Manolis's Analysis of the Government Bailout

By
Real Estate Agent with Keller Williams Realty

Hello Everyone,

The Financial Services Committee of the House of Representatives has reached a tentative deal for the much anticipated federal bailout.  You may get the full text of the document on financialservices.house.gov.

After reviewing the legislation, I picked up on the following important provisions of the bill.  I tried to describe the complex concepts in terms that everyone can understand.

Important Provisions of Bailout Bill

TARPTroubled Asset Relief Program Established

Purchase of Troubled Assets:  Authority to purchase troubled assets from financial institutions and provisions to ensure that un-just enrichment of financial institutions does not occur.

Insurance:  Establishes a program to insure troubled assets.  Premiums would be paid to the government in return for insuring all of the trouble assets in the program against default.

Sale of Purchased Assets:  Government has the authority to re-sell any assets purchased at a price that the Government determines at a later date.

Foreclosure Mitigation Efforts:  Government may use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures.

Making Loan Modification Requests:  Homeowners with troubled mortgages may get their interest rates reduced, loan principal reduced, or term of mortgage extended (among other measures) in an effort to avoid foreclosure of assets that the Government has purchased.

Executive Compensation Limits:  Applies to the Executives of Corporations who sell troubled assets to the Government.

Encouragement of Private Sector Purchases:  Government will encourage the private sector to help purchase some of these troubled assets to limit the cost to the tax payers (possible investment opportunity).

Market Transparency:  All purchases made as part of this bailout bill will be made public and show details as to price, amounts, and description of assets purchased.  Additional disclosure of the financial health of institutions who sell troubled assets to the Government.

Increase in Public Debt Level Limit: The limits to the United States public debt level will be increased to 11.3 Trillion dollars.

Authority to Suspend FASB 157 Accounting Rule:  This is a new accounting standard that requires companies holding financial instruments to mark their portfolio to the market value (current price) of the securities.  This may be suspended to avoid further losses in financial institutions.

Kind Regards,

Manolis Sfinarolakis

Keller Williams Action CT Realty

Real Estate Agent

203-232-2462

Servicing All Of CT and Parts of NY

Comments (8)

C Tann-Starr
Tann Starr & Associates, Inc. - Palm Bay, FL

Oh my word... they just founded a new form of Eminent Domain, didn't they? Geez... they can sell stuff off can they? Hmm... The USA just became a real estate brokerage and bank. Fascinating... I shall have to start a whole new round of recreational reading... Thank you, Manolis. :-)

Sep 28, 2008 01:19 PM
Lisa Friedman
Alliance Realtors - Bedminster, NJ
Central New Jersey Real Estate

Wow, who ever would have predicted this.  Would be nice to have a crystal ball to see where we'll be six months, one year, two years out.

Sep 28, 2008 01:27 PM
Steve Homer
The HBH Group (Keller Williams affiliate) - Round Rock, TX

Manolis:  Thanks for the synopsis of the bill...  Now...  Will it pass?  Hmmmm....

Sep 28, 2008 01:29 PM
Robert Calistri
Homes Plus Realty, llc, - Valrico, FL
Broker Of Record Services

I hope the CEO payoffs are limited at 500K. I don't want to pay them too.

Bob

Sep 28, 2008 01:29 PM
Sean Allen
International Financing Solutions - Fort Myers, FL
International Financing Solutions

Thanks for the information. I believe the 'making loan modifications" is a huge benefit to the people whose homes have dropped in price considerably and will help keep people from going into forclosure.

Sean Allen

Sep 28, 2008 01:42 PM
Pam Dent
Gayle Harvey Real Estate, Inc. - Charlottesville, VA
REALTOR® - Charlottesville Virginia Homes / Horse

Thanks Manolis.  I appreciate the situation.  I like the part on limiting the CEO payoffs.  I would hate to think that they will proffit from this.

Sep 28, 2008 01:55 PM
Lori Lincoln And Associates
Top Agent Serving Dighton Taunton, Rehoboth and more! - Taunton, MA
Top Agent Taunton,Dighton Rehoboth &more

Thanks for putting this in laymen's terms for me. This seems oh so complicated.

Sep 28, 2008 02:05 PM
Manolis "Manny" Sfinarolakis
Keller Williams Realty - West Hartford, CT

It really is amazing.  I am looking at the pre-market movement in the stock market and it appears investors aren't happy about it either.  We will wait and see in what form this legislation will pass.

Kind Regards,

Manolis

Sep 28, 2008 11:03 PM