[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7223 Introduced in House (IH)]







110th CONGRESS
  2d Session
                                H. R. 7223

  To suspend the capital gains tax, schedule the government-sponsored 
    enterprises for privatization, repeal the Humphrey-Hawkins Full 
Employment Act, and suspend mark-to-market accounting requirements, and 
                          for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 29, 2008

 Mr. Hensarling (for himself, Mr. Pearce, Mrs. Blackburn, Mr. Gohmert, 
  Mr. Brady of Texas, Mr. Doolittle, Mr. Gingrey, Mr. Jordan of Ohio, 
Mrs. Bachmann, Mr. Westmoreland, Mr. McCaul of Texas, Mrs. Schmidt, Mr. 
    Sessions, Mr. Conaway, Mr. Garrett of New Jersey, Mr. Franks of 
 Arizona, Mr. Burton of Indiana, Mr. Flake, Mr. Aderholt, Mr. Price of 
Georgia, Mr. Lamborn, Mr. Bishop of Utah, Mr. David Davis of Tennessee, 
Mr. Broun of Georgia, Mr. Culberson, Mr. Deal of Georgia, Mrs. Myrick, 
    Mr. Kuhl of New York, Ms. Foxx, Mr. McCotter, Mr. Manzullo, Mr. 
  Marchant, Mr. Carter, Mr. Barrett of South Carolina, Mr. Pitts, Mr. 
Thornberry, Mr. Wilson of South Carolina, Mr. Bartlett of Maryland, Mr. 
  Radanovich, Mr. Pence, Mr. Feeney, Mr. Kingston, Mr. Sullivan, Mrs. 
Musgrave, Mr. McHenry, Mr. Akin, Mr. Sam Johnson of Texas, Mr. Linder, 
 Mr. Rehberg, Mr. Goodlatte, and Mr. Scalise) introduced the following 
bill; which was referred to the Committee on Financial Services, and in 
addition to the Committees on Ways and Means, the Budget, Education and 
  Labor, and Rules, for a period to be subsequently determined by the 
  Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
  To suspend the capital gains tax, schedule the government-sponsored 
    enterprises for privatization, repeal the Humphrey-Hawkins Full 
Employment Act, and suspend mark-to-market accounting requirements, and 
                          for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    Short Title.--This Act may be cited as the ``Free Market Protection 
Act of 2008''.

       TITLE I--PRIVATIZATION OF GOVERNMENT-SPONSORED ENTERPRISES

SEC. 101. SHORT TITLE.

    This title may be cited as the ``Government-Sponsored Enterprises 
Free Market Reform Act of 2008''.

SEC. 102. DEFINITIONS.

    For purposes of this title, the following definitions shall apply:
            (1) Charter.--The term ``charter'' means--
                    (A) with respect to the Federal National Mortgage 
                Association, the Federal National Mortgage Association 
                Charter Act (12 U.S.C. 1716 et seq.); and
                    (B) with respect to the Federal Home Loan Mortgage 
                Corporation, the Federal Home Loan Mortgage Corporation 
                Act (12 U.S.C. 1451 et seq.).
            (2) Director.--The term ``Director'' means the Director of 
        the Federal Housing Finance Agency.
            (3) Enterprise.--The term ``enterprise'' means--
                    (A) the Federal National Mortgage Association; and
                    (B) the Federal Home Loan Mortgage Corporation.
            (4) Guarantee.--The term ``guarantee'' means, with respect 
        to an enterprise, the credit support of the enterprise that is 
        provided by the Federal Government through its charter as a 
        government-sponsored enterprise.

SEC. 103. TERMINATION OF CURRENT CONSERVATORSHIP.

    (a) In General.--Upon the expiration of the period referred to in 
subsection (b), the Director of the Federal Housing Finance Agency 
shall determine, with respect to each enterprise, if the enterprise is 
financially viable at that time and--
            (1) if the Director determines that the enterprise is 
        financially viable, immediately take all actions necessary to 
        terminate the conservatorship for each of the enterprises; or
            (2) if the Director determines that the enterprise is not 
        financially viable, immediately appoint the Federal Housing 
        Finance Agency as receiver under section 1367 of the Federal 
        Housing Enterprises Financial Safety and Soundness Act of 1992 
        and carry out such receivership under the authority of such 
        section.
    (b) Timing.--The period referred to in this subsection is, with 
respect to an enterprise--
            (1) except as provided in paragraph (2), the 24-month 
        beginning upon the date of the enactment of this Act; or
            (2) if the Director determines before the expiration of the 
        period referred to in paragraph (1) that the financial markets 
        would be adversely affected without the extension of such 
        period under this paragraph with respect to that enterprise, 
        the 30-month period beginning upon the date of the enactment of 
        this Act.
    (c) Financial Viability.--The Director may not determine that an 
enterprise is financially viable for purposes of subsection (a) if the 
Director determines that any of the conditions for receivership set 
forth in paragraph (3) or (4) of section 1367(a) of the Federal Housing 
Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 
4617(a)) exists at the time with respect to the enterprise.

SEC. 104. LIMITATION OF ENTERPRISE AUTHORITY UPON EMERGENCE FROM 
              CONSERVATORSHIP.

    (a) Revised Authority.--Upon the expiration of the period referred 
to in section 103(b), if the Director makes the determination under 
section 103(a)(1), the following provisions shall take effect:
            (1) Portfolio limitations.--Subtitle B of title XIII of the 
        Housing and Community Development Act of 1992 (12 U.S.C. 4611 
        et seq.) is amended by adding at the end the following new 
        section:

``SEC. 1369E. RESTRICTION ON MORTGAGE ASSETS OF ENTERPRISES.

