The economic proposal explained

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By Sean Lengell

The administration's plan seeks to give the Treasury Department the authority to buy up to $700 billion in failed mortgages and related assets from any financial institution headquartered in the United States.

The plan, which needs approval from Congress to become law, would significantly expand the Treasury's powers, giving its secretary full authority to "take such actions as the secretary deems necessary to carry out the authorities in this act....without limitation."

Central among these powers is the authority to enter into contracts to purchase bad loans "without regard to any other provisions of law regarding public contract."

For the full text of the proposal click here

The proposal also would give the secretary authority to pick which troubled institutions the government would assist, as well as the means by which to purchase mortgage-related assets. And it gives the secretary sole power to manage these purchases, including revenues and portfolio risks.

The secretary at an time at any time would be allowed to sell, repurchase loans or enter into other financial transactions - all on terms conditions and prices would be set by the secretary.

The secretary also would wield the authority to issue regulations "and other guidance" as may be necessary to carry out any treasury action covering under the proposal.

Any decisions made by the secretary under the terms of the plan would not be subject to review by Congress, federal agencies or the courts.

Much of the proposal is intended to serve as a short-term fix intended to quickly stabilize the markets, as some provisions would expire in two years. But many of the sweeping powers the plan gives the secretary, like the authority to issues regulations and the right to buy and sell loans, would be indefinite.

In exercising these authorities, the secretary would have to "take into consideration" what action would be best to provide stability and future disruption to the financial markets and banking system, and to protect taxpayer interests.

The secretary also would be required to regularly report to Congress on any action taken.