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Busch: Devil's In The Details For Bailout Bill

The Senate has passed the Emergency Economic Stabilization act with 74 to 25 vote. The mix was 40 Democrats and 34 Republicans for the measure and 10 Democrats and 15 Republicans against it. (Ted Kennedy didn't vote.)

The EES was larded up with over $150 billion in pork barrel spending ranging from tax cuts for riding your bike to work to a 39 cent excise tax for children's wooden arrows. I'm not kidding.

From the portion of the bill addressing TARP: "PREVENTING UNJUST ENRICHMENT.—In making purchases under the authority of this Act, the Secretary will take such steps as may be necessary to prevent unjust enrichment of financial institutions participating in a program established under this section, including by preventing the sale of a troubled asset to the Secretary at a higher price than what the seller paid to purchase the asset.

This subsection does not apply to troubled assets acquired in a merger or acquisition, or a purchase of as sets from a financial institution in conservatorship or receivership, or that has initiated bankruptcy proceedings 3 under title 11, United States Code." This should mean that anyone who has taken over a troubled US financial institution with MBS that has been written down can sell those securities to the US Treasury at a profit. I wonder how much this has come into play during the recent rash of takeovers or forced mergers has occurred?

Now, the US House will be taking up the EES today and tomorrow. It's ironic that the larding up of the bill to get the votes in the Senate is exactly why the bill may not pass the House. Blue Dog fiscally conservative Democrats don't like the pork and wanted to maintain the pay-go structure for new spending. On CNBC, former House of Representatives Republican majority leader Dick Armey has said that bill is an unnecessary $700 billion imposition on the tax payer. He's ripping into current Republican Sen. Bob Corker who is the ranking member on the Senate banking committee. It underscores the lack of understanding of how the TARP plan works. Maybe there should be an education program prior to the vote in the House. This illustrates the divisions between the Republicans and between the House and the Senate.

So where does this leave the House? I've heard Democrats still want 100 Republican votes to ensure a "bi-partisan" agreement and cover to go back to their districts for the election without having their opponents rip on them. It's those competitive House races where the opposition to the bill remains the strongest. There are aspects of this bill that should bring on Republicans such as the raising of the FDIC insurance coverage and the change in the mark-to-market language. There will be vigorous debate on this bill and that means serious verbal shots over the next 24 hours predicting passage and failure.

The only thing that matters is whether the bill is officially announced to be brought up for a vote. That announcement should be the all clear that the leaders have the votes. No announcement of a vote on Friday will be a signal that they don't have the votes. No vote means that the markets will begin another round of equity selling and we'll start the process again on Monday.

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Andrew Busch

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Andrew B. Busch here