    ``(a) Restriction.--No enterprise shall own, as of any applicable 
date in this subsection or thereafter, mortgage assets in excess of--
            ``(1) upon the expiration of the period referred to in 
        section 103(b) of the Government-Sponsored Enterprises Free 
        Market Reform Act of 2008, $850,000,000,000; or
            ``(2) on December 31 of each year thereafter, 80.0 percent 
        of the aggregate amount of mortgage assets of the enterprise as 
        of December 31 of the immediately preceding calendar year;
except that in no event shall an enterprise be required under this 
section to own less than $250,000,000,000 in mortgage assets.
    ``(b) Definition of Mortgage Assets.--For purposes of this section, 
the term `mortgage assets' means, with respect to an enterprise, assets 
of such enterprise consisting of mortgages, mortgage loans, mortgage-
related securities, participation certificates, mortgage-backed 
commercial paper, obligations of real estate mortgage investment 
conduits and similar assets, in each case to the extent such assets 
would appear on the balance sheet of such enterprise in accordance with 
generally accepted accounting principles in effect in the United States 
as of September 7, 2008 (as set forth in the opinions and 
pronouncements of the Accounting Principles Board and the American 
Institute of Certified Public Accountants and statements and 
pronouncements of the Financial Accounting Standards Board from time to 
time; and without giving any effect to any change that may be made 
after September 7, 2008, in respect of Statement of Financial 
Accounting Standards No. 140 or any similar accounting standard).''.
            (2) Increase in minimum capital requirement.--Section 1362 
        of the Federal Housing Enterprises Financial Safety and 
        Soundness Act of 1992 (12 U.S.C. 4612), as amended by section 
        1111 of the Housing and Economic Recovery Act of 2008 (Public 
        Law 110-289), is amended--
                    (A) in subsection (a), by striking ``For purposes 
                of this subtitle, the minimum capital level for each 
                enterprise shall be'' and inserting ``The minimum 
                capital level established under subsection (g) for each 
                enterprise may not be lower than'';
                    (B) in subsection (c)--
                            (i) by striking ``subsections (a) and'' and 
                        inserting ``subsection'';
                            (ii) by striking ``regulated entities'' the 
                        first place such term appears and inserting 
                        ``Federal Home Loan Banks'';
                            (iii) by striking ``for the enterprises,'';
                            (iv) by striking ``, or for both the 
                        enterprises and the banks,'';
                            (v) by striking ``the level specified in 
                        subsection (a) for the enterprises or''; and
                            (vi) by striking ``the regulated entities 
                        operate'' and inserting ``such banks operate'';
                    (C) in subsection (d)(1)--
                            (i) by striking ``subsections (a) and'' and 
                        inserting ``subsection''; and
                            (ii) by striking ``regulated entity'' each 
                        place such term appears and inserting ``Federal 
                        home loan bank'';
                    (D) in subsection (e), by striking ``regulated 
                entity'' each place such term appears and inserting 
                ``Federal home loan bank'';
                    (E) in subsection (f)--
                            (i) by striking ``the amount of core 
                        capital maintained by the enterprises,''; and
                            (ii) by striking ``regulated entities'' and 
                        inserting ``banks''; and
                    (F) by adding at the end the following new 
                subsection:
    ``(g) Establishment of Revised Minimum Capital Levels.--
            ``(1) In general.--The Director shall cause the enterprises 
        to achieve and maintain adequate capital by establishing 
        minimum levels of capital for such the enterprises and by using 
        such other methods as the Director deems appropriate.
            ``(2) Authority.--The Director shall have the authority to 
        establish such minimum level of capital for an enterprise in 
        excess of the level specified under subsection (a) as the 
        Director, in the Director's discretion, deems to be necessary 
        or appropriate in light of the particular circumstances of the 
        enterprise.
    ``(h) Failure To Maintain Revised Minimum Capital Levels.--
            ``(1) Unsafe and unsound practice or condition.--Failure of 
        a enterprise to maintain capital at or above its minimum level 
        as established pursuant to subsection (c) of this section may 
        be deemed by the Director, in his discretion, to constitute an 
        unsafe and unsound practice or condition within the meaning of 
        this title.
            ``(2) Directive to achieve capital level.--
                    ``(A) Authority.--In addition to, or in lieu of, 
                any other action authorized by law, including paragraph 
                (1), the Director may issue a directive to an 
                enterprise that fails to maintain capital at or above 
                its required level as established pursuant to 
                subsection (c) of this section.
                    ``(B) Plan.--Such directive may require the 
                enterprise to submit and adhere to a plan acceptable to 
                the Director describing the means and timing by which 
                the enterprise shall achieve its required capital 
                level.
                    ``(C) Enforcement.--Any such directive issued 
                pursuant to this paragraph, including plans submitted 
                pursuant thereto, shall be enforceable under the 
                provisions of subtitle C of this title to the same 
                extent as an effective and outstanding order issued 
                pursuant to subtitle C of this title which has become 
                final.
            ``(3) Adherence to plan.--
                    ``(A) Consideration.--The Director may consider 
                such enterprise's progress in adhering to any plan 
                required under this subsection whenever such enterprise 
                seeks the requisite approval of the Director for any 
                proposal which would divert earnings, diminish capital, 
                or otherwise impede such enterprise's progress in 
                achieving its minimum capital level.
                    ``(B) Denial.--The Director may deny such approval 
                where it determines that such proposal would adversely 
                affect the ability of the enterprise to comply with 
                such plan.''.
            (3) Repeal of increases to conforming loan limits.--
                    (A) Repeal of temporary increase in economic 
                stimulus act.--Section 201 of the Economic Stimulus Act 
                of 2008 (Public Law 110-185) is hereby repealed.
                    (B) Repeal of general limit and permanent high-cost 
                area increase.--Paragraph (2) of section 302(b) of the 
                Federal National Mortgage Association Charter Act (12 
                U.S.C. 1717(b)(2)) and paragraph (2) of section 305(a) 
                of the Federal Home Loan Mortgage Corporation Act (12 
                U.S.C. 1454(a)(2)) are each amended to read as such 
                sections were in effect immediately before the 
                enactment of the Housing and Economic Recovery Act of 
                2008 (Public Law 110-289).
                    (C) Repeal of new housing price index.--Section 
                1322 of the Federal Housing Enterprises Financial 
                Safety and Soundness Act of 1992, as added by section 
                1124(d) of the Housing and Economic Recovery Act of 
                2008 (Public Law 110-289), is hereby repealed.
                    (D) Repeal.--Section 1124 of the Housing and 
                Economic Recovery Act of 2008 (Public Law 110-289) is 
                hereby repealed.
                    (E) Establishment of conforming loan limit.--For 
                the year in which the expiration of the period referred 
                to in section 103(b) of this title occurs, the 
                limitations governing the maximum original principal 
                obligation of conventional mortgages that may be 
                purchased by the Federal National Mortgage Association 
                and the Federal Home Loan Mortgage Corporation, 
                referred to in section 302(b)(2) of the Federal 
                National Mortgage Association Charter Act (12 U.S.C. 
                1717(b)(2)) and section 305(a)(2) of the Federal Home 
                Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)), 
                respectively, shall be considered to be--
                            (i) $417,000 for a mortgage secured by a 
                        single-family residence,
                            (ii) $533,850 for a mortgage secured by a 
                        2-family residence,
                            (iii) $645,300 for a mortgage secured by a 
                        3-family residence, and
                            (iv) $801,950 for a mortgage secured by a 
                        4-family residence,
                and such limits shall be adjusted effective each 
                January 1 thereafter in accordance with such sections 
                302(b)(2) and 305(a)(2).
                    (F) Prohibition of purchase of mortgages exceeding 
                median area home price.--
                            (i) Fannie mae.--Section 302(b)(2) of the 
                        Federal National Mortgage Association Charter 
                        Act (12 U.S.C. 1717(b)(2)) is amended by adding 
                        at the end the following new sentence: 
                        ``Notwithstanding any other provision of this 
                        title, the corporation may not purchase any 
                        mortgage for a property having a principal 
                        obligation that exceeds the median home price, 
                        for properties of the same size, for the area 
                        in which such property subject to the mortgage 
                        is located.''.
                            (ii) Freddie mac.--Section 305(a)(2) of the 
                        Federal Home Loan Mortgage Corporation Act (12 
                        U.S.C. 1454(a)(2)) is amended by adding at the 
                        end the following new sentence: 
                        ``Notwithstanding any other provision of this 
                        title, the Corporation may not purchase any 
                        mortgage for a property having a principal 
                        obligation that exceeds the median home price, 
                        for properties of the same size, for the area 
                        in which such property subject to the mortgage 
                        is located.''.
            (4) Requirement to pay state and local taxes.--
                    (A) Fannie mae.--Paragraph (2) of section 309(c) of 
                the Federal National Mortgage Association Charter Act 
                (12 U.S.C. 1723a(c)(2)) is amended--
                            (i) by striking ``shall be exempt from'' 
                        and inserting ``shall be subject to''; and
                            (ii) by striking ``except that any'' and 
                        inserting ``and any''.
                    (B) Freddie mac.--Section 303(e) of the Federal 
                Home Loan Mortgage Corporation Act (12 U.S.C. 1452(e)) 
                is amended--
                            (i) by striking ``shall be exempt from'' 
                        and inserting ``shall be subject to''; and
                            (ii) by striking ``except that any'' and 
                        inserting ``and any''.
            (5) Repeals relating to registration of securities.--
                    (A) Fannie mae.--
                            (i) Mortgage-backed securities.--Section 
                        304(d) of the Federal National Mortgage 
                        Association Charter Act (12 U.S.C. 1719(d)) is 
                        amended by striking the fourth sentence.
                            (ii) Subordinate obligations.--Section 
                        304(e) of the Federal National Mortgage 
                        Association Charter Act (12 U.S.C. 1719(e)) is 
                        amended by striking the fourth sentence.
                    (B) Freddie mac.--Section 306 of the Federal Home 
                Loan Mortgage Corporation Act (12 U.S.C. 1455) is 
                amended by striking subsection (g).
            (6) Recoupment of costs for federal guarantee.--
                    (A) Assessments.--The Director of the Federal 
                Housing Finance Agency shall establish and collect from 
                each enterprise assessments in the amount determined 
                under subparagraph (B). In determining the method and 
                timing for making such assessments, the Director shall 
                take into consideration the determinations and 
                conclusions of the study under subsection (b) of this 
                section.
                    (B) Determination of costs of guarantee.--
                Assessments under subparagraph (A) with respect to an 
                enterprise shall be in such amount as the Director 
                determines necessary to recoup to the Federal 
                Government the full value of the benefit the enterprise 
                receives from the guarantee provided by the Federal 
                Government for the obligations and financial viability 
                of the enterprise, based upon the dollar value of such 
                benefit in the market to such enterprise when not 
                operating under conservatorship or receivership. To 
                determine such amount, the Director shall establish a 
                risk-based pricing mechanism as the Director considers 
                appropriate, taking into consideration the 
                determinations and conclusions of the study under 
                subsection (b) of this section.
                    (C) Treatment of recouped amounts.--The Director 
                shall cover into the general fund of the Treasury any 
                amounts received from assessments made under this 
                paragraph.
    (b) GAO Study Regarding Recoupment of Costs for Federal Government 
Guarantee.--The Comptroller General of the United States shall conduct 
a study to determine a risk-based pricing mechanism to accurately 
determine the value of the benefit the enterprises receive from the 
guarantee provided by the Federal Government for the obligations and 
financial viability of the enterprises. Such study shall establish a 
dollar value of such benefit in the market to each enterprise when not 
operating under conservatorship or receivership, shall analyze various 
methods of the Federal Government assessing a charge for such value 
received (including methods involving an annual fee or a fee for each 
mortgage purchased or securitized), and shall make a recommendation of 
the best such method for assessing such charge. Not later than 12 
months after the date of the enactment of this Act, the Comptroller 
General shall submit to the Congress a report setting forth the 
determinations and conclusions of such study.

