If approved, the Emergency Economic Stabilization Act of 2008 would give the Treasury Department up to $700 billion to buy securities and bad debt from struggling banks and financial firms.
Among Minnesota's congressional delegation, Congressman Jim Oberstar, DFL-8th Dist., was the first to signal his approval of the plan.
"This economic rescue is no longer a bailout or a handout to Wall Street as originally proposed by the Bush administration," said Oberstar. "It is now, I would say, more a loan and an asset acquisition and equity package."
Under the deal, taxpayers would get ownership stakes in the companies that sell troubled securities to the government. If after five years the government is facing a loss on those securities, the president must submit a proposal for how that money can be recovered from the companies participating in the plan.
The original Bush administration proposal called for the Treasury Department to have total control over the bailout with no oversight by Congress. The new plan adds strict rules and oversight, and it gives Congress some say in whether all $700 billion can be spent.
The bill limits severance packages for executives who leave firms that receive help from the bailout. It also puts tax restrictions on executive pay over $500,000.
There's also help for homeowners facing foreclosure. The bill requires the Treasury to modify troubled mortgages wherever possible. It directs other federal agencies to modify the loans that they own or control and also expands eligibility for federal programs that help homeowners keep their homes.
Congresswoman Betty McCollum, DFL-St. Paul, says she can support the plan with those changes in place.
"The original plan had no oversight, had no transparency, and it gave a blank check to the very administration who was negligent on making sure that American taxpayers and investors had been protected," said McCollum.
Republican Senator Norm Coleman released a statement yesterday saying he is satisfied so far with details of the tentative deal, but he says his vote is contingent upon the final version, including aggressive oversight and clear limits on executive compensation.
Administration officials say the ultimate cost of the bailout will likely be less than $700 billion, because the government would eventually resell the securities it purchases and recover most, if not all, of its investment.
However, Congresswoman Michele Bachmann, R-Stillwater, says even if it ends up costing less, her constituents are not happy that the federal government is forced to bail out Wall Street.
"Overwhelmingly, they say to me we are paying off our mortgage, we are paying our rent. We do not want to bailout people who did not make their own payments and overwhelmingly, the calls are 95 percent against bailing out Wall Street," said Bachmann. "I am not unique; I think most members of Congress are receiving calls on that same level."
Bachmann says to get her vote the final version of the bill must include every effort to minimize the risk to taxpayers.
An Associated Press-Knowledge Networks poll on Friday found just 30 percent of Americans supporting a bailout. But Congressman Oberstar says those polls reflect dissatisfaction with the original plan as proposed by the Bush administration.
"I'm in accord with them. I couldn't accept that proposal. The secretary of the treasury said give me $700 [billion] with no limitation on what I do with it and no judicial oversight on my actions. Trust me, I'll make the right decisions. Well, we are not going to trust the secretary of the treasury with $700 billion and no judicial oversight," said Oberstar. "That is unconstitutional."
Oberstar says he thinks Minnesotans will be satisfied that the new agreement is fair. He says the deal should also reassure Wall Street and the global markets and help get the economy back on track.
But economists say a recession is still possible.
The bill is expected to come to the House floor for a vote today. The Senate will follow later this week.