Senate Democrats Want Equity, Pay Limits in Bailout
WASHINGTON (Reuters) - Senate Democrats issued a counterproposal to the Treasury Department's $700 billion Wall Street bailout plan on Monday that would give the government a stake in firms unloading troubled assets under the plan, and limit the pay of corporate executives involved.
There would also be assistance to homeowners and localities to prevent foreclosures, and more oversight of the Treasury's actions, under the proposal released by the office of Connecticut Democratic Sen. Christopher Dodd, chairman of the Senate Banking Committee.
Another provision would ensure decisions taken by the Treasury secretary under the bailout would be reviewable under certain circumstances. The Treasury had asked that decisions not be reviewable by any administrative body or court.
It was the latest step in fast-moving negotiations between Congress and the administration over a massive program designed to address the worst U.S. financial crisis since the Great Depression.
The draft released by Dodd "does not reflect an agreement with the (Bush) administration on a legislative product for Senate debate. Discussions and negotiations continue," according to a statement from Dodd's office.
White House spokeswoman Dana Perino declined to directly address the Senate Democrats plan.
"From our perspective, the cleaner the better and the quicker the better," she told reporters aboard Air Force One as Bush flew to New York to attend the U.N. General Assembly.
The counterproposal allows Treasury to buy troubled assets from any financial institution but requires Treasury to report regularly to Congress and disclose publicly each Friday the total assets held and total assets bought and sold that week.
Companies unloading troubled assets onto Treasury could not offer executives pay incentives deemed "inappropriate or excessive" by the Treasury secretary.
In addition, executive incentive pay based on profits or other benchmarks later proven to be inaccurate could be taken away, or clawed back, under the Democrats' language.
Democrats also want to create an oversight board to include the chairmen of the Federal Reserve, Federal Deposit Insurance Corp and Securities and Exchange Commission to limit the Treasury's broad powers under the plan.
The "Emergency Oversight Board" would monitor the bailout and make recommendations to the Treasury secretary.
In addition to the Fed, FDIC and SEC chairmen, the board would include one non-government member appointed by Congress' majority leadership, and one appointed by minority leadership.
A key Senate Republican has significant reservations about the plan, said his spokesman on Monday.
Alabama Sen. Richard Shelby, top Republican on the banking committee, remains unconvinced that Treasury's proposal strikes a balance between the interests of the taxpayer and the economy, said spokesman Jonathan Graffeo.
Shelby is concerned that the plan "would reward Wall Street while doing nothing for homeowners or for local financial institutions ... He will continue to work with Chairman Dodd to see whether there is a way forward," Graffeo said.
Under the Senate Democrats' proposal, Treasury could not buy, or commit to buy, any troubled assets unless it gets "contingent shares" in the asset-selling institution "equal in value to the purchase price of the assets to be purchased."
The contingent shares could be shares in the financial institution, its parent or holding company, or a related institution, according to the draft language.
If shares in the asset-selling company were not publicly traded, Treasury could take senior debt instead of shares.
If Treasury later disposed of the troubled assets and got less money for them than it paid initially, the contingent shares would help cover the loss, the language said.
The Democrats' proposal calls for the entity that manages the troubled assets bought under the plan to work to prevent foreclosures and protect homeownership through loan modifications and use of related federal programs.
(Additional reporting by Jeremy Pelofsky; Editing by Tim Dobbyn)
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