PROPOSAL FOR TREASURY AUTHORITY
TO PURCHASE MORTGAGE-RELATED ASSETS
Section 1. Short Title.
This Act may be cited as ____________________.
Sec. 2. Purchases of Mortgage-Related Assets.
(a) Authority to Purchase.--The Secretary is authorized to purchase,
and to make and fund commitments to purchase, on such terms and
conditions as determined by the Secretary, mortgage-related assets
from any financial institution having its headquarters in the United
(b) Necessary Actions.--The Secretary is authorized to take such
actions as the Secretary deems necessary to carry out the authorities
in this Act, including, without limitation:
(1) appointing such employees as may be required to carry out the
authorities in this Act and defining their duties;
(2) entering into contracts, including contracts for services authorized
by section 3109 of title 5, United States Code, without regard to
any other provision of law regarding public contracts;
(3) designating financial institutions as financial agents of the
Government, and they shall perform all such reasonable duties related
to this Act as financial agents of the Government as may be required
(4) establishing vehicles that are authorized, subject to supervision
by the Secretary, to purchase mortgage-related assets and issue
(5) issuing such regulations and other guidance as may be necessary
or appropriate to define terms or carry out the authorities of this
Sec. 3. Considerations.
In exercising the authorities granted in this Act, the Secretary
shall take into consideration means for--
(1) providing stability or preventing disruption to the financial
markets or banking system; and
(2) protecting the taxpayer.
Sec. 4. Reports to Congress.
Within three months of the first exercise of the authority granted
in section 2(a), and semiannually thereafter, the Secretary shall
report to the Committees on the Budget, Financial Services, and
Ways and Means of the House of Representatives and the Committees
on the Budget, Finance, and Banking, Housing, and Urban Affairs
of the Senate with respect to the authorities exercised under this
Act and the considerations required by section 3.
Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.
(a) Exercise of Rights.--The Secretary may, at any time, exercise
any rights received in connection with mortgage-related assets purchased
under this Act.
(b) Management of Mortgage-Related Assets.--The Secretary shall
have authority to manage mortgage-related assets purchased under
this Act, including revenues and portfolio risks therefrom.
(c) Sale of Mortgage-Related 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 mortgage-related
asset purchased under this Act.
(d) Application of Sunset to Mortgage-Related Assets.--The authority
of the Secretary to hold any mortgage-related asset purchased under
this Act before the termination date in section 9, or to purchase
or fund the purchase of a mortgage-related asset under a commitment
entered into before the termination date in section 9, is not subject
to the provisions of section 9.
Sec. 6. Maximum Amount of Authorized Purchases.
The Secretary’s authority to purchase mortgage-related assets
under this Act shall be limited to $700,000,000,000 outstanding
at any one time
Sec. 7. Funding.
For the purpose of the authorities granted in this Act, and for
the costs of administering those authorities, the Secretary may
use the proceeds of the sale of any securities issued under chapter
31 of title 31, United States Code, and the purposes for which securities
may be issued under chapter 31 of title 31, United States Code,
are extended to include actions authorized by this Act, including
the payment of administrative expenses. Any funds expended for actions
authorized by this Act, including the payment of administrative
expenses, shall be deemed appropriated at the time of such expenditure.
Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act
are non-reviewable and committed to agency discretion, and may not
be reviewed by any court of law or any administrative agency.
Sec. 9. Termination of Authority.
The authorities under this Act, with the exception of authorities
granted in sections 2(b)(5), 5 and 7, shall terminate two years
from the date of enactment of this Act.
Sec. 10. Increase in Statutory Limit on the Public Debt.
Subsection (b) of section 3101 of title 31, United States Code,
is amended by striking out the dollar limitation contained in such
subsection and inserting in lieu thereof $11,315,000,000,000.
Sec. 11. Credit Reform.
The costs of purchases of mortgage-related assets made under section
2(a) of this Act shall be determined as provided under the Federal
Credit Reform Act of 1990, as applicable.
Sec. 12. Definitions.
For purposes of this section, the following definitions shall apply:
(1) Mortgage-Related Assets.--The term “mortgage-related assets”
means residential or commercial mortgages and any securities, obligations,
or other instruments that are based on or related to such mortgages,
that in each case was originated or issued on or before September
(2) Secretary.--The term “Secretary” means the Secretary
of the Treasury.
(3) United States.--The term “United States” means the
States, territories, and possessions of the United States and the
District of Columbia.
Proposed Treasury Authority to Purchase Troubled Assets
Washington – The Treasury Department has submitted legislation
to the Congress requesting authority to purchase troubled assets
from financial institutions in order to promote market stability,
and help protect American families and the US economy. This program
is intended to fundamentally and comprehensively address the root
cause of our financial system's stresses by removing distressed
assets from the financial system. When the financial system works
as it should, money and capital flow to and from households and
businesses to pay for home loans, school loans and investments that
create jobs. As illiquid mortgage assets block the system, the clogging
of our financial markets has the potential to significantly damage
our financial system and our economy, undermining job creation and
income growth. The following description reflects Treasury's proposal
as of Saturday afternoon.
Scale and Timing of Asset Purchases. Treasury
will have authority to issue up to $700 billion of Treasury securities
to finance the purchase of troubled assets. The purchases are intended
to be residential and commercial mortgage-related assets, which
may include mortgage-backed securities and whole loans. The Secretary
will have the discretion, in consultation with the Chairman of the
Federal Reserve, to purchase other assets, as deemed necessary to
effectively stabilize financial markets. Removing troubled assets
will begin to restore the strength of our financial system so it
can again finance economic growth. The timing and scale of any purchases
will be at the discretion of Treasury and its agents, subject to
this total cap. The price of assets purchases will be established
through market mechanisms where possible, such as reverse auctions.
The dollar cap will be measured by the purchase price of the assets.
The authority to purchase expires two years from date of enactment.
Asset and Institutional Eligibility for the Program. To
qualify for the program, assets must have been originated or issued
on or before September 17, 2008. Participating financial institutions
must have significant operations in the U.S., unless the Secretary
makes a determination, in consultation with the Chairman of the
Federal Reserve, that broader eligibility is necessary to effectively
stabilize financial markets.
Management and Disposition of the Assets. The
assets will be managed by private asset managers at the direction
of Treasury to meet program objectives. Treasury will have full
discretion over the management of the assets as well as the exercise
of any rights received in connection with the purchase of the assets.
Treasury may sell the assets at its discretion or may hold assets
to maturity. Cash received from liquidating the assets, including
any additional returns, will be returned to Treasury's general fund
for the benefit of American taxpayers.
Funding. Funding for the program will be provided
directly by Treasury from its general fund. Borrowing in support
of this program will be subject to the debt limit, which will be
increased by $700 billion accordingly. As with other Treasury borrowing,
information on any borrowing related to this program will be publicly
reported at the end of the following day in the Daily Treasury Statement.
Reporting. Within three months of the first asset
purchases under the program, and semi-annually thereafter, Treasury
will provide the appropriate Congressional committees with regular
updates on the program.