Developments on Capitol Hill are moving quickly, and McKenna Long & Aldridge LLP's Government Affairs team is working with clients to ensure their voices are a part of the dialogue. While some constituencies are contacting Congressional offices with calls opposed to the creation of a Resolution Trust Corporation (RTC), Congress is moving ahead with plans for a $700 billion taxpayer funded bailout of the financial services industry.
Over the weekend, the Treasury Department submitted a request to Congress which would give broad authority to the Department to purchase up to $700 billion in distressed assets from virtually any distressed business entity. As they have had time to digest the request, Members are responding with their own proposals. Prior to the creation of the RTC in 1989, our firm advised the Administration on the design of the agency. Should this entity become a reality, our financial restructurings practice group is already preparing to participate on behalf of clients.
Senate Banking Committee Chairman Chris Dodd released his plan yesterday which included restrictions on the executive compensation of firms who sell assets to the government and provisions which force banks to rewrite bad mortgages. Among other provisions, the Senate Democratic plan calls for the creation of an emergency oversight board comprised of representatives from the Federal Reserve, Federal Deposit Insurance Corporation and Securities and Exchange Commission, as well as two outside experts appointed by Congress.
Yesterday afternoon, House Banking Committee Chairman Barney Frank released his response. While we are still reviewing the legislative language, the House language would restrict the executive pay of companies utilizing the government buyout.
Congress is expected to stay in session through the weekend to finish the package. However, tensions over special provisions and uncertain public support raise questions as to a final outcome.