Reply from Senator Dodd: Economic Stabilizatio Actn

[Don]

Following was received from Senator Dodd, in response to an inquiry regarding the Senate Banking Committee:


SUMMARY OF THE "EMERGENCY ECONOMIC STABILIZATION ACT OF 2008"

I. Stabilizing the Economy:

The Emergency Economic Stabilization Act of 2008 (EESA) provides up to $700 billion to the Secretary of the Treasury to buy mortgages and other assets that are clogging the balance sheets of financial institutions and making it difficult for working families, small businesses, and other companies to access credit, which is vital to a strong and stable economy. EESA also establishes a program that would allow companies to insure their troubled assets.

II. Homeownership Preservation:
EESA requires the Treasury to modify troubled loans--many the result of predatory lending practices 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.

III. Taxpayer Protection:
Taxpayers should not be expected to pay for Wall Street's mistakes. The legislation requires companies that sell some of their bad assets to the government to provide warrants so that taxpayers will benefit from any future growth these companies may experience as a result of participation in this program. The legislation also requires the President to submit legislation that would cover any losses to taxpayers resulting from this program from financial institutions.

IV. No Windfalls for Executives:
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.

V. Strong Oversight:
Rather than giving the Treasury all the funds at once, the legislation gives the Treasury $250 billion immediately, then requires the President to certify that additional funds are needed ($100 billion, then $350 billion 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.

VI. Increase in FDIC deposit insurance:
In order to help ease the burden of the credit crisis on small banks and their depositors, the legislation includes a provision that increases the size of bank deposits which are fully insured by the FDIC from $100,000 to $250,000 through December 31, 2009.

Tax Provisions in the Emergency Economic Stabilization Act

I. Alternative Minimum Tax (AMT):
The bill provides for protection from the AMT for 22 million taxpayers. Under the legislation the exempted income level would be raised to $46,200 for an individual and $69,950 for those who are married filing jointly for 2008. The bill also provides relief from the Incentive Stock Option (ISO) AMT.

II. Individual Extenders:
The legislation has a number of provisions to provide tax relief to individuals. Among them are: The Qualified Tuition Deduction, which allows qualifying taxpayers to deduct up to $4,000 for tuition expenses, and the Teacher Expense Deduction, which allows a deduction for teachers of up to $250 for classroom expenses. All of these provisions are extended through the end of 2009. The bill also extends the deduction for State and Local Property Taxes, which would be in effect through 2009. The threshold for families to be able to claim the $1,000 Child Tax Credit will also be lowered to $8,500 for tax year 2008.

II. Business Extenders:
The bill also includes a number of provisions that will reassure American businesses, and provide them with incentives to help them compete and innovate. It would extend the Research and Development (R&D) tax credit, as well as the 15-year Cost Recovery for Qualified Restaurant and Retail Equipment and the New Markets Tax Credit. These provisions would also be extended through 2009.

III. Disaster Relief:
Natural disasters like Hurricane's Ike and Gustav, as well as the 100 year floods in the Midwest have cost billions of dollars in damage, and cost many citizens their homes. To help these affected regions, this bill also includes tax incentives for rebuilding of communities and homes in these regions.

IV. Mental Health Parity:
The bill also includes the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, which would require private insurance plans that offer mental health benefits must offer these benefits on par with medical-surgical benefits effective January 1, 2009.

V. Energy Tax Incentives:
Renewable energy technology development is critical for the future of our nation's environment, as well as our energy security. This bill incentivizes investment in this critical sector by extending the Production Tax Credit through 2009 for wind sources, and through 2010 for a number of other sources. It would also extend the Investment Tax Credit for solar energy property and fuel cells, as well as extending the Residential Energy-Efficient Property Credit, through to 2016, among other important incentives.