first reach an aggregate of $50,000,000,000 and
21 not later than 7 days after each $50,000,000,000 in22
terval of such commitments is reached thereafter.
23 (c) REGULATORY MODERNIZATION REPORT.—The
24 Secretary shall review the current state of the financial
25 markets and the regulatory system and submit a written
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1 report to the appropriate committees of Congress not later
2 than April 30, 2009, analyzing the current state of the
3 regulatory system and its effectiveness at overseeing the
4 participants in the financial markets, including the over5
the-counter swaps market and government-sponsored en6
terprises, and providing recommendations for improve7
ment, including—
8 (1) recommendations regarding—
9 (A) whether any participants in the finan10
cial markets that are currently outside the reg11
ulatory system should become subject to the
12 regulatory system; and
13 (B) enhancement of the clearing and set14
tlement of over-the-counter swaps; and
15 (2) the rationale underlying such recommenda16
tions.
17 (d) SHARING OF INFORMATION.—Any report re18
quired under this section shall also be submitted to the
19 Congressional Oversight Panel established under section
20 125.
21 (e) SUNSET.—The reporting requirements under this
22 section shall terminate on the later of—
23 (1) the date that the last troubled asset ac24
quired by the Secretary under section 101 has been
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1 sold or transferred out of the ownership or control
2 of the Federal Government; or
3 (2) the date of expiration of the last insurance
4 contract issued under section 102.
5 SEC. 106. RIGHTS; MANAGEMENT; SALE OF TROUBLED AS6
SETS; REVENUES AND SALE PROCEEDS.
7 (a) EXERCISE OF RIGHTS.—The Secretary may, at
8 any time, exercise any rights received in connection with
9 troubled assets purchased under this Act.
10 (b) MANAGEMENT OF TROUBLED ASSETS.—The Sec11
retary shall have authority to manage troubled assets pur12
chased under this Act, including revenues and portfolio
13 risks therefrom.
14 (c) SALE OF TROUBLED ASSETS.—The Secretary
15 may, at any time, upon terms and conditions and at a
16 price determined by the Secretary, sell, or enter into secu17
rities loans, repurchase transactions, or other financial
18 transactions in regard to, any troubled asset purchased
19 under this Act.
20 (d) TRANSFER TO TREASURY.—Revenues of, and
21 proceeds from the sale of troubled assets purchased under
22 this Act, or from the sale, exercise, or surrender of war23
rants or senior debt instruments acquired under section
24 113 shall be paid into the general fund of the Treasury
25 for reduction of the public debt.
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1 (e) APPLICATION OF SUNSET TO TROUBLED AS2
SETS.—The authority of the Secretary to hold any trou3
bled asset purchased under this Act before the termination
4 date in section 120, or to purchase or fund the purchase
5 of a troubled asset under a commitment entered into be6
fore the termination date in section 120, is not subject
7 to the provisions of section 120.
8 SEC. 107. CONTRACTING PROCEDURES.
9 (a) STREAMLINED PROCESS.—For purposes of this
10 Act, the Secretary may waive specific provisions of the
11 Federal Acquisition Regulation upon a determination that
12 urgent and compelling circumstances make compliance
13 with such provisions contrary to the public interest. Any
14 such determination, and the justification for such deter15
mination, shall be submitted to the Committees on Over16
sight and Government Reform and Financial Services of
17 the House of Representatives and the Committees on
18 Homeland Security and Governmental Affairs and Bank19
ing, Housing, and Urban Affairs of the Senate within 7
20 days.
21 (b) ADDITIONAL CONTRACTING REQUIREMENTS.—In
22 any solicitation or contract where the Secretary has, pur23
suant to subsection (a), waived any provision of the Fed24
eral Acquisition Regulation pertaining to minority con25
tracting, the Secretary shall develop and implement stand-
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1 ards and procedures to ensure, to the maximum extent
2 practicable, the inclusion and utilization of minorities (as
3 such term is defined in section 1204(c) of the Financial
4 Institutions Reform, Recovery, and Enforcement Act of
5 1989 (12 U.S.C. 1811 note)) and women, and minority6
and women-owned businesses (as such terms are defined
7 in section 21A(r)(4) of the Federal Home Loan Bank Act
8 (12 U.S.C. 1441a(r)(4)), in that solicitation or contract,
9 including contracts to asset managers, servicers, property
10 managers, and other service providers or expert consult11
ants.
