Senate Rejects Stock Restrictions On TARP Funds

Senate Rejects Stock Restrictions On TARP Funds - 5/6/2009

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Senate Rejects Stock Restrictions On TARP Funds
Jessica Dye

Securities Law 360. May 6, 2009
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EXCERPT: Effectively giving the U.S. government a stake in flagging banks and companies that accept federal bailout money, the Senate has rejected an amendment proposed by Sen. Jim DeMint, R-S.C., that sought a ban on converting Troubled Asset Relief Program funds into common stock. The amendment was one of three TARP-related provisions lawmakers tried to tack on to the Helping Families Save Their Homes Act of 2009, sponsored by Sen. Christopher Dodd, D-Conn., as the Senate pushed ahead Tuesday with its effort to enact legislation to protect homeowners' financial interests while assisting the government's efforts to address the economic crisis. The DeMint amendment failed a roll call vote, primarily along party lines, by a vote of 36-59. DeMint proposed barring the government from assuming an ownership stake in bailed-out companies, either directly, by converting TARP funds into common stock, or through future direct capital purchases. The amendment was directly aimed at preventing another situation such as the one the government currently finds itself in with General Motors Corp., in which TARP loans were converted into common stock, the senator said in a floor statement Tuesday. GM is negotiating with the U.S. Treasury to convert to equity at least 50 percent of the loans the government has made to the automaker, the company said. Thus far, the auto giant has received a $15 billion lifeline in federal loans, and it is seeking an additional $11.6 billion “Folks, we cannot let them go any further,” DeMint said. “We have lost the line between government and the private sector ...What we are here for is to develop a framework of law and predictable regulations so free markets and free people can operate. We are not set up to manage auto companies.” DeMint compared common-stock conversion of TARP funds to socialist central planning.

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