Emergency Economic Stabilization Act of 2008

The American Emergency Economic Stabilization Act ( EESA ), about emergency law for economic stabilization, also called Paulson plan after U.S. Treasury Secretary Henry Paulson announced a September 19, 2008 imagined bailout from the Bush administration in support of the U.S. financial market in the context of the financial crisis from 2007 and includes measures worth about 700 billion U.S. dollars, which shall be specified in the " Troubled Asset relief Program " (such as utility for troubled assets ). The EESA is a prime example of "lemon socialism ".

Elements of the Paulson plan

Which entered into force on 3 October 2008 Act provides that the U.S. Treasury Department ( " Treasury" ), the purchase of so-called " toxic assets " ( " harmful Assets" ) will be permitted, unless the seller is a financial institution and meets certain requirements. The U.S. Treasury associated with the entry into force of Law 250 billion U.S. dollars for the purchase of toxic assets available; although it will be several weeks, if not take months to binding purchase and valuation rules have been defined and the first transactions are carried out on the basis of the law. At the request of the White House another 100 billion dollars can be made for purchases available. Another 350 billion dollars can now be used, as the House of Representatives has approved this in a recent vote.

To carry out the objectives of the law a new authority was created, the "Office of Financial Stability ." Here are 24 first officers are employed to coordinate the work of external financial service providers. It is the desire Paulson that is resorted to carry out the purchases to the maximum extent on external expertise.

The plan also includes guarantees for savings accounts. Furthermore, were also adopted tax cuts for the middle class and relief in energy costs for businesses. The aid package provides for a parliamentary oversight and limits the compensation of managers of the banks concerned. It is also provided that the state is involved after the rescue of a bank of possible future profits.

Significance and criticism

The Paulson plan aims to ensure the liquidity of the banking sector and serve to stabilize the U.S. financial market, which is severely impaired as a result of the financial crisis that began in 2007 especially in short-term money market transactions in its function.

Economists and politicians see the rescue plan a majority stake than necessary. Opponents of the plan criticize its strong intervention in the market and that it prevents a cleanup of through mutual investments increasingly opaque banking sector, but above all, that he was the burden the taxpayers with the risk of the banks to be acquired and highly risky loans. So far, private risks would be risks of the state and thus to which the taxpayer.

History

The plan has been in several summit meetings between politicians endorsed the end of September two major parties and various industry representatives for, but received on 29 September by the required majority in the House of Representatives. The revised version of the rescue plan was finally adopted initially on 1 October 2008 by the Senate votes 74:25. The modified package also approved 263 Members of the House of Representatives on 3 October 2008; 171 elected officials refused. Necessary, a majority of 218 was on October 6, Neel Kashkari was appointed interim administrator of the rescue fund.

Help for banks

With the money from the bailout package, the U.S. government acquire stakes in banks and do not buy how the financial market expects mortgage loans. " In the situation in which we were, the value of bad loans was very difficult to ascertain. This was impractical and impossible to perform in principle. Therefore, we changed the course " (Henry Paulson, former U.S. Treasury Secretary: Tagesschau.de: U.S. government bailout changes - More loans for more consumption).. In November 2008, the U.S. government has invested 250 billion dollars to the economy stabilization in U.S. banks.

Help for Homeowners

As U.S. Treasury Secretary Timothy F. Geithner said on 10 February 2009, is to be reduced from the mortgage payments by 50 billion U.S. dollars from the EESA or TARP program loads. This is indebted homeowners be helped threatened with foreclosure of their homes.

A home loan is different in the USA: The house is liable, not the person. If the auction does not " bring out " the money the bank has a problem, not the homeowner.

Help with credit card companies

Due to the poor financial situation of American Express has requested money to support from the Emergency Economic Stabilization Act in the amount of three and a half billion U.S. dollars. This was wanted to support possible by changes in the economic stabilization plan by former U.S. Treasury Secretary Henry Paulson, which credit card companies, so as not to endanger the consumption in the USA.