12 (c) ELIGIBILITY OF FDIC.—Notwithstanding sub13
sections (a) and (b), the Corporation—
14 (1) shall be eligible for, and shall be considered
15 in, the selection of asset managers for residential
16 mortgage loans and residential mortgage-backed se17
curities; and
18 (2) shall be reimbursed by the Secretary for
19 any services provided.
20 SEC. 108. CONFLICTS OF INTEREST.
21 (a) STANDARDS REQUIRED.—The Secretary shall
22 issue regulations or guidelines necessary to address and
23 manage or to prohibit conflicts of interest that may arise
24 in connection with the administration and execution of the
25 authorities provided under this Act, including—
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1 (1) conflicts arising in the selection or hiring of
2 contractors or advisors, including asset managers;
3 (2) the purchase of troubled assets;
4 (3) the management of the troubled assets held;
5 (4) post-employment restrictions on employees;
6 and
7 (5) any other potential conflict of interest, as
8 the Secretary deems necessary or appropriate in the
9 public interest.
10 (b) TIMING.—Regulations or guidelines required by
11 this section shall be issued as soon as practicable after
12 the date of enactment of this Act.
13 SEC. 109. FORECLOSURE MITIGATION EFFORTS.
14 (a) RESIDENTIAL MORTGAGE LOAN SERVICING
15 STANDARDS.—To the extent that the Secretary acquires
16 mortgages, mortgage backed securities, and other assets
17 secured by residential real estate, including multifamily
18 housing, the Secretary shall implement a plan that seeks
19 to maximize assistance for homeowners and use the au20
thority of the Secretary to encourage the servicers of the
21 underlying mortgages, considering net present value to the
22 taxpayer, to take advantage of the HOPE for Home23
owners Program under section 257 of the National Hous24
ing Act or other available programs to minimize fore25
closures. In addition, the Secretary may use loan guaran-
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25
1 tees and credit enhancements to facilitate loan modifica2
tions to prevent avoidable foreclosures.
3 (b) COORDINATION.—The Secretary shall coordinate
4 with the Corporation, the Board (with respect to any
5 mortgage or mortgage-backed securities or pool of securi6
ties held, owned, or controlled by or on behalf of a Federal
7 reserve bank, as provided in section 110(a)(1)(C)), the
8 Federal Housing Finance Agency, the Secretary of Hous9
ing and Urban Development, and other Federal Govern10
ment entities that hold troubled assets to attempt to iden11
tify opportunities for the acquisition of classes of troubled
12 assets that will improve the ability of the Secretary to im13
prove the loan modification and restructuring process and,
14 where permissible, to permit bona fide tenants who are
15 current on their rent to remain in their homes under the
16 terms of the lease. In the case of a mortgage on a residen17
tial rental property, the plan required under this section
18 shall include protecting Federal, State, and local rental
19 subsidies and protections, and ensuring any modification
20 takes into account the need for operating funds to main21
tain decent and safe conditions at the property.
22 (c) CONSENT TO REASONABLE LOAN MODIFICATION
23 REQUESTS.—Upon any request arising under existing in24
vestment contracts, the Secretary shall consent, where ap25
propriate, and considering net present value to the tax-
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1 payer, to reasonable requests for loss mitigation measures,
2 including term extensions, rate reductions, principal write
3 downs, increases in the proportion of loans within a trust
4 or other structure allowed to be modified, or removal of
5 other limitation on modifications.
