The House by a vote of 263 to 171 passed the Emergency Economic Stabilization Act (EESA) of 2008. The bill now goes to President Bush, who is expected to sign it promptly. AGC members led the charge. AGC was one of the first business groups to become engaged in the debate. We greatly appreciate our members' 4000 letters and unknown number of phone calls in support of this legislation.
The package, which the Senate passed on Wednesday, 74-25, includes the financial-market rescue provisions that the House rejected on Monday, plus an increase in FDIC insurance coverage to a maximum of $250,000. The Senate also extended numerous expiring business and energy tax provisions, kept the alternative minimum tax from increasing in 2009, and added disaster assistance.
Highlights of the rescue package:
Stabilizing the economy. EESA provides up to $700 billion to the Secretary of the Treasury to buy mortgages and other assets affecting the balance sheets of financial institutions and making it difficult for families and businesses to access credit. EESA also establishes a program that would allow companies to insure their troubled assets.
Homeownership preservation. EESA requires the Treasury to modify troubled loans wherever possible to help families keep their homes. It also directs other federal agencies to modify loans that they own or control, and 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.
Taxpayer protection. EESA requires companies that sell some of their bad assets to the government to provide warrants so that taxpayers will benefit from any future growth in these companies as a result of participation in this program. The bill also requires the President to submit legislation that would cover any losses to taxpayers resulting from this program from financial institutions.
Mark-to-market accounting. A provision gives the SEC the authority to suspend mark-to-market accounting for any type of security, but doesn't require the agency to act. Mark-to-market accounting requires financial institutions to value securities on their books at current market prices.
No windfall for executives. 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.
Strong oversight. Rather than giving the Treasury all the funds at once, the legislation gives the Treasury $250 billion immediately, and then requires the President to certify that additional funds are needed ($100 billion, then $350 billion subject to Congressional approval). The Treasury must report on the use of 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.
Temporary increase in deposit and credit union share insurance coverage. The provision increases the maximum amount of FDIC deposit insurance coverage from $100,000 to $250,000 per account, and provides the same increase for credit union deposits. The changes are effective upon enhancement and expire on Dec. 31, 2009.
AGC-supported tax provisions include extensions of:
15-year depreciation on qualified leasehold, restaurant, and retail improvements. The proposal would extend the provision to the end of 2009 and allows retail owners and new restaurants to receive the shortened recovery period for 2009 only. The extension is effective for property placed in service after Dec. 31, 2007. The allowance of the 15-year depreciation to retail and new restaurants is effective for property placed in service after Dec. 31, 2008.
Production tax credit for alternative energy investments. The bill extends the placed-in-service date for the Section 45 credit through Dec. 31, 2009, in the case of wind and refined coal, and through December 31, 2010, in the case of other sources. The bill expands the types of facilities qualifying for the credit to new biomass facilities and to those that generate electricity from marine renewables (e.g., waves and tides). The bill extends and expands credits and depreciation deductions for biodiesel production, refineries and energy-efficient buildings.
Targeted relief for investments in real and personal property. The bill extends and adds provisions for investments in brownfields, disaster areas, and other designated locations.