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 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.
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:
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.
Limiting CEO Compensation
The bill allows the Treasury to establish rules limiting executive compensation, bonuses, "golden parachutes" and other incentives at institutions participating in TARP.
Participating institutions will also lose certain tax benefits related to compensation.
General Tax Breaks
The Alternative Minimum Tax was originally intended to prevent America's richest residents from using loopholes to avoid all taxes. Because the tax wasn't indexed to inflation, Congress must regularly pass legislation that amends the AMT so it won't snag some middle class Americans. The "AMT Patch" included in this bill will keep the AMT from hitting 20 million Americans.
There will be $8 billion in tax relief for Americans affected by natural disasters in the Midwest and Gulf Coast.
An extension until 2009 of an above-the-line tax deduction for college tuition. The deduction originally expired in December 2007.
An extension until 2009 of a property tax deduction for taxpayers who do not itemize. The deduction is currently due to expire at the end this year.
Tax benefits for businesses including the extension of a research and development tax credit that originally expired in December 2007 and tax breaks related to the production and use of renewable fuel.
Greater FDIC Insurance