With all the action recently on the financial sector bailout, it almost slipped our notice that Congress has finalized the FY 2009 appropriations process, at least through March 6 of next year. Last week, on Wednesday (Sept. 24), the House passed its package of three appropriations bills (Defense, Homeland Security, and Military Construction-VA), along with a continuing resolution (CR) that will cover all the other sections of the government until March 6, 2009. The vote was 370-58. The Senate passed the House proposal over the weekend on Saturday by a vote of 78-12.

The CR was put together and passed in less than a week, with little transparency or time to review specific provisions, earmarks, and funding levels. The bill level-funds most government programs outside of the three individual security bills that were included and a few select programs and priorities in need of more immediate funding. These include the Low Income Home Energy Assistance Program (LIHEAP), which received a $5.1 billion increase. This is more than double the $2.5 billion appropriated in FY 2008 and finally brings the program up to its authorized funding level. There is also $22.9 billion in emergency funding for disaster relief and $7.5 billion to support a $25 billion loan to the U.S. auto industry.

Even though this was the result of the appropriations process that everyone was expecting for most of this year, the result that Democratic leaders themselves had announced early on as a deliberate strategy, it is still pretty disappointing. In fact, it might be more disappointing because it was pre-ordained by Reid, Pelosi, and others on the Hill early on this year. Congress is supposed to pass appropriations bills on time. In fact, it is their primary responsibility. They have repeatedly failed to do this over the last decade regardless of circumstances, regardless of who controls Congress, and this year we've reached the point where they aren't even trying anymore. How can we expect them to enact a solution to the financial sector crisis if they can't even complete their basic job responsibilities?

Congressional leaders were left scratching their heads, contemplating what to do next after the House failed, by a vote of 205-228 to approve a $700 billion plan to buy up troubled financial assets that are purportedly threatening the financial markets.

CQ Politics reports that although the House voted to adjourn, they will return Thursday to continue working on assuaging the angst of financial markets. Calling the issue "much too important to simply let fail," Treasury Secretary Henry Paulson vowed to return to working out a plan to bailout Wall Street. However, legislators have been at best vague in spelling out what to expect in the next few days. As Speaker of the House Nancy Pelosi said, "stay tuned."

Members of the House Democratic Leadership, from left, House Majority Leader Rep. Steny Hoyer, D-Md., House Speaker Nancy Pelosi, House Democratic Caucus Chair Rep. Rahm Emanuel, D-Ill. and House Majority Whip James Clyburn, D-S.C. meet reporters on Capitol Hill in Washington, Monday, Sept. 29, 2008. (AP Photo/Lawrence Jackson)

This post is an updated version of our previous post on a summary of the $700 billion Wall Street bailout plan that the House rejected (205-228) this afternoon.

Size: Up to $700 billion
• $250 billion would be immediately available to Treasury to buy up troubled assets
• Another $100 billion would be available to Treasury "upon report to Congress"
• The final $350 billion would be available upon request of the presidentt, which Congress could reject within 15 days . The rejection could then be vetoed by the president.

Mechanics
• The government could purchase mortgage-backed securities and other troubled assets and their derivatives. With support from the Fed, it could also purchase other troubled assets from investment, commercial, and smaller community banks, credit unions, pension funds, and local governments.

Taxpayer Protection
• Firms participating in the bailout would be required to grant the government warrants to obtain nonvoting shares of stock, if the firm becomes profitable.
• Participating firms would be subject to executive pay restrictions, implemented through the tax code. The plan would also bar firms from giving "golden parachutes" to executives leaving participating firms for reasons other than retirement
• The Treasury Secretary would have the authority to establish an insurance fund not unlike the FDIC to guarantee troubled assets; premiums would be paid for by private firms
• If, after five years, the Congressional Budget Office and the Office of Management and Budget agree that the government has not profited from the sale of troubled assets, the president must submit to Congress a plan to recuperate the cost of the plan from the financial industry

Foreclosure Protection
• Treasury can encourage mortgage servicers to modify troubled mortgages
• Requires federal entities that own mortgages to develop a plan to mitigate the foreclosure rate
• Relaxes requirements for eligibility for the Hope for Homeowners program

Oversight and Transparency
• A bipartisan oversight board appointed by members of both parties in Congress would be created
• An inspector general would monitor Treasury decisions, and the Government Accountability Office would regularly audit the program
• Treasury would be required to make transactions made through the troubled asset program available publicly online
• There would be conflict-of-interest rules for firms hired by the Treasury to help run the program
• There would be judicial review of Treasury decisions

Executive Power Enhancement
• An affirmation of the SEC head to suspend mark-to-market accounting, thus allowing firms to report asset values different from what the market believes them to be
• Allows Treasury Secretary to suspend federal contracting rules

