Under separate proposals from the incoming Obama administration and Democratic lawmakers to release the final $350 billion in bailout funds, the financial sector would face tough new conditions and a more defined mission to expand lending and reduce foreclosures.
Here are key elements of both plans, based on a letter to congressional leaders from chief Obama economic adviser Larry Summers and on more detailed legislation introduced by House Financial Services Committee Chairman Barney Frank:
Lending: Obama and Frank would seek to get credit flowing to consumers, homeowners, small businesses and local governments. Both would provide assistance to small community banks.
Oversight: Both plans would require continuous reports on earning, repayments and lending practices from institutions that receive bailout funds.
Foreclosure: Both would seek to reduce the number of foreclosures. Summers, in his letter, said Obama would also seek to change bankruptcy laws. Frank’s bill would require $40 billion to $100 billion of the bailout money to be spent on mitigating foreclosures.
Restrictions: Both would set conditions on financial institutions that receive federal money, including limits on executive compensation. Obama would ban most dividend payments and place limits on stock repurchases. Both would place conditions on the acquisition of healthy financial companies. Frank would prohibit bonuses or incentives to the 25 most highly compensated employees. The restriction would apply retroactively to banks that already have received bailout funds.
Housing: Frank would require the Treasury Department to use nonbailout resources to increase demand for home purchases, particularly in areas with the highest number of foreclosures. (AP)