SEC. 105. REQUIREMENT TO PERIODICALLY RENEW CHARTER UNTIL WIND DOWN AND 
              DISSOLUTION.

    (a) Required Renewal; Wind Down and Dissolution Upon Non-Renewal.--
Upon the expiration of the 3-year period that begins upon the 
expiration of the period referred to in section 103(b), unless the 
charter of an enterprise is renewed pursuant to subsection (b) of this 
section, section 106 (relating to wind down of operations and 
dissolution of enterprise) shall apply to the enterprise.
    (b) Renewal Procedure.--
            (1) Application; timing.--The Director shall provide for 
        each enterprise to apply to the Director, before the expiration 
        of the 3-year period under subsection (a), for renewal of the 
        charter of the enterprise.
            (2) Standard.--The Director shall approve the application 
        of an enterprise for the renewal of the charter of the 
        enterprise if--
                    (A) the application includes a certification by the 
                enterprise that the enterprise is financially sound and 
                is complying with all provisions of, and amendments 
                made by, section 104 of this title applicable to such 
                enterprise; and
                    (B) the Director verifies that the certification 
                made pursuant to subparagraph (A) is accurate.
    (c) Option To Reapply.--Nothing in this section may be construed to 
require an enterprise to apply under this section for renewal of the 
charter of the enterprise.

SEC. 106. REQUIRED WIND DOWN OF OPERATIONS AND DISSOLUTION OF 
              ENTERPRISE.

    (a) Applicability.--This section shall apply to an enterprise--
            (1) upon the expiration of the 3-year period referred to in 
        such section 105(a), to the extent provided in such section; 
        and
            (2) if this section has not previously applied to the 
        enterprise, upon the expiration of the 6-year period that 
        begins upon the expiration of the period referred to in section 
        103(b).
    (b) Wind Down.--Upon the applicability of this section to an 
enterprise, the Director and the Secretary of the Treasury shall 
jointly take such action, and may prescribe such regulations and 
procedures, as may be necessary to wind down the operations of an 
enterprise as an entity chartered by the United States Government over 
the duration of the 10-year period beginning upon the applicability of 
this section to the enterprise (pursuant to subsection (a)) in an 
orderly manner consistent with this title and the ongoing obligations 
of the enterprise.
    (c) Division of Assets and Liabilities; Authority To Establish 
Holding Corporation and Dissolution Trust Fund.--The action and 
procedures required under subsection (b)--
            (1) shall include the establishment and execution of plans 
        to provide for an equitable division and distribution of assets 
        and liabilities of the enterprise, including any liability of 
        the enterprise to the United States Government or a Federal 
        reserve bank that may continue after the end of the period 
        described in subsection(b); and
            (2) may provide for establishment of--
                    (A) a holding corporation organized under the laws 
                of any State of the United States or the District of 
                Columbia for the purposes of the reorganization and 
                restructuring of the enterprise; and
                    (B) one or more trusts to which to transfer--
                            (i) remaining debt obligations of the 
                        enterprise, for the benefit of holders of such 
                        remaining obligations; or
                            (ii) remaining mortgages held for the 
                        purpose of backing mortgage-backed securities, 
                        for the benefit of holders of such remaining 
                        securities.
    (d) Repeal of Charter.--Effective upon the expiration of the 10-
year period referred to in subsection (b) for an enterprise, the 
charter for the enterprise is repealed, except that the provisions of 
such charter in effect immediately before such repeal shall continue to 
apply with respect to the rights and obligations of any holders of 
outstanding debt obligations and mortgage-backed securities of the 
enterprise.

                       TITLE II--PRICE STABILITY

SEC. 201. SHORT TITLE.

    This title may be cited as the ``Price Stability Act of 2008''.

SEC. 202. FINDINGS; STATEMENT OF POLICY.

    (a) Findings.--The Congress finds the following:
            (1) Price stability is a prerequisite for sustainable long-
        term economic growth, job creation, and moderate interest 
        rates.
            (2) Inflation erodes the value of Americans' income and 
        savings.
            (3) Inflation distorts the pricing system and the efficient 
        allocation of resources in the economy.
            (4) Inflation makes long-term planning difficult and raises 
        the effective tax rate on capital, thereby impeding investment.
            (5) Through its determination of monetary policy, the Board 
        of Governors of the Federal Reserve System is ultimately 
        responsible for controlling the long-run rate of inflation in 
        the economy.
            (6) The multiple policy goals of the Full Employment and 
        Balanced Growth Act of 1978 cause confusion and ambiguity about 
        the appropriate role and aims of monetary policy, which can add 
        to volatility in economic activity and financial markets.
            (7) There is a need for the Congress to clarify the proper 
        role of the Board of Governors of the Federal Reserve System in 
        economic policymaking, in order to achieve the best environment 
        for long-term economic growth and job creation.
            (8) An explicit price stability goal would promote 
        transparency, accountability and credibility in monetary 
        policy.
            (9) Price stability should be the primary long-term goal of 
        the Board of Governors of the Federal Reserve.
    (b) Statement of Policy.--It is the policy of the United States 
that--
            (1) the principal economic responsibilities of the 
        Government are to establish and ensure an environment that is 
        conducive to both long-term economic growth and increases in 
        living standards, by establishing and maintaining free markets, 
        low taxes, respect for private property, and the stable, long-
        term purchasing power of the United States currency; and
            (2) the primary long-term goal of the Board of Governors of 
        the Federal Reserve System should be to promote price 
        stability.

