Senate Passes Emergency Economic Stabilization Act; House to Vote Friday

The Senate Wednesday by a vote of 74 to 25 passed its version of the Emergency Economic Stabilization Act (EESA) of 2008 as an amendment to a tax extenders package, H.R. 1424.  In addition to the inclusion of a tax extenders package that includes business and energy tax extenders, the alternative minimum tax (AMT) patch, and additional disaster assistance, the primary difference between the bill the House defeated Monday and the Senate-passed bill is an increase in the FDIC insurance coverage to a maximum of $250,000. AGC has made passage of this legislation its top priority this week and has been working with Congressional and White House leaders to help deliver the votes needed for its passage. As part of the financial package, Congress passed legislation to help the middle class and extend other tax benefits. The alternative minimum tax “patch” was a late edition added by the Senate.  It's a high priority, as it would stop a tax increase on middle-class taxpayers.  Also included in the legislation is an extension of the state and local sales tax deduction, brownfields expensing, 15-year cost recovery of leasehold, restaurant and retail improvements and the research and experimentation tax credit. Finally, the bill encourages energy production by extending the following: production tax credit for energy produced through biomass; the investment credits for wind and solar energy; and the energy-efficiency property tax credits for both residential and commercial properties. Additional highlights of the package the House is expected to consider on Friday include the following: 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 loses to taxpayers resulting from this program from financial institutions. 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 December 31, 2009.