Thursday, September 25, 2008

Secretary Paulson's enabling act (4)

We continue our review of Sen. Dodd's competing bailout proposal.

Dodd would establish a Special Inspector General for the TARP
It shall be the duty of the Special Inspector General for the Troubled Asset Program to conduct, supervise, and coordinate audits and investigations of the purchase, management, and sale of assets by the Secretary of the Treasury
He would require the Fed to report on any use of its discounting authority under 12 USC 343
(1) the justification for exercising the authority; and
(2) the specific terms of the actions of the Board, including the size and duration of the lending, the value of any collateral held with respect to such a loan, the recipient of warrants or any other potential equity in exchange for the loan, and any expected cost to the taxpayer for such exercise.
Provides for a study of financial leverage
(A) an analysis of the roles and responsibilities of the Board, the Securities and Exchange Commission, the Secretary of the Treasury, and banking regulators with respect to monitoring leverage and acting to curtail excessive leveraging;
(B) an analysis of the authority of the Board to regulate leverage, including by setting margin requirements, and what process the Board used to decide whether or not use its authority; and
(C) recommendations for the Board and Congress with respect to the existing authority of the Board.
And an impact assessment of the TARP
The Comptroller General shall conduct a study to assess the impact of the program authorized by this Act, including—
(A) whether it has—
(i) provided stability or prevented disruption to the financial markets or the banking system; and
(ii) protected taxpayers;
Dodd sets (gentle) executive compensation limits
(1) limits on compensation to exclude incentives for executives to take risks that the Secretary deems to be inappropriate or excessive;
(2) a claw-back provision for incentive compensation paid to a senior executive based on earnings, gains, or other criteria that are later proven to be inaccurate; and
(3) such limitations on the entity paying severance compensation to its senior executives as are determined to be appropriate in the public interest in light of the assistance being given to the entity.
Funds money-market fund insurance out of the TARP (and forbids the use of the Exchange Stabilization Fund)
And makes slight changes to the mortgage modification code

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