The Emergency Economic Stabilization Act of 2008 (EESA) is better known as the Paulson plan or the Proposed bailout of US financial system - action plan to overcome the effects of the financial crisis of 2008-2010 .
The plan was developed in response to a series of bankruptcies of major US financial institutions, such as mortgage agencies Fanny May , Freddie Mack , banks Lehman Brothers , Washington Muel and others. The plan involves the provision of loans to banks by the US Federal Reserve in the amount of $ 700 billion .
The second section of the plan - involves significant tax incentives designed to support energy, especially the alternative.
The developer of the plan is Henry Paulson , 74th US Treasury Secretary (2006-2009), former head of Goldman Sachs (1998-2006).
In 2009, when the Obama Plan was adopted, from March to December, the dollar lost 20% against the euro and more than 40% against gold [1] .
“This project to save the market has become the largest since the crisis in the 30s of the 20th century,” noted People's Daily in September 2011 [2] .
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Key Provisions
Paulson's plan includes:
- buyback program for troubled assets (bailout)
- tax incentives to business and the public
- special incentives in the energy sector.
The term “bailout” (other spelling “bailout”, Eng. Bailout ), meaning a financial policy aimed at redeeming the state from financial institutions, the so-called " Toxic assets " (bad credit obligations), in order to prevent their massive bankruptcy and collapse of the financial system, came into widespread use precisely in connection with Paulson's plan. The consequence of this kind of policy is the growth of the budget deficit and inflationary processes.
Criticism of the Plan
A group of Republican congressmen on Thursday October 2 criticized the Paulson Plan, calling it “socialism,” and unveiled an alternative plan. In their opinion, instead of redeeming troubled assets from banks and other financial institutions, it is necessary to create a special hedge fund that will insure banks' losses and not allocate funds to buy troubled assets. One of the critics of the government program was Richard Shelby. According to him, the “Paulson plan” turned out to be “incorrect from the very beginning”, therefore it should not be ratified.
In particular, the method used by the government to select banks, the so-called CAMELS rating, was criticized. The New York Times wrote that the method will lead to a new wave of consolidation, as the method selects effective banks and the banks are "too large to let them fall."