SEC. 203. MONETARY POLICY.

    (a) Amendment to the Federal Reserve Act.--Section 2A of the 
Federal Reserve Act (12 U.S.C. 225a) is amended to read as follows:

``SEC. 2A. MONETARY POLICY.

    ``(a) Price Stability.--The Board and the Federal Open Market 
Committee (hereafter in this section referred to as the `Committee') 
shall--
            ``(1) establish an explicit numerical definition of the 
        term `price stability'; and
            ``(2) maintain a monetary policy that effectively promotes 
        long-term price stability.
    ``(b) Market Stability and Liquidity.--Subsection (a) shall not be 
construed as a limitation on the authority or responsibility of the 
Board--
            ``(1) to provide liquidity to markets in the event of a 
        disruption that threatens the smooth functioning and stability 
        of the financial sector; or
            ``(2) to serve as a lender of last resort under this Act 
        when the Board determines such action is necessary.
    ``(c) Congressional Consultation.--Not later than February 20 and 
July 20 of each year, the Board shall consult with the Congress at 
semiannual hearings before the Committee on Banking, Housing, and Urban 
Affairs of the Senate and the Committee on Financial Services of the 
House of Representatives, about the objectives and plans of the Board 
and the Committee with respect to achieving and maintaining price 
stability.
    ``(d) Congressional Oversight.--The Board shall, concurrent with 
each semiannual hearing required by subsection (c), submit a written 
report to the Congress containing--
            ``(1) numerical measures to help assess the extent to which 
        the Board and the Committee are achieving and maintaining price 
        stability in accordance with subsection (a);
            ``(2) a description of the intermediate variables used by 
        the Board to gauge the prospects for achieving the objective of 
        price stability; and
            ``(3) the definition, or any modifications thereto, of the 
        term `price stability' established in accordance with 
        subsection (a)(1).''.
    (b) Compliance Estimate.--Concurrent with the first semiannual 
hearing required by section 2A(b) of the Federal Reserve Act (as 
amended by subsection (a) of this section) following the date of 
enactment of this Act, the Board of Governors of the Federal Reserve 
System shall submit to the Congress a written estimate of the length of 
time it will take for the Board and the Federal Open Market Committee 
to fully achieve price stability. The Board and the Committee shall 
take into account any potential short-term effects on employment and 
output in complying with the goal of price stability.

SEC. 204. REPEAL OF OBSOLETE PROVISIONS.

    (a) Full Employment and Balanced Growth Act of 1978.--The Full 
Employment and Balanced Growth Act of 1978 (15 U.S.C. 3101 et seq.) is 
hereby repealed.
    (b) Employment Act of 1946.--The Employment Act of 1946 (15 U.S.C. 
1021 et seq.) is amended--
            (1) in section 3 (15 U.S.C. 1022)--
                    (A) in the section heading, by striking ``and 
                short-term economic goals and policies'';
                    (B) by striking ``(a)''; and
                    (C) by striking ``in accord with section 11(c) of 
                this Act'' and all that follows through the end of the 
                section and inserting ``in accordance with section 
                5(c).'';
            (2) in section 9(b) (15 U.S.C. 1022f(b)), by striking ``, 
        the Full Employment and Balanced Growth Act of 1978,'';
            (3) in section 10 (15 U.S.C. 1023)--
                    (A) in subsection (a), by striking ``in the light 
                of the policy declared in section 2'';
                    (B) in subsection (e)(1), by striking ``section 9'' 
                and inserting ``section 3''; and
                    (C) in the matter immediately following paragraph 
                (2) of subsection (e), by striking ``and the Full 
                Employment and Balanced Growth Act of 1978'';
            (4) by striking section 2;
            (5) by striking sections 4, 5, 6, 7, and 8; and
            (6) by redesignating sections 3, 9, 10, and 11 as sections 
        2, 3, 4, and 5, respectively.
    (c) Congressional Budget Act of 1974.--Title III of the 
Congressional Budget Act of 1974 (2 U.S.C. 631 et seq.) is amended--
            (1) in section 301--
                    (A) in subsection (b), by striking paragraph (1) 
                and redesignating paragraphs (2) through (9) as 
                paragraphs (1) through (8), respectively;
                    (B) in subsection (d), in the second sentence, by 
                striking ``the fiscal policy'' and all that follows 
                through the end of the sentence and inserting ``fiscal 
                policy.'';
                    (C) in subsection (e)(1), in the second sentence, 
                by striking ``as to short-term and medium-term goals''; 
                and
                    (D) by striking subsection (f) and inserting the 
                following:
    ``(f) Repealed''; and
            (2) in section 305--
                    (A) in subsection (a)(3), by inserting before the 
                period at the end ``, as described in section 2 of the 
                Price Stability Act of 2008'';
                    (B) in subsection (a)(4)--
                            (i) by striking ``House sets forth the 
                        economic goals'' and all that follows through 
                        ``designed to achieve,'' and inserting ``House 
                        of Representatives sets forth the economic 
                        goals and policies, as described in section 2 
                        of the Price Stability Act of 2008,''; and
                            (ii) by striking ``such goals,'' and all 
                        that follows through the end of the paragraph 
                        and inserting ``such goals and policies.'';
                    (C) in subsection (b)(3), by inserting before the 
                period at the end ``, as described in section 2 of the 
                Price Stability Act of 2008''; and
                    (D) in subsection (b)(4)--
                            (i) by striking ``goals (as'' and all that 
                        follows through ``designed to achieve,'' and 
                        inserting ``goals and policies, as described in 
                        section 2 of the Price Stability Act of 
                        2008,''; and
                            (ii) by striking ``such goals,'' and all 
                        that follows through the end of the paragraph 
                        and inserting ``such goals and policies.''.

                       TITLE III--TAX PROVISIONS

SEC. 301. TEMPORARY ZERO PERCENT CAPITAL GAINS RATE FOR INDIVIDUALS AND 
              CORPORATIONS.

    (a) In General.--Subchapter A of chapter 1 of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new part:

``PART VIII--TEMPORARY ZERO PERCENT CAPITAL GAINS RATE FOR INDIVIDUALS 
                            AND CORPORATIONS

``Sec. 59B. Temporary zero percent capital gains rate for individuals 
                            and corporations.

``SEC. 59B. TEMPORARY ZERO PERCENT CAPITAL GAINS RATE FOR INDIVIDUALS 
              AND CORPORATIONS.