Not Included
• The package does not have language that would allow bankruptcy judges adjust mortgage rates or principal
• No profits from the scheme would flow to an affordable housing trust fund

Media reports and a press release from House Speaker Nancy Pelosi (D-CA) indicate that Congressional leaders and the White House have agreed to a package of measures designed to prevent a financial market meltdown. An official announcement of agreement is expected tonight, and final details of the plan remain unsettled. Here are the package's main provisions:

Size: Up to $700 billion
• $250 billion would be immediately available to Treasury to buy up troubled assets
• Another $100 billion would be available to Treasury "upon report to Congress"
• The final $350 billion would be available upon request of the president. Media reports, however, are inconsistent on this. Some are reporting says that the money would be available "only upon action by Congress," while others say it would be available upon presidential request, which Congress could reject. The rejection could then be vetoed.

Mechanics
• The government could purchase mortgage-backed securities and other troubled assets from investment, commercial, and smaller community banks, credit unions, pension funds, and local governments.

Taxpayer Protection
• Firms participating in the bailout would be required to grant the government warrants to obtain nonvoting shares of stock.
• Participating firms would be subject to executive pay restrictions, although the details remain vague
• The Treasury Secretary would have the authority to establish an insurance fund not unlike the FDIC to guarantee troubled assets; premiums would be paid for by private firms
• A fee may be imposed upon the banking industry to pay for the bailout if the government loses money on the purchase of these toxic assets. Reports on this provisions vary, an no details have been announced

Foreclosure Protection
• Treasury can renegotiate mortgages purchased by the federal government with borrowers
• A "tax holiday" for homeowners facing foreclosure will be extended

Oversight and Transparency
• A bipartisan oversight board appointed by members of both parties in Congress would be created
• An inspector general would monitor Treasury decisions, and the Government Accountability Office would regularly audit the program
• Treasury would be required to make transactions made through the troubled asset program available publicly online
• There would be conflict-of-interest rules for firms hired by the Treasury to help run the program
• There would be judicial review of Treasury decisions

Not Included
• The package does not have language that would allow bankruptcy judges adjust mortgage rates or principal
• No profits from the scheme would flow to an affordable housing trust fund

This information has been compiled from the following news sources:
The Wall Street Journal
The New York Times
The Washington Post
McClatchy Newspapers
Congressional Quarterly ($)

The House Appropriations Committee is circulating this morning an economic stimulus proposal (summary and bill text) they hope will be debated by the full House later this afternoon (nothing like the last minute). Chairman David Obey (D-WI) writes about the need for this legislation in the summary:

84,000 Americans lost their jobs last month and the number of unemployed Americans is the highest it has been since 1992. The economy has lost jobs for eight straight months, with 605,000 American jobs lost this year.

Congress responded quickly to the White House's call for a financial rescue package. The White House should join Congress in putting together a solid package for Main Street. Today the House will take up legislation to boost our economy, create jobs, and help provide additional relief to families who are struggling.

The House stimulus package consistents of blocks of spending on infrastructure (public housing, transit, schools, and water and sewer), energy development (electric grid moderinization, advanced vehicle battery technology, and renewable energy development) and human needs (unemployment benefits extension, job training, health care, and food assistance). The full cost of the House package is reported to be around $50 billion or a bit more.

Of course, Obey (and others who have been calling for this type of package) are right. If Wall Street was not literally melting before our eyes, the quickly deteriorating economy would be the top issue in the news. As Andrew Samwick reminded us yesterday blogging over at Capital Gains and Games, traditional economic indicators are really not doing very well, with demand for workers and manufactured products decreasing.

The Senate is working on a similar package, and Majority Leader Reid (D-NV) and Appropriations Committee Chairman Robert Byrd (D-WV) have announced the Senate's will be $56.2 billion. The bill would "extend unemployment insurance benefits for seven weeks, address high food costs and energy prices, create jobs, promote education and job training, and aid small businesses." A detailed summary of the bill is available.

House Stimilus Summary
House Stimulus Bill Text

Senate summary

With all the news of the massive Wall Street bailout, I've heard really nothing about how this $700 billion gamble is supposed to be paid for (other than more borrowing, which is to say paid for by later). And what I have read, makes me real nervous. In a "dear colleague" letter, former chair of the Republican Study Committe Rep. Mike Pense (R-IN) pleads with colleagues (MS Word doc) to avoid raising revenue or the national debt.

If Congress decides to spend nearly 1 trillion dollars on a corporate bailout, it must find budget savings to prevent that cost from being passed along to the American people.

[...]

[Republicans] should demand consideration of free market alternatives to massive government spending and we should fight to pay for the solution through budget cuts and reform instead of more debt or taxes.

