The public comment period for this legislation has ended.

Dodd's Legislative Proposal From Treasury Department for Authority to Buy Mortgage-Related Assets

27 section comments

Title I - Authorizing the Treasury Department to Buy Mortgage-Related Assets

Sec. 5. Rights; management; sale of troubled assets.




  1. EXERCISE OF RIGHTS.The Secretary may, at any time, exercise any rights received in connection with troubled assets purchased under this Act.




  2. MANAGEMENT OF TROUBLED ASSETS.




    1. IN GENERAL.Except as provided in paragraph (2), the Secretary shall have authority to manage troubled assets purchased under this Act, including revenues and portfolio risks there from.




    2. CORPORATION AUTHORITY.




      1. IN GENERAL.The Corporation, shall manage all residential mortgages and residential mortgage-backed securities purchased by the Secretary under this Act.




      2. REIMBURSEMENT OF COSTS.All costs and expenses of the Corporation in carrying out this paragraph shall be reimbursed to the Corporation by the Secretary.




      3. SYSTEMATIC APPROACH.In carrying out this paragraph, the Corporation shall utilize a systematic approach for preventing foreclosures and ensuring long-term, sustainable homeownership through loan modifications and use of the HOPE for Homeowners Program established under section 257 of the National Housing Act and any other programs that may be available for such purposes.




      4. REPORTS TO CONGRESS.The Corporation shall provide to Congress a monthly report on its activities under this paragraph during the reporting period, including specific information on the number and types of loan modifications made and the number of actual foreclosures occurring with respect to such loans during the reporting period.




      5. SALE OF TROUBLED ASSETS.The Corporation may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions, or other financial transactions in regard to any troubled asset managed by the Corporation under this paragraph.






    3. ACQUISITION OF SECURITIZATION POOLS AND MORTGAGELOANS.The Secretary shall, to the extent practicable, acquire




      1. sufficient ownership or control of pooled residential mortgage loans, or a securitization vehicle for such loans so that the Corporation has authority to modify the underlying residential mortgage loans, either directly or through a designee; and




      2. whole residential mortgage loans, so that the Corporation may use its authority to modify the underlying residential mortgage loans, either directly or through a designee.








  3. SALE OF TROUBLED ASSETS.The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions, or other financial transactions in regard to any troubled asset purchased under this Act.




  4. TRANSFER OF A PERCENTAGE OF PROFITS.




    1. DEPOSITS.Not less than 20 percent of any profit realized on the sale of each troubled asset purchased under this Act shall be deposited as provided in paragraph (2).




    2. USE OF DEPOSITS.Of the amount referred to in paragraph (1)




      1. 65 percent shall be deposited into the Housing Trust Fund established under section 1338 of the Federal Housing Enterprises Regulatory Reform Act of 1992 (12 U.S.C. 4568); and




      2. 35 percent shall be deposited into the Capital Magnet Fund established under section 1339 of that Act (12 U.S.C. 4569).






    3. REMAINDER DEPOSITED IN THE TREASURY.All amounts remaining after payments under paragraph (1) shall be paid into the General Fund of the Treasury for reduction of the public debt.






General Comments on Dodd's Legislative Proposal From Treasury Department for Authority to Buy Mortgage-Related Assets

Mithras Invicti, mithras.blogs.com on September 22, 2008

What is a "profit" on a sale is not defined, and should be. Specifically, if the sale price of a troubled asset is below its purchase price, but Treasury vests equity securities in the company that sold Treasury the troubled asset with a market value at the time of vesting that exceed the deficiency, is that a "profit"? If so, it should be made clear.

Chuck Anderson on September 22, 2008

There should be a provision that there shall never be an agreement athorized that would protect these people from other leagal proceedings as part of the purchase. ie Amnesty... other law enforcement types should be allowed to make thier own arrangements.

Eric Zuesse on September 22, 2008

That might be a good point, but I suspect not, because the natural way to define "profit" here would seem to be a simple comparison of the purchase-price of a security versus its selling-price, nothing else than that.

Barring a specific definition of "profit realized on the sale of each troubled asset purchased under this Act," the natural ordinary-language meaning should apply to this phrase.

