A number of house progressives who voted against yesterday’s bailoutbill, including Pete DeFazio, Donna Edwards and Marcy Kaptur, have justheld a press conference unveiling their own proposal. Text below.Commentary to follow:

DRAFT

No BAILOUTS Act

Bringing Accounting, Increased Liquidity, Oversight and UpholdingTaxpayer Security

1. Require the Securities and Exchange Commission(SEC) torequire an economic value standard to measure the capital of financialinstitutions.

This bill will require SEC to implement a rule to suspend theapplication of fair value accounting standards to financialinstitutions, which marks assets to the market value, no matter theconditions of the market. When no meaningful market exists, as is thecurrent market for mortgage backed securities, this standard requiresinstitutions to value assets at fire-sale prices. This creates a capitalshortfall on paper. Using the economic value standard as bank examineshave traditionally done will immediately correct the capital shortfallsexperienced by many institutions.

2. Require the Securities and Exchange Commission torestrictingnaked short sells permanently

This bill will require SEC to implement a rule that blocks nakedselling, selling a stock short without first borrowing the shares orensuring the shares can be borrowed. Such practices many times harm thecompanies represented in the sales and hurt their efforts to raisecapital. There is no economic value produced by naked short sales, butsignificant negative effects.

3. Require the Securities and Exchange Commission torestore theup-tick rule permanently.

This bill will require SEC to implement a rule that blocks short saleswithout an up-tick in the market. On September 19, 2008, the SECapproved a temporary pause of short selling in financial companies “toprotect the integrity and quality of the securities market andstrengthen investor confidence.” This rule prevents market crashesbrought on by irrational short term market behavior.

4. “Net Worth Certificate Program”

This bill will require FDIC to implement a net worth certificateprogram. The FDIC would determine banks with short-term capital needsand the ability to financially recover in the foreseeable future. Forthose entities that qualify, the FDIC should purchase net worthcertificates in these institutions. In exchange, these institutionsissue promissory notes to repay the FDIC, counting the amount “borrowed”as capital on their balance sheets. This exchange provides short termcapital, with not cash outlay. Interest rates on the certificates andthe FDIC notes should be identical so no subsidy is necessary.

Participating banks must be subject to strict oversight by the FDICincluding oversight of top executive compensation and if necessary theremoval of poor management. Financial records and business plans shouldbe subject to scrutiny while participating in the program.

In 1982, Congress approved a program, known as the Net Worth CertificateProgram, that allowed banks and thrifts to apply for immediate capitalassistance. From 1982 to 1993, banks with total assets of $40 billionparticipated in the program. The majority of these banks, 75%, requiredno further assistance beyond the certificate program.

5. Increase the FDIC Insurance limit from $100,000 to$250,000.

The bill will require the FDIC raise its limit to provide depositorsconfidence that their money is safe and help eliminate runs on bankswhich are destabilizing to the industry.