Details of the Troubled-Asset Relief Program (TARP)

CNN has posted a draft of the proposed $700 billion Wall Street bank bailout bill, known as the "Emergency Economic Stabilization Act of 2008." The meat of the proposal is for the Troubled Assets Relief Program, which people refer to as TARP. I personally have not digested the full proposal yet, and I would not recommend trying to make much sense of it yourself since it is written in the non-English foreign language used by Congress. Actually, pieces are readable, but the flow is rather arcane.

It starts with the seemingly innocent:

To provide authority for the Federal Government to purchase certain types of troubled assets for the purposes of providing stability to and preventing disruption in the economy and financial system and protecting taxpayers, and for other purposes.

But... you have to wonder when then take that too-innocent "and for other purposes" at the end.

Try making sense of the final provision of the bill:

SEC. 302. EXTENSION OF EXCLUSION OF INCOME FROM DISCHARGE OF QUALIFIED PRINCIPAL RESIDENCE INDEBTEDNESS.

(a) EXTENSION.--Subparagraph (E) of section 18 108(a)(1) of the Internal Revenue Code of 1986 is amended by striking ''January 1, 2010'' and inserting ''January 1, 2013''.

(b) EFFECTIVE DATE.--The amendment made by this subsection shall apply to discharges of indebtedness occurring on or after January 1, 2010.

This has to do with mortgage modification and that a reduction in the principal owed is not considered as taxable income. Why the effective date is more than a year from now is a mystery.

-- Jack Krupansky