In other words: Though in Section 2 there are two possible ways presented by means of which taxpayers might profit from a purchase of a distressed security (via a rise in either the value of the given security, or else of the value of the financial firm from which it has been purchased), this particular phrase here makes no reference whatsoever to the financial firm from which the given security has been purchased; it refers to only the distressed security which has been purchased. The "profit" here arises only from "the sale of each troubled asset purchased under this Act."

Mithras Invicti, blog Fables of the Reconstruction on September 23, 2008

Eric Zuesse- I think that's a perfectly reasonable interpretation of the act as written, but it could be much more clearly defined one way or the other, and it should be.

I advocate that "profit" should include the value of the equity stake. The purpose of having the equity stake is to protect the taxpayer from losing money in the program, as much as possible. To report a "loss" when sale of the equity stake has offset the deficiency is misleading.

Donald Rodgers on September 25, 2008

This is a royal mess. Paragraph 3 - d. reads that for EACH sale, 20% of the profit (if there is a profit) is transfered to "assistance" programs. If 1/2 of the assets produce a profit and 1/2 produce a loss and the loss and profit are equal (fat chance) the tax payers of this country will be on the hook for a transfer of 10% of the 700 Billion (70 Billion) net to these "assistance programs".

Remembering that the root cause of this problem was the implementation of these types of well intentioned but poorly thought out plans to help the disadvantaged have better housing, hanging the taxpayers out for another 70+ Billion (and it could be a whole lot more) is absoultly outrageous.

This just shows who Bush (who on economics has often proven about as conservative as Karl Marx), Reid, Dodd, Frank and Pelosi are really looking out for. It sure is not the taxpayers. All who are putting pressure to remove this foolishness should be applauded and the rest - well I will let you complete that thought.

Tom Paine, Citizen on September 26, 2008

Why should ANY return that MY TAX dollar generates go to a socialist thug group like ACORN? This is completely unacceptable. Graham, Dodd, Frank, and my Congressional delegation are getting called about this.

Why not have the profit go to reduce the nation DEBT!?!?!?

Washington D.C. has lost its freaking mind.

william on September 26, 2008

wtf is the deal with these people, to set aside any profit at all for any program, at least of all ACORN is a gross mistrust of tax payers funds. my friends there is a reason congressional approval ratings is at an all time low, and this is a perfect example of why. Couple that with the shale ban trying to be sneaked through, i wanna punch some of these clowns in the face. I hope, McCain and his staff blast these a$$holes for trying to do such......I own my own business and just may have to stage a personal "i'm not paying anymore taxes" protest, i might as well just give it to the local crackheads that live on my block and watch them smoke a big fat rock....on me.... Having said that, i'm at a loss for words.

Nancy H. Armstrong, NoQuarter on September 26, 2008

ACORN is part and parcel of the housing crisis. Their agreements with banks like Bank of America and Citigroup forced these banks to make mortgage loans that were quite often not documented. They were often approved for people with starter teaser interest rates of 3%. As the interest rates rose these people could no longer afford their mortgages, creating many of the foreclosures. Many of these loans were made on recommendation of ACORN and even went to illegal immigrants!

There is a conflict of interest with ACORN. Obama has been paying them for work through a front company Citizen's Services Inc. to directly affect the November elections. See the following articles: http://www.pittsburghlive.com/x/pitts... http://www.texasgop.org/site/News2?JS...

ACORN can't be allowed to have one hand in this bailout. Read ACORN AHC Report at www.consumerrightsleague.org. It spells out ACORN's part in the housing collapse! Please liten....because the main stream media isn't!

Ragan on September 26, 2008

Don Rodgers is all over it. The key word in the 20% of profits language is "each". This means "each" troubled asset stands on its own so that any profits are not used to offset the losses of the entire portfolio of troubled assets prior to determining how much goes to the Housing Fund (ACORN)? So when an individual troubled asset makes money, 20% of that goes straight away to other government programs, and if a troubled asset loses money, well too bad taxpayers, that's all your loss! Taxpayers get 80% of the good and 100% of the bad. How do they come up with this stuff?

