Agreement on Bailout Bill. The ''Emergency Economic Stabilization Act of 2008" likely to pass. Sets up the "TARP" for the U.S. economy and the hospitality industry
By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
28 September 2008
Hotel Lawyer: The Bailout Bill looks certain to pass. Hospitality Lawyer muses what it means to the world's economy and the hospitality industry. . .
As of 7 pm, Sunday, September 28, 2008, it appears that all contingents have approved the largest financial bailout in U.S. history -- a historic $7 billion which is more than the entire budget for 2009. Here is an early take on this situation from www.HotelLawBlog.com.
The ''Emergency Economic Stabilization Act of 2008" -- The $700 billion Bailout Bill
Here is the text of the bill that is expected to be approved by Congress and the President in the next few days.
The overview and a new alphabet soup to memorize.
The bill is called the Emergency Economic Stabilization Act of 2008. Who knows what acronym it will acquire in the coming days . . . Will it become known as the EESA or will it always be the "Bailout Bill" for the Panic of 2008?
The bill establishes a "TARP" or Troubled Asset Relief Program which is described in Section 101 of the Law. Get ready for all the bad puns about the protection of a TARP over your business or industry. The painters will be chagrined.
There is also a new "Fund" called the Assets Insurance Financing Fund (AIFF?) apparently created as the compromise with the "revolting House Republicans".
The law basically will be administered by the Treasury, which many assume will make the Treasury the predominant financial regulator in the U.S.
And the term "Financial Institution" (generally meaning those institutions that are eligible to participate in the bailout) is very broadly defined to include banks, savings associations, credit unions, security brokers or dealers, and insurance companies established or regulated under the laws of the U.S. or any State of the U.S.
The law is basically focused on assets that involve residential or commercial mortgages or any securities related to mortgages issued before March 14, 2008. It may also include other instruments that the Secretary of the Treasury determines must be purchased to promote financial market stability.
There is also a Financial Oversight Board to make sure things go well. This is comprised of:
the Chairman of the Board of Governors of the Federal Reserve System the Secretary of the Treasury the Director of the Federal Home Finance Agency the Chairman of the Securities Exchange Commission the Secretary of Housing and Urban Development
When do we know what this really means to us? Why are asset mangers the new elite in the EESA?
Right now, no one really knows what the largest financial bailout in history really means. Although it takes more than 100 pages to say it, the real decisions will be made in the next 45 days when regulations are supposed to be promulgated.
This bill may be the biggest boon to asset managers in the history of the U.S. The EESA expects to hire asset managers to assist in the purchase and sale of assets, and the management of those assets to optimize value. Who will be the asset managers? How will they go about their job? How do they select assets to purchase or manage? These are all great questions to be answered "soon" when regulations are promulgated.
It is expected that troubled assets will be valued by a Dutch Auction, where sellers offer bids of the prices at which they will sell their assets, and the buyer takes the cheapest assets first.
How much?
The purchasing power of the legislation is $700 billion.
It comes in tranches:
$250 billion is authorized immediately Another $350 billion can be authorized by Treasury upon certification to Congress Thereafter, the President can authorize another $100 billion upon submitting a report to Congress, unless denied by a joint resolution of Congress
The Bill increases the Federal Debt ceiling to $11 Trillion to accommodate these commitments.
More to come soon.
The bill is not yet law. The discussion above is the current iteration of what is believed to be the version that will be passed by House and Senate in the next few days. Nancy Pelosi has said that this version of the law is "frozen", meaning that it cannot and will not change further.
There is incredible administrative authority to be exercised in implementing this law. It will be many weeks before we really know what it means and how it will apply.
But in any event, this is one of the most important pieces of legislation and financial policy to be implemented in the world in the many decades. We will continue to be here to help interpret and evaluate the impact on the economy, as well as the Hospitality Industry.
This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. We've done more than $50 billion of hotel transactions and more than 100 hotel mixed-used deals in the last 5 years alone. Who's your hotel lawyer?
Related articles that may be of interest
- Hospitality Lawyer: $700 billion bailout bill is now law! Warren Buffett insights on (1) Why the Bailout Bill had to pass, (2) The key to making the bailout work, and (3) How the Treasury an make a profit.
- Hotel Lawyer: $700 billion financial rescue bill is signed! Full text of the "Emergency Economic Stabilization Act of 2008''
- Hospitality Lawyer: Fortunes will be made . . . or lost . . . in the wake of The Financial Bailout Bill and the Panic of 2008. What happens AFTER the Bailout Bill . . .
- Agreement on Bailout Bill. The ''Emergency Economic Stabilization Act of 2008" likely to pass. Sets up the "TARP" for the U.S. economy and the hospitality industry
- Hospitality Lawyer's take on The Panic of 2008. Financial Crisis impact on the Lodging Industry.
- Hospitality Lawyer with Outlooks and Predictions for U.S. Lodging Industry from The Phoenix Lodging Conference. PKF Consulting's Mark Woodworth's presentation.
- Hospitality Lawyer: Pulse of the industry from the Phoenix Lodging Conference. Where are we now? Where are we going?
Our Perspective. We represent developers, owners and lenders. We have helped our clients as business and legal advisors on more than $50 billion of hotel transactions, involving more than 1,000 properties all over the world. For more information, please contact Jim Butler at jbutler@jmbm.com or 310.201.3526 or go to www.HotelLawBlog.com.
Jim Butler is one of the top hospitality attorneys in the world. GOOGLE "hotel lawyer" or "hotel mixed-use" or "condo hotel lawyer" and you will see why.
Jim devotes 100% of his practice to hospitality, representing hotel owners, developers and lenders. Jim leads JMBM's Global Hospitality Group® -- a team of 50 seasoned professionals with more than $50 billion of hotel transactional experience, involving more than 1,000 properties located around the globe. In the last 5 years alone, Jim and his team have assisted clients with more than 100 hotel mixed-use projects -- frequently integrated with energizing lifestyle elements.
Jim and his team are more than "just" great hotel lawyers. They are also hospitality consultants and business advisors. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them.
