Bailout Bill Basics: From TARP to Tax Breaks

The government rescue plan approved by the Senate Wednesday night includes the provisions of a bill defeated Monday by the House of Representatives as well as new provisions known as "sweeteners" -- measures that the bill's supporters hope will persuade opponents to the original legislation, namely members of the House, to change their minds.

The new version of the bailout bill includes tax breaks for individuals and businesses, and an...

The new version of the bailout bill includes tax breaks for individuals and businesses, and an increase in the amount of insurance coverage that the FDIC provides for bank accounts. There are also some surprising additions to the bill, ranging from the provision for more insurance coverage for mental health services to the repeal of excise taxes for the makers of wooden arrows.

(ABC News)

The sweeteners could convince reluctant representatives that the bill "is in the overall interests of their constituents," said Ed Paisley, of the Center for American Progress, a progressive think tank.

The bill's new provision includes a host of tax breaks, a temporary increase in the size of bank accounts insured by the Federal Deposit Insurance Corp. and several more esoteric measures, including a requirement that health insurance companies provide more coverage for mental health services, a tax benefit for victims of the 1989 Exxon Valdez oil spill, even a tax exemption for makers of children's wooden arrows.

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The heart of the bill, however, remains a plan to provide the Treasury with $700 billion to buy troubled assets from financial institutions -- an effort that proponents say will help ease the credit crunch by allowing banks to clear their balance sheets and lend money.

Here is an overview of some of the basics of the bill:

Buying Mortgages

The bill gives the Treasury secretary up to $700 billion to buy mortgages and other troubled assets owned by financial institutions under a new Troubled Asset Relief Program or TARP.

The Treasury Department will immediately receive $250 billion to begin the program.

An additional $100 billion will be provided if the president certifies that the money is necessary.

An additional $350 billion will be provided if the president certifies that the money is necessary and if the Congress approves of funding.

The bill also establishes a program to allow the government to insure, instead of buying, some troubled assets held by banks.

The bill establishes an oversight board to monitor the Treasury's use of the funds.