Senator Kent Conrad | North Dakota

Stabilizing the Economy, Protecting the Taxpayer

Emergency Economic Stabilization Act of 2008 FAQs

What specifically is the nature of this crisis and why are the American taxpayers rescuing private businesses?
What will Congress and Administration do about this crisis and how will their actions support the economy?
How does the plan help the nation's homeowners?
What provisions have been included in the plan to protect the taxpayer?
I don't want my tax dollars to support golden parachutes for executives of failed companies. What protections are there in the plan to prevent this from happening?
How do I know that this plan won't benefit those who got us into this mess? Who is looking out for the taxpayer?
Who will sit on the oversight board?
Will the Emergency Economic Stabilization Act of 2008 end the financial threat facing the American people and our markets?

What specifically is the nature of this crisis and why are the American taxpayers rescuing private businesses?

Although most of the attention has focused on the fall of major companies on Wall Street and elsewhere, the danger to the broader economy is in the national credit market - that market where regional and community banks extend loans and borrow money. The credit market is freezing up, meaning there is less capital available as bank loans to small businesses and families. In turn, that is threatening to substantially slow the national economy, as families are unable to borrow car loans or take out a mortgage, and businesses are unable to finance projects or get short-term loans for payroll or stock inventory. This could lead businesses all across the country to give out pink slips; the Chairman of the Federal Reserve has said we could lose 3-4 million American jobs in the next six months.

What will Congress and Administration do about this crisis and how will their actions support the economy?

The Emergency Economic Stabilization Act of 2008 (EESA) provides up to $700 billion to the Secretary of the Treasury to buy troubled assets that are clogging the balance sheets of financial institutions - essentially investing taxpayer money into assets that could be later sold when the markets recover. The Treasury Secretary would not get all the money at once, but would have to ask Congress for the payments in installments. EESA also establishes an optional program that would allow companies to insure their troubled assets. The taxpayer will get an equity share in the companies that participate, allowing taxpayers to share in their future growth and profitability once they lose these troubled assets.

How does the plan help the nation's homeowners?

The rescue package requires the Treasury to modify troubled home loans wherever possible to help American families keep their homes. It also directs other federal agencies to modify loans that they own or control. Finally, it improves the HOPE for Homeowners program by expanding eligibility and increasing the tools available to the Department of Housing and Urban Development to help more families keep their homes.

What provisions have been included in the plan to protect the taxpayer?

Taxpayers should not be expected to pay for Wall Street's mistakes - and this bill is a substantial improvement in protecting the taxpayers over the original version offered by the Administration. The legislation requires companies that sell some of their bad assets to the government to provide stock warrants, which allows the taxpayers to sell those assets later and see benefits when markets recover. When the federal government intervened to rescue the Chrysler Corp. and the Farm Credit Services agency, taxpayers eventually saw profits when the government-owned assets were later sold. So the $700 billion cost to taxpayers may never be realized, and in fact, there is an opportunity for taxpayers to actually see a return on whatever federal investment is required. Finally, if the program has not recouped its costs within five years, the EESA directs the President to submit legislation that would recover from the financial industry any losses to taxpayers.

I don't want my tax dollars to support golden parachutes for executives of failed companies. What protections are there in the plan to prevent this from happening?

Executives who made bad decisions should not be allowed to dump their bad assets on the government and then walk away with millions of dollars in bonuses. In order to participate in this program, companies will lose certain tax benefits and, in some cases, must limit executive pay. In addition, the bill limits "golden parachutes" and requires that unearned bonuses be returned.

How do I know that this plan won't benefit those who got us into this mess? Who is looking out for the taxpayer?

Rather than giving the Treasury all the funds at once, the legislation gives the Treasury $250 billion immediately, but then requires the President to certify that an additional $100 billion is needed before it can be released. If that is still not sufficient, an additional $350 billion can be provided, subject to Congressional disapproval. The Treasury must report on the use of the funds and the progress in addressing the crisis. EESA also establishes an Oversight Board so that the Treasury cannot act in an arbitrary manner. It also establishes a special inspector general to protect against waste, fraud and abuse, and requires the Government Accountability Office to audit the program.

Who will sit on the oversight board?

There are two oversight boards. The Financial Stability Oversight Board consists of members of the executive branch and has the authority to ensure that the policies implemented by the Treasury Secretary are in the interests of taxpayers. The Chairman of the Federal Reserve, the chairman of the Securities and Exchange Commission, the Secretary of the Treasury, the Secretary of Housing and Urban Development, and the Director of the Federal Home Financing Agency are members of this Board. In addition, there is a Congressional Oversight Board. It will consist of five private sector experts selected by the Congressional leadership.

Will the Emergency Economic Stabilization Act of 2008 end the financial threat facing the American people and our markets?

This economic rescue plan is not assured of being a success. It may only be the first of a series of steps needed to stabilize the economy. However, the Federal Reserve Chairman and the Treasury Secretary have both said that if something isn't done, the credit crisis could send the nation's economy into a sharp, prolonged downturn - with job losses reaching more than 3 million over the next six months as companies shed payroll and end expansion plans.


