Republican grp forging alternative bailout plan: report

Washington, Oct 1 (PTI) A group of Republicans are
putting together an alternative to the USD 700-billion rescue
plan proposed by U.S. Treasury Secretary Henry Paulson, a
media report said Wednesday.

The rejection of the bailout plan on Monday by the U.S.
House of Representatives has made the group to press forward
with its own plan, news broadcaster CNBC quoting sources
reported on its website.

The development of the alternative plan comes as members
of the Senate consider voting on the original financial rescue
plan later Wednesday, the report added.

According to sources, components of the alternative plan
include a guarantee from the U.S. treasury of up to 100 per
cent for bank losses resulting from failed mortgage-backed
securities originated prior to the plan's enactment, the
report said.

Such insurance would provide immediate value to the
securities and a foundation for which they could then be sold
and the Treasury Department would finance that insurance by
assessing a premium on outstanding mortgage-backed securities,
it added.

The alternative plan also includes allowing companies to
carry back losses arising in tax years ending in 2007, 2008,
or 2009, generating a tax refund and immediate capital. While
it also envisages allowing 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, the report stated.

Besides, the Republicans in their alternative plan also
propose to allow banks to treat losses on shares of preferred
stock in Fannie Mae and Freddie Mac as ordinary losses, not as
capital losses.

The alternative plan would also include suspension of
capital gains tax rate for two years, limit backing of
high-risk loans by Fannie Mae and Freddie Mac and schedule
privatisation for these two Government Sponsored Entities.

Among other things it also proposes suspension of
"mark-to-market" accounting until the Securities Exchange
Commission (S.E.C.) issues new guidelines that would allow
firms to mark these assets to their true economic value.

The plan also includes stabilisation of 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, the CNBC report said.

The plan also requires the Treasury to write rules
prohibiting excessive compensation or golden parachutes to
executives of failed companies and task the S.E.C. with
regular, annual audit reports of entities, the federal
government has brought under conservatorship or now owns.