A group of House Republicans is cobbling together a proposal to stabilize
financial markets that can serve as an alternative to the plan proposed
by Treasury Secretary Henry Paulson, legislative sources have told
CNBC.
The failure of Monday's vote on the $700 billion bailout package—which
these Republicans doubt is likely to cause an economic "doomsday"
scenario—emboldened the group to press forward with its own
plan, sources said.
The group pressing the alternative plan is doing so for largely ideological
reasons: They're opposed to the federal government taking a large
role in financial markets, sources say.
Components of the alternative plan including the following, according
to sources:
Require the Treasury Department to guarantee, at
up to 100 percent, bank losses resulting from failed mortgage-backed
securities originated prior to the plan's enactment. Such insurance,
supporters say, would provide immediate value to the securities
and a foundation for which they could then be sold. The Treasury
Department would finance that insurance by assessing a premium on
outstanding mortgage-backed securities.
Allow companies to carry back losses arising in
tax years ending in 2007, 2008, or 2009 back five years, generating
a tax refund and immediate capital
Allow a "repatriation window" for profits
earned by U.S. firms overseas. Such repatriation amounts would not
be taxed if invested in distressed debt (as defined by Treasury)
for at least one year.
Allow banks to treat losses on shares of preferred
stock in Fannie Mae and Freddie Mac as ordinary losses, not as capital
losses
Suspend the capital gains tax rate for two years
Limit backing of high-risk loans by Fannie Mae and
Freddie Mac
Schedule Fannie and Freddie for privatization
Suspend "mark-to-market" accounting until
the SEC can issue new guidelines that will allow firms to mark these
assets to their true economic value
Stabilize the dollar by repealing the Humphrey-Hawkins
Full Employment Act, which alternative bailout supporters say diverts
the Federal Reserve's attention from long-term price stability to
short-term economic growth
Require the Treasury to write rules prohibiting
excessive compensation or golden parachutes to executives of failed
companies
Task the SEC with regular, annual audit reports
of entities the federal government has brought under conservatorship
or now owns
