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Signed and sealed, the $700 billion bailout
now must be delivered


      After 14 days, three votes and billions of dollars in stock
market losses to get the massive financial rescue through Congress,
the government is rushing to develop a plan for spending the money.


      Still, it will likely be at least a month before funds are
flowing to ailing financial institutions from the bill signed by
President Bush shortly after passing the House on Friday.


      Treasury Secretary Henry Paulson said he did not wait for final
approval of the measure to begin preparation. He has been lining up
outside advisers as his staff works out details on a multitude of
complex issues.


      For instance, the government must decide how it will determine
which bad assets to buy from banks and how those purchases will be
made. One possibility being considered is a process known as a
reverse auction in which the winners would be the financial firms
willing to sell their assets for less money to the government, say
50 cents on the dollar instead of 60 cents.


      "We have been doing a lot of work, a lot of thinking getting
ready for this," Paulson told reporters at Treasury. "We will be
going out and lining up some advisers from the private sector."


      The bill, H.R. 1424 - all 451 pages of it - gives Treasury the
power to spend up to $700 billion to buy bad debt from banks,
credit unions, thrifts and insurance companies. The hope is that by
shoring up their books, trust will be restored to the financial
system, banks will begin lending again, and it will start the
economy on the road to recovery.


      Over the next few weeks, the government will have to determine
what price to pay for complex mortgage-backed securities that have
plunged in value because of the worst slump in housing in decades.
The goal is to take enough of these toxic assets off the books of
financial institutions to bring an end to the severe credit crisis,
which has caused the biggest upheaval on Wall Street since the 1929
stock market crash.


      To help them do that, Treasury expects to retain at least five
and maybe as many as 10 asset management companies to operate the
program, a department official said.


      Besides contracting with these firms, Treasury will be hiring
about two dozen new employees, including accountants, experts in
asset management, financial advisers, bankers and attorneys, to
help run the program, said the official, who spoke on condition of
anonymity because details have not been publicly announced.


      The successful House vote came four days after the House
defeated the first bailout bill, sending the Dow Jones industrial
average plunging by 778 points, its worst one-day point loss on
record. Congressional leaders and the administration worked the
rest of the week to get the proposal back on track.


      The legislation that Paulson sent Congress two weeks ago was
only three pages long. It grew to 110 pages during negotiations
with key lawmakers who objected to giving the administration
sweeping authority with no congressional oversight.


      Congressional negotiators broke the $700 billion into
installments of $250 billion, then another $100 billion and the
final $350 billion upon congressional approval.


      They also added extensive oversight provisions and limits on
executive compensation for firms participating in the program and
gave the government the power to take equity stakes in
participating companies to guarantee that taxpayers will benefit if
the financial firms return to health with the government's
assistance.


      The Senate temporarily increased bank deposit insurance to
$250,000, up from $100,000, and included a number of tax breaks.

      Congress isn't through with the issue yet.

      Leaders promised the biggest changes in government regulation of
financial companies since the 1930s, and no fewer than five
hearings already were scheduled in the House - Monday on the
collapse of investment bank Lehman Brothers, Tuesday on the $85
billion bailout of insurance giant American International Group,
Oct. 16 on hedge funds, Oct. 17 on the actions of credit rating
agencies and Oct. 23 on the role of federal regulators.


      "It will be our job to enact - and I think it will be
comparable to what Franklin Roosevelt and the Congress did in the
New Deal - a set of regulations for all of the financial
industry," said House Financial Services Chairman Barney Frank,
D-Mass.

Gallery

Signed and sealed, the $700 billion bailout now must be delivered.

Administration rushes to begin financial rescue

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