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I don't want my tax dollars to support golden parachutes for executives of failed companies. What protections are there in the plan to prevent this from happening? How do I know that this plan won't benefit those who got us into this mess? Who is looking out for the taxpayer? Who will sit on the oversight board? Will the Emergency Economic Stabilization Act of 2008 end the financial threat facing the American people and our markets? What specifically is the nature of this crisis and why are the American taxpayers rescuing private businesses? Although most of the attention has focused on the fall of major companies on Wall Street and elsewhere, the danger to the broader economy is in the national credit market - that market where regional and community banks extend loans and borrow money. The credit market is freezing up, meaning there is less capital available as bank loans to small businesses and families. In turn, that is threatening to substantially slow the national economy, as families are unable to borrow car loans or take out a mortgage, and businesses are unable to finance projects or get short-term loans for payroll or stock inventory. This could lead businesses all across the country to give out pink slips; the Chairman of the Federal Reserve has said we could lose 3-4 million American jobs in the next six months. What will Congress and Administration do about this crisis and how will their actions support the economy? The Emergency Economic Stabilization Act of 2008 (EESA) provides up to $700 billion to the Secretary of the Treasury to buy troubled assets that are clogging the balance sheets of financial institutions - essentially investing taxpayer money into assets that could be later sold when the markets recover. The Treasury Secretary would not get all the money at once, but would have to ask Congress for the payments in installments. EESA also establishes an optional program that would allow companies to insure their troubled assets. The taxpayer will get an equity share in the companies that participate, allowing taxpayers to share in their future growth and profitability once they lose these troubled assets. How does the plan help the nation's homeowners? The rescue package requires the Treasury to modify troubled home loans wherever possible to help American families keep their homes. It also directs other federal agencies to modify loans that they own or control. Finally, it improves the HOPE for Homeowners program by expanding eligibility and increasing the tools available to the Department of Housing and Urban Development to help more families keep their homes. What provisions have been included in the plan to protect the taxpayer? Taxpayers should not be expected to pay for Wall Street's mistakes - and this bill is a substantial improvement in protecting the taxpayers over the original version offered by the Administration. The legislation requires companies that sell some of their bad assets to the government to provide stock warrants, which allows the taxpayers to sell those assets later and see benefits when markets recover. When the federal government intervened to rescue the Chrysler Corp. and the Farm Credit Services agency, taxpayers eventually saw profits when the government-owned assets were later sold. So the $700 billion cost to taxpayers may never be realized, and in fact, there is an opportunity for taxpayers to actually see a return on whatever federal investment is required. Finally, if the program has not recouped its costs within five years, the EESA directs the President to submit legislation that would recover from the financial industry any losses to taxpayers. I don't want my tax dollars to support golden parachutes for executives of failed companies. What protections are there in the plan to prevent this from happening? Executives who made bad decisions should not be allowed to dump their bad assets on the government and then walk away with millions of dollars in bonuses. In order to participate in this program, companies will lose certain tax benefits and, in some cases, must limit executive pay. In addition, the bill limits "golden parachutes" and requires that unearned bonuses be returned. How do I know that this plan won't benefit those who got us into this mess? Who is looking out for the taxpayer? Rather than giving the Treasury all the funds at once, the legislation gives the Treasury $250 billion immediately, but then requires the President to certify that an additional $100 billion is needed before it can be released. If that is still not sufficient, an additional $350 billion can be provided, subject to Congressional disapproval. The Treasury must report on the use of the funds and the progress in addressing the crisis. EESA also establishes an Oversight Board so that the Treasury cannot act in an arbitrary manner. It also establishes a special inspector general to protect against waste, fraud and abuse, and requires the Government Accountability Office to audit the program. Who will sit on the oversight board? There are two oversight boards. The Financial Stability Oversight Board consists of members of the executive branch and has the authority to ensure that the policies implemented by the Treasury Secretary are in the interests of taxpayers. The Chairman of the Federal Reserve, the chairman of the Securities and Exchange Commission, the Secretary of the Treasury, the Secretary of Housing and Urban Development, and the Director of the Federal Home Financing Agency are members of this Board. In addition, there is a Congressional Oversight Board. It will consist of five private sector experts selected by the Congressional leadership. Will the Emergency Economic Stabilization Act of 2008 end the financial threat facing the American people and our markets? This economic rescue plan is not assured of being a success. It may only be the first of a series of steps needed to stabilize the economy. However, the Federal Reserve Chairman and the Treasury Secretary have both said that if something isn't done, the credit crisis could send the nation's economy into a sharp, prolonged downturn - with job losses reaching more than 3 million over the next six months as companies shed payroll and end expansion plans.

Economic Rescue Plan

Stabilizing the Economy, Protecting the Taxpayer

Emergency Economic Stabilization Act of 2008 FAQs