Ho hum, the U.S. Senate passes The Big Bailout Bill

Ho hum, as was commonly predicted, the U.S. Senate voted to pass the Emergency Economic Stabilization Act of 2008, and by a much wider margin (74 to 25, or almost 3 to 1) than I expected. Supposedly the House will vote (again) on Friday, but I did see one account suggesting that a vote may occur on Thursday. Basically, the vote will occur as soon as the vote counters figure they have enough dependable voting commitments to assure a comfortable margin. The other open question is whether additional changes will be needed to sway more Republicans to accept the bill.

Just to be clear, I do support the bill and supported the original bill and the version the house voted on.

My one big concern is that Treasury buy up mortgage assets at a steep-enough discount to be able to offer homeowners a big enough break on their principal so that their mortgage payments will be low enough to help them avoid foreclosure. Alas, the specific details for buying mortgages are not in the bill. The bill just says that Treasury agrees to come up with a plan within 45 days of passage or within 2 days of actually buying assets. People have discussed the use of reverse auctions and that is mentioned in the bill as a possible option, but that is not dictated by the bill. The bill says that "the Secretary shall pursue additional measures to ensure that prices paid for assets are reasonable and reflect the underlying value of the asset." I have no idea what "prices paid for assets are reasonable and reflect the underlying value" really means, both in terms of "reflect" and "underlying value." But, I would venture to read that as implying that the "underlying" value of a mortgage would be roughly the current market value of the property that the mortgage covers.

-- Jack Krupansky