Text of Lawmakers’ Agreement on Principles

Congressional Republicans and Democrats came to an agreement on principles for the Treasury’s Troubled Asset Relief Program that they will take into final negotiations with the White House. It includes sections on taxpayer protections, oversight and transparency, homeownership preservation and funding authority.

Agreement on Principles

1. Taxpayer Protection
1. Requires Treasury Secretary to set standards to prevent excessive or inappropriate executive compensation for participating companies
2. To minimize risk to the American taxpayer, requires that any transaction include equity sharing
3. Requires most profits to be used to reduce the national debt
2. Oversight and Transparency
1. Treasury Secretary is prohibited from acting in an arbitrary or capricious manner or in any way that is inconsistent with existing law
2. Establishes strong oversight board with cease and desist authority
3. Requires program transparency and public accountability through regular, detailed reports to Congress disclosing exercise of the Treasury Secretary’s authority
4. Establishes an independent Inspector General to monitor the use of the Treasury Secretary’s authority
5. Requires GAO audits to ensure proper use of funds, appropriate internal controls, and to prevent waste, fraud, and abuse
3. Homeownership Preservation
1. Maximize and coordinate efforts to modify mortgages for homeowners at risk of foreclosure
2. Requires loan modifications for mortgages owned or controlled by the Federal Government
3. Directs a percentage of future profits to the Affordable Housing Fund and the Capital Magnet Fund to meet America’s housing needs
4. Funding Authority
1. Treasury Secretary’s request for $700 billion is authorized, with $250 billion available immediately and an additional $100 billion released upon his or her certification that funds are needed
2. final $350 billion is subject to a Congressional joint resolution of disapproval

So now it’s a matter of codifying these principles into the Paulson Plan, putting it to a vote, and submitting to the White House for signature.

I still want more details.

Congress has a plan

Lawmakers agree on bailout principles to protect taxpayers and ensure oversight.

NEW YORK (CNNMoney.com) — Lawmakers have reached agreement on a bipartisan counterproposal to the Bush administration’s $700 billion financial bailout plan.

Both parties and both houses agreed Thursday to a set of principles on revisions to the rescue plan, which calls for the Treasury Department to buy up bad mortgage securities from banks in an effort to get them to lend again.

The proposal will help homeowners, curb executive pay packages at participating firms and provide oversight of Treasury’s actions, said Sen. Christopher Dodd, D-Conn., a key architect of the congressional effort. He did not provide details but said lawmakers will sit down with Treasury officials to discuss it.

“We’ve reached a fundamental agreement on a set of principles, one, for taxpayers, which is tremendously important,” Dodd said.

Americans should “legitimately feel better about the overall approach,” said Rep. Barney Frank, D-Mass., who heads the House Financial Services Committee.

Taxpayers will be protected under the Congressional version of the bailout, said Rep. Spencer Bachus, R-Ala., the top Republican on the House Financial Services Committee.

Somebody get me a copy of the bill of the new plan, please!

One thing I’ve learned from working for years in investment services …

From Investopedia:

Risk-Return Tradeoff

The principle that potential return rises with an increase in risk. Low levels of uncertainty (low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk) are associated with high potential returns. In other words, the risk-return tradeoff says that invested money can render higher profits only if it is subject to the possibility of being lost.

Because of the risk-return tradeoff, you must be aware of your personal risk tolerance when choosing investments for your portfolio. Taking on some risk is the price of achieving returns; therefore, if you want to make money, you can’t cut out all risk. The goal instead is to find an appropriate balance — one that generates some profit, but still allows you to sleep at night.

It’s all about risk/reward; sometimes you have to lose a little to gain a lot … but somewhere along the line you have to decide when it’s time to cut your losses and recoup.

And this concept holds true in so many aspects of life.