6 SEC. 110. ASSISTANCE TO HOMEOWNERS.
7 (a) DEFINITIONS.—As used in this section—
8 (1) the term ‘‘Federal property manager’’
9 means—
10 (A) the Federal Housing Finance Agency,
11 in its capacity as conservator of the Federal
12 National Mortgage Association and the Federal
13 Home Loan Mortgage Corporation;
14 (B) the Corporation, with respect to resi15
dential mortgage loans and mortgage-backed se16
curities held by any bridge depository institu17
tion pursuant to section 11(n) of the Federal
18 Deposit Insurance Act; and
19 (C) the Board, with respect to any mort20
gage or mortgage-backed securities or pool of
21 securities held, owned, or controlled by or on
22 behalf of a Federal reserve bank, other than
23 mortgages or securities held, owned, or con24
trolled in connection with open market oper25
ations under section 14 of the Federal Reserve
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1 Act (12 U.S.C. 353), or as collateral for an ad2
vance or discount that is not in default;
3 (2) the term ‘‘consumer’’ has the same meaning
4 as in section 103 of the Truth in Lending Act (15
5 U.S.C. 1602);
6 (3) the term ‘‘insured depository institution’’
7 has the same meaning as in section 3 of the Federal
8 Deposit Insurance Act (12 U.S.C. 1813); and
9 (4) the term ‘‘servicer’’ has the same meaning
10 as in section 6(i)(2) of the Real Estate Settlement
11 Procedures Act of 1974 (12 U.S.C. 2605(i)(2)).
12 (b) HOMEOWNER ASSISTANCE BY AGENCIES.—
13 (1) IN GENERAL.—To the extent that the Fed14
eral property manager holds, owns, or controls mort15
gages, mortgage backed securities, and other assets
16 secured by residential real estate, including multi17
family housing, the Federal property manager shall
18 implement a plan that seeks to maximize assistance
19 for homeowners and use its authority to encourage
20 the servicers of the underlying mortgages, and con21
sidering net present value to the taxpayer, to take
22 advantage of the HOPE for Homeowners Program
23 under section 257 of the National Housing Act or
24 other available programs to minimize foreclosures.
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1 (2) MODIFICATIONS.—In the case of a residen2
tial mortgage loan, modifications made under para3
graph (1) may include—
4 (A) reduction in interest rates;
5 (B) reduction of loan principal; and
6 (C) other similar modifications.
7 (3) TENANT PROTECTIONS.—In the case of
8 mortgages on residential rental properties, modifica9
tions made under paragraph (1) shall ensure—
10 (A) the continuation of any existing Fed11
eral, State, and local rental subsidies and pro12
tections; and
13 (B) that modifications take into account
14 the need for operating funds to maintain decent
15 and safe conditions at the property.
16 (4) TIMING.—Each Federal property manager
17 shall develop and begin implementation of the plan
18 required by this subsection not later than 60 days
19 after the date of enactment of this Act.
20 (5) REPORTS TO CONGRESS.—Each Federal
21 property manager shall, 60 days after the date of
22 enactment of this Act and every 30 days thereafter,
23 report to Congress specific information on the num24
ber and types of loan modifications made and the
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1 number of actual foreclosures occurring during the
2 reporting period in accordance with this section.
3 (6) CONSULTATION.—In developing the plan re4
quired by this subsection, the Federal property man5
agers shall consult with one another and, to the ex6
tent possible, utilize consistent approaches to imple7
ment the requirements of this subsection.
8 (c) ACTIONS WITH RESPECT TO SERVICERS.—In any
9 case in which a Federal property manager is not the owner
10 of a residential mortgage loan, but holds an interest in
11 obligations or pools of obligations secured by residential
12 mortgage loans, the Federal property manager shall—
13 (1) encourage implementation by the loan
14 servicers of loan modifications developed under sub15
section (b); and
16 (2) assist in facilitating any such modifications,
17 to the extent possible.
18 (d) LIMITATION.—The requirements of this section
19 shall not supersede any other duty or requirement imposed
20 on the Federal property managers under otherwise appli21
cable law.
22 SEC. 111. EXECUTIVE COMPENSATION AND CORPORATE
23 GOVERNANCE.
24 (a) APPLICABILITY.—Any financial institution that
25 sells troubled assets to the Secretary under this Act shall
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1 be subject to the executive compensation requirements of
2 subsections (b) and (c) and the provisions under the Inter3
nal Revenue Code of 1986, as provided under the amend4
ment by section 302, as applicable.
