In late September, Congress developed the proposal to put forth a bill that would release up to $700 billion to the Treasury Secretary to purchase struggling assets from stressed financial institutions. This hefty amount of fiscal power had never been awarded to an entity in the Federal government without any checks or balances; hence the political wranglings over this bill were understandably tense.
The political firestorm that was started when Henry Paulson issued his three-page Paulson Plan-tersely drafted in a deliberate attempt to omit bogging detail in order to quickly pass the proposal-was an example of what can happen when government entities fail to cooperate during the drafting of contingency plans. Paulson’s attempt to quickly and concisely create broad-ranging power for his office to deal with the impending economic crisis left too much room for interpretation: partisan debate within Congress in response to his plan grew to a fever-pitch and drew rancor from the American public.
Over the weekend of 27-28 September the House of Representatives developed the proposal, and put the bill to a vote on September 29. It failed to pass by a roll call vote of 228-205. A revision of the bill was quickly worked and approved by the Senate with a 74-25 vote, but this amendment drew ire from members of the House who claimed that the Senate legislated by “blunt force without public-consent” and that they had “sweetened the bailout” to force passage by the House (Soraghan, 2008). Despite the heated debate the bill passed the House by a vote of 263-171 on October 1st.
The bill authorizes the establishment of the Troubled Asset Relief Program (TARP) managed under the office of the Secretary of the Treasury. He had immediate access to $250 billion with $100 billion to be granted upon approval by the President. Congress would grant the remaining $350 billion if they did not pass a resolution opposing the funding within 15 days. The Treasury would gain grand leeway to use the funds to purchase troubled assets, provide mortgage assistance to homeowners, and recapitalize banks.