    ``(a) Application to Individuals.--In the case of a specified 
recognition event occurring on or after September 22, 2008, and on or 
before December 31, 2010--
            ``(1) In general.--Section 1(h)(1) shall be applied by 
        substituting `shall not exceed a tax computed at the rates and 
        in the same manner as if this subsection had not been enacted 
        on taxable income reduced by the net capital gain.' for `shall 
        not exceed' and all that follows.
            ``(2) Alternative minimum tax.--Section 55(b)(3) shall be 
        applied by substituting `shall not exceed the amount determined 
        under such first sentence computed at the rates and in the same 
        manner as if this paragraph had not been enacted on the taxable 
        excess reduced by the net capital gain.' for `shall not exceed' 
        and all that follows through the end of the first sentence.
    ``(b) Application to Corporations.--In the case of a specified 
recognition event occurring on or after September 22, 2008, and on or 
before December 31, 2010--
            ``(1) In general.--Section 1201 shall be applied--
                    ``(A) by substituting `0 percent' for `35 percent' 
                both places it appears, and
                    ``(B) by treating `net capital gain' as having the 
                meaning given such term by section 1(h)(11).
            ``(2) Alternative minimum tax.--For purposes of section 55, 
        the amount determined under subsection (b)(1)(B)(i) of such 
        section shall not exceed the sum of--
                    ``(A) the amount determined under such subsection 
                computed at the rates and in the same manner as if this 
                paragraph had not been enacted on the taxable excess 
                reduced by the net capital gain (as defined in section 
                1(h)(11)), plus
                    ``(B) the amount determined under section 1201.
    ``(c) Technical Provisions.--In the case of a specified recognition 
event occurring on or after September 22, 2008, and on or before 
December 31, 2010--
            ``(1) Section 1445(e)(1) shall be applied by substituting 
        `0 percent' for `35 percent (or, to the extent provided in 
        regulations, 15 percent)'.
            ``(2) Section 1445(e)(2) shall be applied by substituting 
        `0 percent' for `35 percent'.
            ``(3) Section 7518(g)(6)(A) shall be applied by 
        substituting `0 percent' for `15 percent (34 percent in the 
        case of a corporation)'.
            ``(4) Section 607(h)(6)(A) of the Merchant Marine Act, 1936 
        shall be applied by substituting `0 percent' for `15 percent 
        (34 percent in the case of a corporation)'.
    ``(d) Specified Recognition Event.--For purposes of this section, 
the term `specified recognition event' means--
            ``(1) the sale or exchange of a capital asset held for more 
        than 1 year, and
            ``(2) the receipt of qualified dividend income (as defined 
        in section 1(h)(11)).
    ``(e) Application to Transitional Years.--The Secretary shall issue 
regulations providing appropriate transition rules for the application 
of the provisions of this title referred to in subsections (a) or (b) 
for taxable years which include September 22, 2008, or December 31, 
2010.''.
    (b) Conforming Amendment.--The table of parts for subchapter A of 
chapter 1 of such Code is amended by adding at the end the following 
new item:

``Part VIII--Temporary Zero Percent Capital Gains Rate for Individuals 
                          and Corporations''.

    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        ending after September 22, 2008.
            (2) Withholding.--Paragraphs (1) and (2) of section 59B(c) 
        of the Internal Revenue Code of 1986, as added by this section, 
        shall apply to dispositions and distributions after such date.

SEC. 302. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF DETERMINING GAIN 
              OR LOSS.

    (a) In General.--Part II of subchapter O of chapter 1 (relating to 
basis rules of general application) is amended by redesignating section 
1023 as section 1024 and by inserting after section 1022 the following 
new section:

``SEC. 1023. INDEXING OF CERTAIN ASSETS FOR PURPOSES OF DETERMINING 
              GAIN OR LOSS.