5 (b) DIRECT PURCHASES.—
6 (1) IN GENERAL.—Where the Secretary deter7
mines that the purposes of this Act are best met
8 through direct purchases of troubled assets from an
9 individual financial institution where no bidding
10 process or market prices are available, and the Sec11
retary receives a meaningful equity or debt position
12 in the financial institution as a result of the trans13
action, the Secretary shall require that the financial
14 institution meet appropriate standards for executive
15 compensation and corporate governance. The stand16
ards required under this subsection shall be effective
17 for the duration of the period that the Secretary
18 holds an equity or debt position in the financial in19
stitution.
20 (2) CRITERIA.—The standards required under
21 this subsection shall include—
22 (A) limits on compensation that exclude in23
centives for senior executive officers of a finan24
cial institution to take unnecessary and exces25
sive risks that threaten the value of the finan-
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1 cial institution during the period that the Sec2
retary holds an equity or debt position in the fi3
nancial institution;
4 (B) a provision for the recovery by the fi5
nancial institution of any bonus or incentive
6 compensation paid to a senior executive officer
7 based on statements of earnings, gains, or other
8 criteria that are later proven to be materially
9 inaccurate; and
10 (C) a prohibition on the financial institu11
tion making any golden parachute payment to
12 its senior executive officer during the period
13 that the Secretary holds an equity or debt posi14
tion in the financial institution.
15 (3) DEFINITION.—For purposes of this section,
16 the term ‘‘senior executive officer’’ means an indi17
vidual who is one of the top 5 highly paid executives
18 of a public company, whose compensation is required
19 to be disclosed pursuant to the Securities Exchange
20 Act of 1934, and any regulations issued thereunder,
21 and non-public company counterparts.
22 (c) AUCTION PURCHASES.—Where the Secretary de23
termines that the purposes of this Act are best met
24 through auction purchases of troubled assets, and only
25 where such purchases per financial institution in the ag-
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1 gregate exceed $300,000,000 (including direct purchases),
2 the Secretary shall prohibit, for such financial institution,
3 any new employment contract with a senior executive offi4
cer that provides a golden parachute in the event of an
5 involuntary termination, bankruptcy filing, insolvency, or
6 receivership. The Secretary shall issue guidance to carry
7 out this paragraph not later than 2 months after the date
8 of enactment of this Act, and such guidance shall be effec9
tive upon issuance.
10 (d) SUNSET.—The provisions of subsection (c) shall
11 apply only to arrangements entered into during the period
12 during which the authorities under section 101(a) are in
13 effect, as determined under section 120.
14 SEC. 112. COORDINATION WITH FOREIGN AUTHORITIES
15 AND CENTRAL BANKS.
16 The Secretary shall coordinate, as appropriate, with
17 foreign financial authorities and central banks to work to18
ward the establishment of similar programs by such au19
thorities and central banks. To the extent that such for20
eign financial authorities or banks hold troubled assets as
21 a result of extending financing to financial institutions
22 that have failed or defaulted on such financing, such trou23
bled assets qualify for purchase under section 101.
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1 SEC. 113. MINIMIZATION OF LONG-TERM COSTS AND MAXI2
MIZATION OF BENEFITS FOR TAXPAYERS.
3 (a) LONG-TERM COSTS AND BENEFITS.—
4 (1) MINIMIZING NEGATIVE IMPACT.—The Sec5
retary shall use the authority under this Act in a
6 manner that will minimize any potential long-term
7 negative impact on the taxpayer, taking into account
8 the direct outlays, potential long-term returns on as9
sets purchased, and the overall economic benefits of
10 the program, including economic benefits due to im11
provements in economic activity and the availability
12 of credit, the impact on the savings and pensions of
13 individuals, and reductions in losses to the Federal
14 Government.
15 (2) AUTHORITY.—In carrying out paragraph
16 (1), the Secretary shall—
17 (A) hold the assets to maturity or for re18
sale for and until such time as the Secretary
19 determines that the market is optimal for sell20
ing such assets, in order to maximize the value
21 for taxpayers; and
22 (B) sell such assets at a price that the Sec23
retary determines, based on available financial
24 analysis, will maximize return on investment for
25 the Federal Government.
