Bailout Bill Gives SEC Oversight Role Amidst Extraordinary Power for Treasury

The Emergency Economic Stabilization Act that failed to pass the House today, but which I expect to pass Congress by the end of the week, gives the SEC a crucial role in overseeing the Secretary of the Treasury as that cabinet member exercises extraordinary, but judicially reviewable power in purchasing illiquid mortgage-backed securities from financial institutions. The bill sets up an oversight body called the Financial Stability Oversight Board composed of the chairs of the SEC and the Fed, the HUD Secretary and the Director of the Federal Home Finance Agency and the Secretary of the Treasury. The Board will select its own chair, but it cannot be the Secretary. So, the new SEC Chair could be the Board chair.

The Board will meet two weeks after the Secretary's first purchase of distressed assets and monthly thereafter. The Board must report to Congress semiannually. It may also set up a credit review committee to review how the purchase of troubled assets program is being conducted.