    ``(a) General Rule.--
            ``(1) Indexed basis substituted for adjusted basis.--Solely 
        for purposes of determining gain or loss on the sale or other 
        disposition by a taxpayer (other than a corporation) of an 
        indexed asset which has been held for more than 3 years, the 
        indexed basis of the asset shall be substituted for its 
        adjusted basis.
            ``(2) Exception for depreciation, etc.--The deductions for 
        depreciation, depletion, and amortization shall be determined 
        without regard to the application of paragraph (1) to the 
        taxpayer or any other person.
            ``(3) Written documentation requirement.--Paragraph (1) 
        shall apply only with respect to indexed assets for which the 
        taxpayer has written documentation of the original purchase 
        price paid or incurred by the taxpayer to acquire such asset.
    ``(b) Indexed Asset.--
            ``(1) In general.--For purposes of this section, the term 
        `indexed asset' means--
                    ``(A) common stock in a C corporation (other than a 
                foreign corporation), or
                    ``(B) tangible property,
        which is a capital asset or property used in the trade or 
        business (as defined in section 1231(b)).
            ``(2) Stock in certain foreign corporations included.--For 
        purposes of this section--
                    ``(A) In general.--The term `indexed asset' 
                includes common stock in a foreign corporation which is 
                regularly traded on an established securities market.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to--
                            ``(i) stock of a foreign investment 
                        company,
                            ``(ii) stock in a passive foreign 
                        investment company (as defined in section 
                        1296),
                            ``(iii) stock in a foreign corporation held 
                        by a United States person who meets the 
                        requirements of section 1248(a)(2), and
                            ``(iv) stock in a foreign personal holding 
                        company.
                    ``(C) Treatment of american depository receipts.--
                An American depository receipt for common stock in a 
                foreign corporation shall be treated as common stock in 
                such corporation.
    ``(c) Indexed Basis.--For purposes of this section--
            ``(1) General rule.--The indexed basis for any asset is--
                    ``(A) the adjusted basis of the asset, increased by
                    ``(B) the applicable inflation adjustment.
            ``(2) Applicable inflation adjustment.--The applicable 
        inflation adjustment for any asset is an amount equal to--
                    ``(A) the adjusted basis of the asset, multiplied 
                by
                    ``(B) the percentage (if any) by which--
                            ``(i) the gross domestic product deflator 
                        for the last calendar quarter ending before the 
                        asset is disposed of, exceeds
                            ``(ii) the gross domestic product deflator 
                        for the last calendar quarter ending before the 
                        asset was acquired by the taxpayer.
        The percentage under subparagraph (B) shall be rounded to the 
        nearest \1/10\ of 1 percentage point.
            ``(3) Gross domestic product deflator.--The gross domestic 
        product deflator for any calendar quarter is the implicit price 
        deflator for the gross domestic product for such quarter (as 
        shown in the last revision thereof released by the Secretary of 
        Commerce before the close of the following calendar quarter).
    ``(d) Suspension of Holding Period Where Diminished Risk of Loss; 
Treatment of Short Sales.--
            ``(1) In general.--If the taxpayer (or a related person) 
        enters into any transaction which substantially reduces the 
        risk of loss from holding any asset, such asset shall not be 
        treated as an indexed asset for the period of such reduced 
        risk.
            ``(2) Short sales.--
                    ``(A) In general.--In the case of a short sale of 
                an indexed asset with a short sale period in excess of 
                3 years, for purposes of this title, the amount 
                realized shall be an amount equal to the amount 
                realized (determined without regard to this paragraph) 
                increased by the applicable inflation adjustment. In 
                applying subsection (c)(2) for purposes of the 
                preceding sentence, the date on which the property is 
                sold short shall be treated as the date of acquisition 
                and the closing date for the sale shall be treated as 
                the date of disposition.
                    ``(B) Short sale period.--For purposes of 
                subparagraph (A), the short sale period begins on the 
                day that the property is sold and ends on the closing 
                date for the sale.
    ``(e) Treatment of Regulated Investment Companies and Real Estate 
Investment Trusts.--
            ``(1) Adjustments at entity level.--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, the adjustment under subsection (a) 
                shall be allowed to any qualified investment entity 
                (including for purposes of determining the earnings and 
                profits of such entity).
                    ``(B) Exception for corporate shareholders.--Under 
                regulations--
                            ``(i) in the case of a distribution by a 
                        qualified investment entity (directly or 
                        indirectly) to a corporation--
                                    ``(I) the determination of whether 
                                such distribution is a dividend shall 
                                be made without regard to this section, 
                                and
                                    ``(II) the amount treated as gain 
                                by reason of the receipt of any capital 
                                gain dividend shall be increased by the 
                                percentage by which the entity's net 
                                capital gain for the taxable year 
                                (determined without regard to this 
                                section) exceeds the entity's net 
                                capital gain for such year determined 
                                with regard to this section, and
                            ``(ii) there shall be other appropriate 
                        adjustments (including deemed distributions) so 
                        as to ensure that the benefits of this section 
                        are not allowed (directly or indirectly) to 
                        corporate shareholders of qualified investment 
                        entities.
                For purposes of the preceding sentence, any amount 
                includible in gross income under section 852(b)(3)(D) 
                shall be treated as a capital gain dividend and an S 
                corporation shall not be treated as a corporation.
                    ``(C) Exception for qualification purposes.--This 
                section shall not apply for purposes of sections 851(b) 
                and 856(c).
                    ``(D) Exception for certain taxes imposed at entity 
                level.--
                            ``(i) Tax on failure to distribute entire 
                        gain.--If any amount is subject to tax under 
                        section 852(b)(3)(A) for any taxable year, the 
                        amount on which tax is imposed under such 
                        section shall be increased by the percentage 
                        determined under subparagraph (B)(i)(II). A 
                        similar rule shall apply in the case of any 
                        amount subject to tax under paragraph (2) or 
                        (3) of section 857(b) to the extent 
                        attributable to the excess of the net capital 
                        gain over the deduction for dividends paid 
                        determined with reference to capital gain 
                        dividends only. The first sentence of this 
                        clause shall not apply to so much of the amount 
                        subject to tax under section 852(b)(3)(A) as is 
                        designated by the company under section 
                        852(b)(3)(D).
                            ``(ii) Other taxes.--This section shall not 
                        apply for purposes of determining the amount of 
                        any tax imposed by paragraph (4), (5), or (6) 
                        of section 857(b).
            ``(2) Adjustments to interests held in entity.--
                    ``(A) Regulated investment companies.--Stock in a 
                regulated investment company (within the meaning of 
                section 851) shall be an indexed asset for any calendar 
                quarter in the same ratio as--
                            ``(i) the average of the fair market values 
                        of the indexed assets held by such company at 
                        the close of each month during such quarter, 
                        bears to
                            ``(ii) the average of the fair market 
                        values of all assets held by such company at 
                        the close of each such month.
                    ``(B) Real estate investment trusts.--Stock in a 
                real estate investment trust (within the meaning of 
                section 856) shall be an indexed asset for any calendar 
                quarter in the same ratio as--
                            ``(i) the fair market value of the indexed 
                        assets held by such trust at the close of such 
                        quarter, bears to
                            ``(ii) the fair market value of all assets 
                        held by such trust at the close of such 
                        quarter.
                    ``(C) Ratio of 80 percent or more.--If the ratio 
                for any calendar quarter determined under subparagraph 
                (A) or (B) would (but for this subparagraph) be 80 
                percent or more, such ratio for such quarter shall be 
                100 percent.
                    ``(D) Ratio of 20 percent or less.--If the ratio 
                for any calendar quarter determined under subparagraph 
                (A) or (B) would (but for this subparagraph) be 20 
                percent or less, such ratio for such quarter shall be 
                zero.
                    ``(E) Look-thru of partnerships.--For purposes of 
                this paragraph, a qualified investment entity which 
                holds a partnership interest shall be treated (in lieu 
                of holding a partnership interest) as holding its 
                proportionate share of the assets held by the 
                partnership.
            ``(3) Treatment of return of capital distributions.--Except 
        as otherwise provided by the Secretary, a distribution with 
        respect to stock in a qualified investment entity which is not 
        a dividend and which results in a reduction in the adjusted 
        basis of such stock shall be treated as allocable to stock 
        acquired by the taxpayer in the order in which such stock was 
        acquired.
            ``(4) Qualified investment entity.--For purposes of this 
        subsection, the term `qualified investment entity' means--
                    ``(A) a regulated investment company (within the 
                meaning of section 851), and
                    ``(B) a real estate investment trust (within the 
                meaning of section 856).
    ``(f) Other Pass-Thru Entities.--
            ``(1) Partnerships.--
                    ``(A) In general.--In the case of a partnership, 
                the adjustment made under subsection (a) at the 
                partnership level shall be passed through to the 
                partners.
                    ``(B) Special rule in the case of section 754 
                elections.--In the case of a transfer of an interest in 
                a partnership with respect to which the election 
                provided in section 754 is in effect--
                            ``(i) the adjustment under section 
                        743(b)(1) shall, with respect to the transferor 
                        partner, be treated as a sale of the 
                        partnership assets for purposes of applying 
                        this section, and
                            ``(ii) with respect to the transferee 
                        partner, the partnership's holding period for 
                        purposes of this section in such assets shall 
                        be treated as beginning on the date of such 
                        adjustment.
            ``(2) S corporations.--In the case of an S corporation, the 
        adjustment made under subsection (a) at the corporate level 
        shall be passed through to the shareholders. This section shall 
        not apply for purposes of determining the amount of any tax 
        imposed by section 1374 or 1375.
            ``(3) Common trust funds.--In the case of a common trust 
        fund, the adjustment made under subsection (a) at the trust 
        level shall be passed through to the participants.
            ``(4) Indexing adjustment disregarded in determining loss 
        on sale of interest in entity.--Notwithstanding the preceding 
        provisions of this subsection, for purposes of determining the 
        amount of any loss on a sale or exchange of an interest in a 
        partnership, S corporation, or common trust fund, the 
        adjustment made under subsection (a) shall not be taken into 
        account in determining the adjusted basis of such interest.
    ``(g) Dispositions Between Related Persons.--
            ``(1) In general.--This section shall not apply to any sale 
        or other disposition of property between related persons except 
        to the extent that the basis of such property in the hands of 
        the transferee is a substituted basis.
            ``(2) Related persons defined.--For purposes of this 
        section, the term `related persons' means--
                    ``(A) persons bearing a relationship set forth in 
                section 267(b), and
                    ``(B) persons treated as single employer under 
                subsection (b) or (c) of section 414.
    ``(h) Transfers To Increase Indexing Adjustment.--If any person 
transfers cash, debt, or any other property to another person and the 
principal purpose of such transfer is to secure or increase an 
adjustment under subsection (a), the Secretary may disallow part or all 
of such adjustment or increase.
    ``(i) Special Rules.--For purposes of this section--
            ``(1) Treatment of improvements, etc.--If there is an 
        addition to the adjusted basis of any tangible property or of 
        any stock in a corporation during the taxable year by reason of 
        an improvement to such property or a contribution to capital of 
        such corporation--
                    ``(A) such addition shall never be taken into 
                account under subsection (c)(1)(A) if the aggregate 
                amount thereof during the taxable year with respect to 
                such property or stock is less than $1,000, and
                    ``(B) such addition shall be treated as a separate 
                asset acquired at the close of such taxable year if the 
                aggregate amount thereof during the taxable year with 
                respect to such property or stock is $1,000 or more.
        A rule similar to the rule of the preceding sentence shall 
        apply to any other portion of an asset to the extent that 
        separate treatment of such portion is appropriate to carry out 
        the purposes of this section.
            ``(2) Assets which are not indexed assets throughout 
        holding period.--The applicable inflation adjustment shall be 
        appropriately reduced for periods during which the asset was 
        not an indexed asset.
            ``(3) Treatment of certain distributions.--A distribution 
        with respect to stock in a corporation which is not a dividend 
        shall be treated as a disposition.
            ``(4) Section cannot increase ordinary loss.--To the extent 
        that (but for this paragraph) this section would create or 
        increase a net ordinary loss to which section 1231(a)(2) 
        applies or an ordinary loss to which any other provision of 
        this title applies, such provision shall not apply. The 
        taxpayer shall be treated as having a long-term capital loss in 
        an amount equal to the amount of the ordinary loss to which the 
        preceding sentence applies.
            ``(5) Acquisition date where there has been prior 
        application of subsection (a)(1) with respect to the 
        taxpayer.--If there has been a prior application of subsection 
        (a)(1) to an asset while such asset was held by the taxpayer, 
        the date of acquisition of such asset by the taxpayer shall be 
        treated as not earlier than the date of the most recent such 
        prior application.
    ``(j) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section.''.
    (b) Clerical Amendment.--The table of sections for part II of 
subchapter O of chapter 1 is amended by striking the item relating to 
section 1023 and by inserting after the item relating to section 1022 
the following new item:

