Details of the US Bail out plan

The legislation gives power to Treasury secretary Hank Paulson to buy troubled financial assets and mortgages. Troubled Asset Relief Fund (TARF) has been established which will lend the money in 3 stages. Treasury will first get $250 billion, with an additional $100 billion immediately accessible. Congress would have the option of blocking or allowing the final installment of $350 billion after assessing the future course of developments in the Financial markets.

The plan allows Government to take over troubled assets in return for a stake in the company, in an expectation that the company will render profits in long run and there by protecting Tax payers money. In case of net loss even after 5 years, the president will have to submit a legislative proposal to seek reimbursement from the financial institutions that participated.

The plan also offers Insurance cover to protect tax payers. Financial institutions that want to participate would essentially pay the government a fee and, in return, the government would insure their assets against any future losses.