WASHINGTON – In a letter sent Wednesday to all members of the House, U.S. Rep. Joe Barton, R-Texas, proposed a set of ideas for discussion and possible inclusion in Thursday’s financial stabilization legislation. The Barton proposals would cap executive compensation, insure shaky assets, and lighten the load on taxpayers by actually paying for the plan. The text of the Barton letter follows:
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October 1, 2008
EXPANDING THE DIALOGUE AND MOVING THE DISCUSSION FORWARD
Dear Colleague:
In the wake of the defeat of the federal financial bailout, I have discussed with many Members what steps can be taken to develop a package that will command passage in the House with substantial support from Members of both parties.
To that end, in consultation with other Members, I have developed these ideas which could be used to improve the federal stabilization plan. This list is not meant to be exhaustive or exclusive. Rather it is intended to motivate discussion among Members of both parties and the Administration with the goal of developing a plan that can pass.
Please direct any comments to my personal or Committee staffs.
Improvements to Federal Bailout Plan
This proposal is designed to achieve two goals:
- Reduce the risk to taxpayers that the direct purchase of toxic subprime securities entails; and
- Require senior executives of participating institutions to take real haircuts on compensation in lieu of the Paulson plan, which provides only for loss of deductibility for institutions without tax liability.
Improvement Suggestions:
1) Recapitalization and Insurance of Assets.
- Prior to $700 billion of asset purchases - require all financial institutions to purchase insurance on existing mortgage-backed securities (MBS) from the FDIC.
- To assist institutions in purchasing this insurance – The FDIC is directed to use its existing authority to purchase either mezzanine debt or non-voting preferred stock from financial institutions which apply for this assistance. The debt or preferred stock shall pay interest to the FDIC, which shall be used to offset any loss on the insurance on MBS.
2) Reform of Executive Compensation.
- Any entity applying for assistance from the FDIC shall require the top five paid executives and Members of its Board of Directors to:
forfeit all accrued non-exercised options and restricted stock (except those held in qualified retirement plans); and
- Have total compensation (salary and bonus) limited to no more than the salary of the President of the United States ($400,000) during the time FDIC holds mezzanine debt or preferred stock in such companies.
3) Paying for the Paulson Bailout.
- Treasury may not purchase assets in troubled institutions until Recapitalization and Insurance of assets has been established and the FDIC has purchased in excess of $800 billion in debt or preferred stock from participating institutions.
- Treasury purchases are limited to $250 billion, and may only come from institutions that have participated in recapitalization and insurance.
Purchase of assets must be fully paid for by:
a)Payment of all royalties from drilling in the OCS and ANWR for the next ten years (or the life of the program); or
b) a 2% across the board reduction in Federal spending (excluding Social Security, Defense and Veterans benefits) for Fiscal Year 2008.
4) Accounting Reform.
- The SEC, in consultation with the banking regulators, is directed on application of an institution, by order, to suspend mark to market accounting for purposes of assisting financial institutions with regulatory capital, consistent with the public interest and the protection of investors.
5) FDIC Insurance.
- Raise the limit on insured depots from $100,000 to $250,000.
6) Reduction in increase in Federal Debt Ceiling
- Raise the federal debt limit by $500,000,000
7) Eligible Financial Institutions:
- Shall include Banks, Broker Dealers and Insurance companies, and other firms as determined by the Secretary by rule. It expressly may not include hedge funds and private equity firms.
- The Treasury in consultation with other financial regulators shall direct all holders of mortgage backed securities to direct the servicers of said securities to provide the following information on all underlying mortgages to the public on the internet:
Payment history
Classification of mortgage (no doc/ doc; sub prime, alt a, ARM, etc.)
Interest rate and size of loan
Credit rating of borrower at issuance (all information must be depersonalized).
8) Sunset.
- All new authority in this program shall sunset in seven years.
Sincerely,
JOE BARTON
Congressman |