``Sec. 1022. Indexing of certain assets for purposes of determining 
                            gain or loss.
``Sec. 1023. Cross references.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales and other dispositions of indexed assets after the date 
of the enactment of this Act, in taxable years ending after such date.

               TITLE IV--FAIR VALUE ACCOUNTING REFORM ACT

SEC. 401. FINDINGS AND PURPOSE.

    (a) Findings.--The Congress finds that--
            (1) for many purposes, fair value accounting requirements 
        can inform and protect investors;
            (2) in periods of market turmoil when there is an inactive 
        market, fair value accounting requirements can force financial 
        institutions to write down the value of a long-term, non-
        trading asset below its true economic value even though the 
        cash flow on the asset remains unimpaired and other indicia of 
        value of the asset reflect value consistent with the cash flow; 
        and
            (3) the application of fair value accounting requirements 
        on assets for which there is an inactive market has the 
        unintended effect of exacerbating economic downturns by 
        reducing the ability of financial institutions to provide 
        credit to consumers and businesses.
    (b)  Purpose.--The purpose of this Act is to--
            (1) maintain the ability of all financial institutions to 
        provide credit in periods of market stress;
            (2) permit financial institutions to maintain the economic 
        value of long term, non-trading assets in an inactive market; 
        and
            (3) continue to provide transparency to investors.

SEC. 402. DEFINITIONS.

    For purposes of this legislation, ``long-term, non-trading assets'' 
are defined as all instances in which fair value measurement is 
required under U.S. Generally Accepted Accounting Principles for which 
the company is not actively trading and for which the company has the 
ability to hold those financial instruments for an extended period of 
time.

SEC. 403. TEMPORARY SUSPENSION OF FAIR VALUE ACCOUNTING.

    (a) In General.--Effective on the date of enactment of the Troubled 
Asset Relief Act of 2008, the Securities and Exchange Commission shall 
suspend the application of fair value reporting standards to troubled 
assets held by financial institutions, as those terms are defined in 
such Act. The suspension required by this subsection shall remain in 
effect until the issuance of the guidance required in subsection (b). 
Until such guidance is issued, the fair value of these assets should be 
estimated using the best available information of the instrument's 
value, including the entity's intended use of that asset, from the 
point of view of the holder of that instrument.
    (b) Guidance.--Within 90 days of the date of enactment of this Act, 
the Securities and Exchange Commission shall issue guidance on the 
reporting requirements for long-term, non-trading assets during periods 
in which there is no active market for such assets. Such guidance 
shall:
            (1) define ``market participants'' eligible for such 
        guidance;
            (2) define an inactive market which will trigger such 
        guidance;
            (3) specify a valuation method that reflects the economic 
        value of such assets; and
            (4) determine the period in which such assets should be 
        evaluated under this method.

SEC. 404. GAO ANALYSIS OF FAIR VALUE ACCOUNTING.

    (a) In General.--The General Accountability Office shall prepare an 
analysis of the effect of fair value accounting standards on financial 
institutions. Such analysis shall--
            (1) describe the current impact of fair value accounting on 
        financial institutions during different economic cycles and 
        under different market conditions, including periods in which 
        there is an inactive market for long-term, non-trading assets 
        held by such institutions;
            (2) evaluate auditors' practices and procedures in 
        reviewing the application of fair value accounting on long-
        term, non-trading assets in an inactive market; and
            (3) describe the impact of the Securities and Exchange 
        Commission's application of fair value accounting, as 
        prescribed by such guidance required in Section 4 (b).
    (b) Timing.--The analysis required by subsection (a) shall be 
completed within 1 year of the date of enactment of this Act, and shall 
be submitted to the Committee on Financial Services of the House of 
Representatives and the Committee on Banking, Housing and Urban Affairs 
of the Senate.

                  TITLE V--MORTGAGE-BACKED SECURITIES

SEC. 501. THE INSURANCE OF MORTGAGE-BACKED SECURITIES.

    (a) Mortgage-Backed Security Insurance.--Upon the enactment of this 
Act, the timely payment of up to 100 percent of principal of and 
interest on each mortgage-backed security held by a financial 
institution on or before September 24, 2008 is hereby insured on such 
terms and conditions as determined by the Secretary consistent with 
this title, as those terms are defined in Section 111.
    (b) Necessary Actions.--The Secretary is authorized to take such 
actions as he deems necessary to carry out the authorities in this 
title, including--
            (1) appointing such employees as may be required to carry 
        out the authorities in this title and defining their duties;
            (2) entering into contracts, including contracts for the 
        services of experts and consultants as authorized by section 
        3109 of title 5, United States Code, without regard to any 
        other provision of law regarding public contracts;
            (3) designating financial institutions as financial agents 
        of the Government, and they shall perform all such reasonable 
        duties related to this title as financial agents of the 
        Government as may be required of them;
            (4) establishing vehicles that are authorized, subject to 
        supervision by the Secretary, to provide, and make payments on, 
        the insures referred to in subsection (a) and issue 
        obligations; and
            (5) issuing such regulations and other guidance as may be 
        necessary or appropriate to define terms or carry out the 
        authorities of this title.

SEC. 502. CONSIDERATIONS.

    (a) Secretary Consideration.--In exercising the authorities granted 
in this title, the Secretary shall take into consideration means for--
            (1) protecting the taxpayer;
            (2) providing stability or preventing disruption to the 
        financial markets or banking system; and
            (3) taking appropriate steps to manage any conflicts of 
        interest in the hiring of contractors or advisors.
    (b) Rulemaking Exemption.--Any regulation issued under the 
authority provided in this title shall not be subject to the rulemaking 
provisions as set forth in section 553 of title 5, United States Code.

SEC. 503. INSURANCE PREMIUMS.