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1 (3) PRIVATE SECTOR PARTICIPATION.—The
2 Secretary shall encourage the private sector to par3
ticipate in purchases of troubled assets, and to in4
vest in financial institutions, consistent with the pro5
visions of this section.
6 (b) USE OF MARKET MECHANISMS.—In making pur7
chases under this Act, the Secretary shall—
8 (1) make such purchases at the lowest price
9 that the Secretary determines to be consistent with
10 the purposes of this Act; and
11 (2) maximize the efficiency of the use of tax12
payer resources by using market mechanisms, in13
cluding auctions or reverse auctions, where appro14
priate.
15 (c) DIRECT PURCHASES.—If the Secretary deter16
mines that use of a market mechanism under subsection
17 (b) is not feasible or appropriate, and the purposes of the
18 Act are best met through direct purchases from an indi19
vidual financial institution, the Secretary shall pursue ad20
ditional measures to ensure that prices paid for assets are
21 reasonable and reflect the underlying value of the asset.
22 (d) CONDITIONS ON PURCHASE AUTHORITY FOR
23 WARRANTS AND DEBT INSTRUMENTS.—
24 (1) IN GENERAL.—The Secretary may not pur25
chase, or make any commitment to purchase, any
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1 troubled asset under the authority of this Act, unless
2 the Secretary receives from the financial institution
3 from which such assets are to be purchased—
4 (A) in the case of a financial institution,
5 the securities of which are traded on a national
6 securities exchange, a warrant giving the right
7 to the Secretary to receive nonvoting common
8 stock or preferred stock in such financial insti9
tution, or voting stock with respect to which,
10 the Secretary agrees not to exercise voting
11 power, as the Secretary determines appropriate;
12 or
13 (B) in the case of any financial institution
14 other than one described in subparagraph (A),
15 a warrant for common or preferred stock, or a
16 senior debt instrument from such financial in17
stitution, as described in paragraph (2)(C).
18 (2) TERMS AND CONDITIONS.—The terms and
19 conditions of any warrant or senior debt instrument
20 required under paragraph (1) shall meet the fol21
lowing requirements:
22 (A) PURPOSES.—Such terms and condi23
tions shall, at a minimum, be designed—
24 (i) to provide for reasonable participa25
tion by the Secretary, for the benefit of
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1 taxpayers, in equity appreciation in the
2 case of a warrant or other equity security,
3 or a reasonable interest rate premium, in
4 the case of a debt instrument; and
5 (ii) to provide additional protection
6 for the taxpayer against losses from sale of
7 assets by the Secretary under this Act and
8 the administrative expenses of the TARP.
9 (B) AUTHORITY TO SELL, EXERCISE, OR
10 SURRENDER.—The Secretary may sell, exercise,
11 or surrender a warrant or any senior debt in12
strument received under this subsection, based
13 on the conditions established under subpara14
graph (A).
15 (C) CONVERSION.—The warrant shall pro16
vide that if, after the warrant is received by the
17 Secretary under this subsection, the financial
18 institution that issued the warrant is no longer
19 listed or traded on a national securities ex20
change or securities association, as described in
21 paragraph (1)(A), such warrants shall convert
22 to senior debt, or contain appropriate protec23
tions for the Secretary to ensure that the
24 Treasury is appropriately compensated for the
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1 value of the warrant, in an amount determined
2 by the Secretary.
3 (D) PROTECTIONS.—Any warrant rep4
resenting securities to be received by the Sec5
retary under this subsection shall contain anti6
dilution provisions of the type employed in cap7
ital market transactions, as determined by the
8 Secretary. Such provisions shall protect the
9 value of the securities from market transactions
10 such as stock splits, stock distributions, divi11
dends, and other distributions, mergers, and
12 other forms of reorganization or recapitaliza13
tion.
14 (E) EXERCISE PRICE.—The exercise price
15 for any warrant issued pursuant to this sub16
section shall be set by the Secretary, in the in17
terest of the taxpayers.
18 (F) SUFFICIENCY.—The financial institu19
tion shall guarantee to the Secretary that it has
20 authorized shares of nonvoting stock available
21 to fulfill its obligations under this subsection.
