The Emergency Economic Stabilization Act of 2008
The United States or the “300 pound gorilla of the world” as some people refer to it as, isn’t all that invulnerable. As one would expect, the U.S. has the largest federal budget and income of any nation in the world. Yet we find ourselves in an economic crisis again. Within the last year numerous banks have gone out of business, prices for consumer goods have gone up, and the stock market just keeps on losing money. One would question how this happened or who let this happen. In either case, experts believe the U.S. is in a recession while the general public instead is calling it the second Depression. Then it would seem the government must take an immediate and drastic action, and it has by proposing a $700 billion dollar bailout.
On October 3, 2008 Congress and then President George W. Bush passed the bailout, officially known as the Emergency Economic Stabilization Act of 2008 or EESA into law (Lore 3). The EESA provides the Department of Treasury up to $700 billion to be used to restore and stabilize the financial system (N.A.). Examples include buying out troubled assets such as mortgages and stocks from both public and private financial institutions (Lore 3). The EESA initially has a budget of no higher than the proposed $700 billion, until further legislation (Stout). And the Secretary of Treasury can only use $250 billion at any given point (Lore 5). However the President of the United States can petition Congress for an extra $100 billion at any time, for a total of $350 billion of purchasing authority for the Secretary of Treasury (Lore 5).
The main provision of the EESA though, is to bailout the largest banks of the United States. Up to $250 billion will be used to secure investments and buy off stocks from the banks (see Figure 1 below).
Figure 1: Demonstrates the amount of money each bank will receive (New York Times.)
The decline of home values, high foreclosure rates, and the prices of the...