Republican members forging new bailout plan: Sources

Republican members forging new bailout plan: Sources

Sources tell CNBC that a group of US Republican members are forging an alternative bailout plan after the previous one failed to pass muster.
The proposal will be an alternative to that proposed by US Treasury Secretary Henry Paulson.

Components of the alternative plan including the following, according to sources:
· Require the Treasury Department to guarantee, at up to 100 percent, bank losses resulting from failed mortgage-backed securities originated prior to the plan's enactment. Such insurance, supporters say, would provide immediate value to the securities and a foundation for which they could then be sold. The Treasury Department would finance that insurance by assessing a premium on outstanding mortgage-backed securities.
· Allow companies to carry back losses arising in tax years ending in 2007, 2008, or 2009 back five years, generating a tax refund and immediate capital
· Allow a "repatriation window" for profits earned by U.S. firms overseas. Such repatriation amounts would not be taxed if invested in distressed debt (as defined by Treasury) for at least one year
· Allow banks to treat losses on shares of preferred stock in Fannie Mae and Freddie Mac as ordinary losses, not as capital losses
· Suspend the capital gains tax rate for two years
· Limit backing of high-risk loans by Fannie Mae and Freddie Mac
· Schedule Fannie and Freddie for privatization
· Suspend "mark-to-market" accounting until the SEC can issue new guidelines that will allow firms to mark these assets to their true economic value.
· Stabilize the dollar by repealing the Humphrey-Hawkins Full Employment Act, which alternative bailout supporters say diverts the Federal Reserve's attention from long-term price stability to short-term economic growth
· Require the Treasury to write rules prohibiting excessive compensation or golden parachutes to executives of failed companies
· Task the SEC with regular, annual audit reports of entities the federal government has brought under conservatorship or now owns

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Source:ET,MC,BS