Alann on September 26, 2008

Sale of Troubled Assets: This should be allowed at all. This enables the Secretary to buy and then sell securities at a loss even right back to the party it was first purchased from, since the 700 billion is a cap on holding not a funding cap it opens the door to unlimited loss. The strict intention should be to acquire and hold these securities to maturity. In addition the repurchase agreement clause is disconcerting. Why would you allow the Secretary to borrow money against these securities which will only result in additional finance expenses? The 700 billion is already being effectively borrowed from treasury bond sales (about 5% financing cost).

Mark on September 26, 2008

First of all ACORN should be out of this completely (and I say that as a liberal) because even though they are technically non-partisan there is no denying that they focus on a number of issues which lean (to put it mildly) to the left.

I don't see how anybody can expect Republican legislators to vote for something that is going to send money a group that is despised by a large portion of their constituencies.

it would be as offensive to the right as Bush's faith-based funding was to many on the left. And this is not the time for stuff like that.

So if there is some need to administer funds get another group to do it. Not ACORN!

Regarding the 20% issue. I guess it gets down to what the goal is. I can understand why this was written to be against EACH sale (sale) but that seems problematic.

I think EACH was used because these assets will be sold over a period of time so if you say 20% of the total net then you have a different set of problems

1: The total net is unknown until the last asset is sold (there is a workaround for this one). The total net could be negative which would put no money into this ACORN fund (for lack of a better term)..

One possibility here would be to take a quarterly snapshot and disburse the funds against a moving average of sorts. So each quarter (or month even) assess how much should have been paid out against the standard to date and make the payment to that value. In other words, if the new calculation is that x dollars shouldhave been paid so far and actual disbursements to date is y then the amount to be transferred into this fund is (x - y)

Regarding the other issue of this fund potentially receiving nothing if the total net profit is negative, that could be handled as follows:

The payment would be the greater of these two measures: 1) 20% of total net profits (accounting also for assets sold at a loss) or 2) 5% of cumulative profits (excluding assets sold at a loss).

I'll admit that I have no idea what this ACORN fund is supposed to do (haven't read that part yet and, as I said, I hope they find some other group to administer it) but it sounds like some sort of assistance to keep people in their homes. I can't say I have a real problem with that if it is going to cost less than having them shift into public housing.

Anyway, that's my two cents.

Robert on September 26, 2008

20% of the proceeds going to ACORN and La Raza funding. Anyone with access to google can see what a tragedy this bill is and that's on top of the $600mil per year they just gave them in July with the mortgage bail out. OUTRAGEOUS

Every single encumbent on the hill should be voted out with all due speed!

Lee on September 26, 2008

20% of the profit goes to the Housing Trust Fund. My understand of housing trusts is that they vary by state. In MD we have the "MD Affordable Housing Trust" which basically gives money to private entities to create public housing. According to the NLIHC 90% of the money has to go to rental housing.

We all know, and many poorer people know, the horrors and inadequacies of public housing. A lot of that money will go in the pockets of political fatcats and sugar daddys.

I don't trust this. The money that they are taking from us NEEDS to come back to us. We are the ones taking the risk. No offense, but that 20% that is directed to public housing, is directed at a group a people who DO NOT PAY TAXES. They are not taking ANY RISK in this. So why shouldn't the entire profit go to reduce all debt and not to anymore special interests.

Dawn -TAXPAYER FEED UP on September 27, 2008

NO!!! NOT one more penny to ACORN. As it stands they are funded handsomely and are part of the problem. WAKE UP this is how we got here in the first place. BOYS AND GIRLS OF CONGRESS LISTEN UP!!!!!! WE DON'T WORK FOR YOU-YOU WORK FOR US!!!! I would like Sen. Dodd and Sen. Frank removed from this process since it was these two who pushed these banks to give out bad loans that the rest of us will now pay for. DO NOT ASK US TO kick back anymore funds to a fraudulent and failed organization like ACORN (which is nothing but a front for the Democratic Party, and where Obama did his community organizing) to give out more bad loans. Do you know what the definition of insanity is? It is OUR MONEY CONGRESS NOT YOURS.

jrterrier - private citizen on September 27, 2008

Can someone please explain where this 20% in Sec 5d is going and what entities are included within the Housing Trust Fund and the Capital Magnet Fund?