22 Should the financial institution not have suffi23
cient authorized shares, including preferred
24 shares that may carry dividend rights equal to
25 a multiple number of common shares, the Sec-
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1 retary may, to the extent necessary, accept a
2 senior debt note in an amount, and on such
3 terms as will compensate the Secretary with
4 equivalent value, in the event that a sufficient
5 shareholder vote to authorize the necessary ad6
ditional shares cannot be obtained.
7 (3) EXCEPTIONS.—
8 (A) DE MINIMIS.—The Secretary shall es9
tablish de minimis exceptions to the require10
ments of this subsection, based on the size of
11 the cumulative transactions of troubled assets
12 purchased from any one financial institution for
13 the duration of the program, at not more than
14 $100,000,000.
15 (B) OTHER EXCEPTIONS.—The Secretary
16 shall establish an exception to the requirements
17 of this subsection and appropriate alternative
18 requirements for any participating financial in19
stitution that is legally prohibited from issuing
20 securities and debt instruments, so as not to
21 allow circumvention of the requirements of this
22 section.
23 SEC. 114. MARKET TRANSPARENCY.
24 (a) PRICING.—To facilitate market transparency, the
25 Secretary shall make available to the public, in electronic
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1 form, a description, amounts, and pricing of assets ac2
quired under this Act, within 2 business days of purchase,
3 trade, or other disposition.
4 (b) DISCLOSURE.—For each type of financial institu5
tions that sells troubled assets to the Secretary under this
6 Act, the Secretary shall determine whether the public dis7
closure required for such financial institutions with re8
spect to off-balance sheet transactions, derivatives instru9
ments, contingent liabilities, and similar sources of poten10
tial exposure is adequate to provide to the public sufficient
11 information as to the true financial position of the institu12
tions. If such disclosure is not adequate for that purpose,
13 the Secretary shall make recommendations for additional
14 disclosure requirements to the relevant regulators.
15 SEC. 115. GRADUATED AUTHORIZATION TO PURCHASE.
16 (a) AUTHORITY.—The authority of the Secretary to
17 purchase troubled assets under this Act shall be limited
18 as follows:
19 (1) Effective upon the date of enactment of this
20 Act, such authority shall be limited to
21 $250,000,000,000 outstanding at any one time.
22 (2) If at any time, the President submits to the
23 Congress a written certification that the Secretary
24 needs to exercise the authority under this paragraph,
25 effective upon such submission, such authority shall
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1 be limited to $350,000,000,000 outstanding at any
2 one time.
3 (3) If, at any time after the certification in
4 paragraph (2) has been made, the President trans5
mits to the Congress a written report detailing the
6 plan of the Secretary to exercise the authority under
7 this paragraph, unless there is enacted, within 15
8 calendar days of such transmission, a joint resolu9
tion described in subsection (c), effective upon the
10 expiration of such 15-day period, such authority
11 shall be limited to $700,000,000,000 outstanding at
12 any one time.
13 (b) AGGREGATION OF PURCHASE PRICES.—The
14 amount of troubled assets purchased by the Secretary out15
standing at any one time shall be determined for purposes
16 of the dollar amount limitations under subsection (a) by
17 aggregating the purchase prices of all troubled assets held.
18 (c) JOINT RESOLUTION OF DISAPPROVAL.—
19 (1) IN GENERAL.—Notwithstanding any other
20 provision of this section, the Secretary may not exer21
cise any authority to make purchases under this Act
22 with regard to any amount in excess of
23 $350,000,000,000 previously obligated, as described
24 in this section if, within 15 calendar days after the
25 date on which Congress receives a report of the plan
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1 of the Secretary described in subsection (a)(3), there
2 is enacted into law a joint resolution disapproving
3 the plan of the Secretary with respect to such addi4
tional amount.
5 (2) CONTENTS OF JOINT RESOLUTION.—For
6 the purpose of this section, the term ‘‘joint resolu7
tion’’ means only a joint resolution—
8 (A) that is introduced not later than 3 cal9
endar days after the date on which the report
10