Magazine article Mortgage Banking

Congress Passes, Bush Signs Emergency Economic Stabilization Act

Magazine article Mortgage Banking

Congress Passes, Bush Signs Emergency Economic Stabilization Act

Article excerpt

A controversial and much-debated $700 billion financial-market rescue bill that grants the Treasury secretary broad discretionary authority to stabilize the mortgage and financial markets passed both houses of Congress and was signed by President Bush on Oct. 3.

The Emergency Economic Stabilization Act of 2008 (H.R. 1424) establishes a program at the Treasury Department to purchase distressed mortgage-related assets, makes emergency injections of capital at banks and includes the extension of several tax provisions designed to steady the economy.

Treasury Secretary Henry Paulson praised the bill's passage, but warned that it is no "one-size-fits-all" solution.

"This bill contains a broad set of tools that can be deployed to strengthen financial institutions, large and small, that serve businesses and families," said Paulson. "The broad authorities in this legislation, when combined with existing regulatory authorities and resources, give us the ability to protect and recapitalize our financial system as we work through the stresses in our credit markets."

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The bill authorizes Treasury to implement the Troubled Assets Relief Program (TARP) through the newly created Office of Financial Stability, allowing the Treasury to purchase up to $700 billion in distressed mortgage-related assets from financial institutions in an effort to increase liquidity and restart the seized credit markets.

Mortgage Bankers Association (MBA) Chief Operating Officer John A. Courson lauded the bill's passage.

"The ongoing credit crunch has severely impacted the ability of individuals and businesses of all sizes to borrow, and has threatened to slow down the entire U.S. economy," said Courson. "We very much appreciate the hard work and long hours that congressional and administration negotiators have put in over the last several weeks [in late September] and look forward to the quick implementation of the program. This will enable financial institutions to offer credit so individuals can purchase homes and other items, and businesses can continue to operate and grow."

The bill immediately authorizes $250 billion for the Treasury to buy troubled assets or take other steps to unfreeze the credit markets, plus an additional $100 billion upon presidential certification. …

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