"d. Transfer of Percentage of Profits . . . 2. Use of Deposits A. 65 percent shall be deposited into the Housing Trust Fund established under section 1338 of the Federal Housing Enterprises Regulatory Reform Act of 1992 (12 U.S.C. 4568); and

B. 35 percent shall be deposited into the Capital Magnet Fund established under section 1339 of that Act (12 U.S.C. 4569)."

Amazed in Miami on September 27, 2008

I am amazed that the revisionist spin doctors are finding a way to twist the melt down of right wing republican economics as a failure of liberal Democrats. The Bushies presided over the real estate bubble and the mortgage mess. Maybe the dems didn't have the sense to stop them, but it was Reganomics / Bushonomics that brought down the US economy. Sure the Democrats like to see people in homes, but wasn't "the ownership society" a republican mantra?

Scott -- Itsour money.com on September 27, 2008

It is obvious at this point that this entire bill is just another Federal hand in the pockets of the tax payer to fund the schemes of groups & their connected politicians that got us into this mess in the first place! All this talk of the taxpayers actually "making money" on this deal is disgusting. A five year old can tell that any "profit" (whatever that is since its undefined in the bill) will go toward local groups & politicians allied with the Democrat party. It will only result in buckets of cash to hand out to their friends. Those funds will then get used for yet more failed "affordable housing" schemes! The result will be legalized larceny & organized voter registration fraud on an unprecedented scale, not to mention the socialization of a large part of the financial sector of the economy. Any "profits" should go into a true "lock box" in the Treasury until this mess is over. "NOT ONE PENNY FOR TRIBUTE!" If the language sending "profits" to Acorn & LaRaza is not stripped from this bill then no one should vote for it. In fact if there is ANY pork in this bill no self respecting American representitive or Senator should vote for it. Its OUR MONEY!! Holding the American people hostage with this bill loaded with political pork & favors is criminal. We worked too hard to earn it to give it up into this sham. Barney Frank & Chris Dodd should not be allowed to have anything to do with the construction of this bill. They should be restricted to voting yea or nay. Period. Messrs. Frank & Dodd's obstruction of oversight of Fannie & Freddie & the financial sector in previous years has placed us in the despicable position. Anyone voting for this bill should be removed from office. Our Founding Fathers would & should be ashamed of the imposters calling themselves our representives. They represent themselves! This is only the tip of the iceberg. They will be back for more.

miguelina on September 28, 2008

Not ONE dime to ACORN, Laraza and like organizations! They are a huge part of why we are in this mess! Any and all profits should go to eliminate any debt, with strict checks and balances in place.

Politicians who profited from these sham programs should be run out of office.

Jenny/ Jenny O on September 28, 2008

ACORN has publicly endorsed Obama, it would be a conflict of interest to give any of this money to this Agency..They are a biased liberal partisan group who has problems with voter fraud and members of the management have been indicted for fraud...NO MONEY TO ACORN!! The Democrats need to stop giving the taxpayers money away to special interest groups that benefit them financially...

Craig Bryant, Citizen on September 28, 2008

There should be a provision that there shall never be an agreement authorized that would protect these people from other legal proceedings as part of the purchase. ie Amnesty... other law enforcement types should be allowed to make their own arrangements. (I agree with Chuck)

And no funds to Acorn!

Marianne Stebbins, homeowner and mortgagee on September 28, 2008

Since I've made the mistake of paying my mortgage each month, it sounds like the way to get in on the plunder is to stop paying. Spread the word.

Or if I'm a business, start multiplying my "1"s and "0"s until I'm too big to fail, then reveal what a scam I've been running so I can grab some of the inflating dollars before the foreign banks get them all.

This is going to be great for the economy. You boys are GENIUSES!

(Just hoping China, India, and the countries holding our debt don't catch on quite as quickly. They might require payment in nukes, since the dollars won't be worth anything. Hey, is that what happened with India yesterday?)

PIM Tinnin on September 28, 2008

I have managed to get through to 71 senators offices, letting them know come monday I was going into the office and changing my deductions to married and 9 dependents. No more money from me, and if uncle sam wants to put me in prison ,Fine, they will have to build more federal prisons and I have already sold my home for $5.00. Did a quick claim deed Friday. to a family member. If I go to prison ,so be it, I will get free medical and fed prety dog gone good save me $10,000. a year in medical insurance, Bring it on!!!!!