Surely Rep. Pense knows that the entire FY 2009 discretionary budget is $1.01 trillion. Of that, $350 billion funds non-defense, domestic discretionary programs. I don't know what Pense has in mind, but there simply isn't $700 billion to be found in "budget savings" that would prevent an increase in the national debt.

Just a little perspective on the size of this bailout.

Image by Flickr user dharma communications used under a Creative Commons license.

House Democratic leaders have announced some details of a potential continuing resolution (CR) that would keep the federal government operating for half a year from the start of the FY 2009 fiscal year on October 1 through March of 2009. With none of the appropriations bills enacted into law and only eight days before the start of the fiscal year, passage of a CR is almost guaranteed. CongressDaily reported this afternoon some of the details of the plan:

According to a draft version of the CR, House Democrats would fund most federal government programs at FY08 levels until March 6 unless Congress acts before that. The draft also includes $5.1 billion for the Low Income Home Energy Assistance Program. House Democratic leaders had previously discussed including the funding in an economic stimulus package valued at about $50 billion. The package also includes $25 billion in loan guarantees for the U.S. auto industry that was authorized in legislation enacted last year.

You can read a discussion draft of the proposed continuing resolution.

Update: 9.23.08, 4:00 pm
CongressDaily is reporting ($) this afternoon that the House will take up the proposed CR legislation on Wednesday this week. More details to come tomorrow.

It looks like the end of the current congressional session is in sight, maybe. While legislators had an insurmountable work load to complete in the three weeks of work in September, Senate Majority Leader Harry Reid (D-NV) still hopes to adjourn the Senate a week from tomorrow (Sept. 26). Reid is hoping the Senate can still finish quite a lot in the next 6 days, including energy legislation, a tax cut extension bill (with an Alternative Minimum Tax patch), a new economic stimulus package, and some number of appropriations bills and a continuing resolution. The Senate might begin consideration of a compromise tax package as early as this afternoon.

The Senate did successfully pass the Defense Authorization bill last night by a 88-8 vote. The authorization bill has been delayed for months, mostly due to a conflict over earmarks being listed in the committee report language for the bill, but not the legislative text of the bill. Sen. Jim DeMint (R-SC) attempted to offer an amendment to effectively strike the $5 billion worth of earmarks in the committee report, but his amendment was not considered. Sen. John Warner (R-VA) attempted to strike a compromise between DeMint and Armed Service Committee Chairman Carl Levin (D-MI) by offering an amendment that would require the final bill produced by a House-Senate conference committee list the earmarks in the legislative text of the bill. Neither DeMint's or Warner's amendments were considered, along with almost 100 other amendments that were introduced.

The authorization bill also contains some contracting reform provisions that OMB Watch been following throughout 2008, including a contractor misconduct database first proposed by Rep. Carolyn Maloney (D-NY) and Sen. Claire McCaskill (D-MO). While the database is structured to be publicly available in the House version of the authorization bill, the Senate has restricted access to the database just to government personnel.

The House and Senate will need to quickly find compromises to various differences in the two versions as congressional leaders hope to send a final bill to the President before the target adjournment date of Sept. 26. We'll post additional information about the contracting reforms and the earmarking conflict as they become available during the House-Senate conference.

We'll be shutting down the BudgetBrigade a bit early today to head off to OMB Watch's 25th Anniversary celebration. Yup, that's right. OMBW is 25 years young this year and we're primed and ready for our quarter life crisis! We're taking some time to celebrate tonight with friends and supporters and remember 25 years of fighting for a more transparent and accountable federal government.

While we are looking back over some of our accomplishments of the last quarter century (and honoring the unsung work of some of our public sector colleagues), we are also looking forward to the challenges we'll face over the next 25 years and beyond.

You will be a key part of overcoming those future challenges, just as you've been crucial to our past accomplishments. Your involvement, along with hundreds of thousands of people just like you has helped to make us the success we are today. So thank you for your commitment to the open and accountable ideals that have helped guide OMBW over the past 25 years.

And if you want to help make sure those ideals continue to be realized, consider making a small donation to OMB Watch in honor of our 25th birthday. Your contribution will join with hundreds of others who want to ensure we are able to continue our mission and the important work we do everyday.

The scheduled adjournment date for Congress is currently Sept. 26, but CQ reported earlier this week that a lame duck session may be in the cards. House Minority Leader John Boehner (R-OH) was quoted as saying "there's going to be a lame-duck session. No question." Boehner believes that the to-do list was already long -- a list that includes an AMT patch, the tax extenders package, appropriations, and offshore drilling --, but hurricane Gustav recovery will force Congress to get back to work after the election. House Speaker Nancy Pelosi (D-CA) remains circumspect ( "I'm not thinking in that direction." )while House Majority Whip James Clyburn (D-SC) sees the chances for a lame duck session improving.

Image by Flickr user Thomas Hawk used under a Creative Commons license.