    (a) Insurance Premiums.--The Secretary shall collect premiums from 
each financial institution, as such term is defined in section 111 of 
this title, in order to fund the Mortgage-Backed Securities Fund 
established in section 105 and used to satisfy obligations incurred 
under this title.
    (b) Premium Collection.--The premium collected pursuant to 
subsection (a) shall be collected from each financial institution 
notwithstanding such institution's application, if any, for insures set 
forth in section 101(a).
    (c) Authority To Base Insurance Premium on Product Risk.--In 
establishing the insurance premium under subsection (a), the Secretary 
may provide for variations in such rates according to the credit risk 
associated with the mortgage-backed security held by a financial 
institution as such term is defined in section 111.
    (d)  Sufficient Level.--The premium referred to in subsection (a) 
shall be set by the Secretary at a level necessary to maintain a level 
of funding in the Mortgage-Backed Securities Fund, as established in 
section 104, sufficient to meet anticipated claims based upon actuarial 
analysis.
    (e) Expiration.--The Secretary may cease collecting premiums set 
forth in subsection (a) if he determines the Mortgage-Backed Securities 
Fund has sufficient reserves to meet anticipated claims as described in 
subsection (d).

SEC. 504. MORTGAGE-BACKED SECURITIES FUND.

    (a) Collected Premiums.--The Secretary shall deposit premiums 
collected pursuant to section 103(a) of this title into the Mortgage-
Backed Securities Fund as established in subsection (b).
    (b) Mortgage-Backed Securities Fund.--There is hereby established a 
Mortgage-Backed Securities Fund (in this title referred to as the 
``Fund'').
    (c) Authority.--Premiums deposited in the Fund pursuant to 
subsection section (a) shall be invested in obligations of the United 
States, or kept in cash on hand or on deposit, as necessary.
    (d) Payments From the Fund.--The Secretary shall make payments from 
amounts deposited in the Fund to fulfill the obligations of the 
insurance provided to financial institutions as set forth in section 
101(a).
    (e) Fund Sufficiency.--The Secretary shall increase insurance 
premiums if he determines, after consultation with the Government 
Accountability Office, to a level sufficient to assure reserves in the 
Fund will meet anticipated needs.
    (f) Transfer Authority.--The Secretary of the Treasury is 
authorized and directed to loan to the Fund, on such terms as may be 
fixed by the Secretary, such funds as in the Secretary's judgment are 
from time to time required for purposes of this title.

SEC. 505. PAYMENT OF INSURANCE PREMIUMS.

    (a) Payment and Subrogation.--If a financial institution that holds 
a mortgage-backed security on September 24, 2008, for which insurance 
is provided pursuant to this title, is unable to make any payment of 
principal of or interest on such security, the Secretary shall make 
such payment as and when due, in cash, and upon such payment shall be 
subrogated fully to the rights satisfied by such payment.
    (b) Contract.--The Secretary is hereby authorized, in connection 
with any insurance under this title, whether before or after any 
default, to provide by contract with the holder, referred to in 
subsection (a), for the extinguishment, upon default by the holder, of 
any redemption, equitable, legal, or other right, title, or interest of 
the holder in any mortgage or mortgages constituting the trust or pool 
against which the mortgage-backed securities insured under this title 
are issued; and with respect to any issue of such insured securities, 
in the event of default and pursuant otherwise to the terms of the 
contract, the mortgages that constitute such trust or pool backing the 
security shall become the absolute property of the U.S. Treasury, 
subject only to the unsatisfied rights of the holders of the mortgage-
backed securities based on and backed by such trust or pool.
    (c) Limitation on Application of Law.--No State or local law, and 
no Federal law, shall preclude or limit the exercise of the 
Secretary's--
            (1) power to contract with the issuer on the terms set 
        forth in subsection (b); or
            (2) authorization to enforce any such contract with the 
        holder; or
            (3) the rights, as provided in subsection (b), in the 
        mortgages constituting the trust or pool against which such 
        insured securities are issued.
    (d) Full Faith and Credit.--The full faith and credit of the United 
States is pledged to the payment of all amounts which may be required 
to be paid under any insurance under this title.

SEC. 506. FUNDING.

    For the purpose of the authorities granted in this title, and for 
the costs of administering those authorities, the Secretary may use 
funds from the amounts in the Mortgage-Backed Securities Fund. Any 
funds expended from the Fund for actions authorized by this title, 
including the payment of administrative expenses, shall be deemed 
appropriated at the time of such expenditure.

SEC. 507. JUDICIAL REVIEW AND RELATED MATTERS.

    (a) Judicial Review.--
            (1) Standard.--Actions by the Secretary pursuant to the 
        authority of this Act shall be subject to chapter 7 of title 5, 
        United States Code, including that such final actions shall be 
        held unlawful and set aside if found to be arbitrary, 
        capricious, an abuse of discretion, or not in accordance with 
        law.
            (2) Limitations on equitable relief.--
                    (A) Injunction.--No injunction or other form of 
                equitable relief shall be issued against the Secretary 
                for actions pursuant to section 101, 102, 106, and 109, 
                other than to remedy a violation of the Constitution.
                    (B) Temporary restraining order.--Any request for a 
                temporary restraining order against the Secretary for 
                actions pursuant to this Act shall be considered and 
                granted or denied by the court within 3 days of the 
                date of the request.
                    (C) Preliminary injunction.--Any request for a 
                preliminary injunction against the Secretary for 
                actions pursuant to this Act shall be considered and 
                granted or denied by the court on an expedited basis 
                consistent with the provisions of rule 65(b)(3) of the 
                Federal Rules of Civil Procedure, or any successor 
                thereto.
                    (D) Permanent injunction.--Any request for a 
                permanent injunction against the Secretary for actions 
                pursuant to this Act shall be considered and granted or 
                denied by the court on an expedited basis. Whenever 
                possible, the court shall consolidate trial on the 
                merits with any hearing on a request for a preliminary 
                injunction, consistent with the provisions of rule 
                65(a)(2) of the Federal Rules of Civil Procedure, or 
                any successor thereto.
            (3) Limitation on actions by participating companies.--No 
        action or claims may be brought against the Secretary by any 
        person that divests its assets with respect to its 
        participation in a program under this Act, except as provided 
        in paragraph (1), other than as expressly provided in a written 
        contract with the Secretary.
            (4) Stays.--Any injunction or other form of equitable 
        relief issued aginst the Secretary for actions pursuant to 
        section 101, 102, 106, and 109, shall be automatically stayed. 
        The stay shall be lifted unless the Secretary seeks a stay from 
        a higher court within 3 calendar days after the date on which 
        the relief is issued.
    (b) Related Matters.--
            (1) Treatment of homeowners' rights.--The terms of any 
        residential mortgage loan that is part of any purchase by the 
        Secretary under this Act shall remain subject to all claims and 
        defenses that would otherwise apply, notwithstanding the 
        exercise of authority by the Secretary under this Act.
            (2) Savings clause.--Any exercise of the authority of the 
        Secretary pursuant to this Act shall not impair the claims or 
        defenses that would otherwise apply with respect to persons 
        other than the Secretary. Except as established in any 
        contract, a servicer of pooled residential mortgages owes any 
        duty to determine whether the net present value of the payments 
        on the loan, as modified, is likely to be greater than the 
        anticipated net recovery that would result from foreclosure to 
        all investors and holders of beneficial interests in such 
        investment, but not to any individual or groups of investors or 
        beneficial interest holders, and shall be deemed to act in the 
        best interests of all such investors or holders of beneficial 
        interests if the servicer agrees to or implements a 
        modification or workout plan when the servicer takes reasonable 
        loss mitigation actions, including partial payments.

SEC. 508. CREDIT REFORM.

    (a) In General.--Subject to subsection (b), the costs of insures 
made under this title shall be determined as provided under the Federal 
Credit Reform Act of 1990 (2 U.S.C. 661 et seq.), as applicable.
    (b) Costs.--For the purposes of Section 502(5) of the Federal 
Credit Reform Act of 1990 (2 U.S.C. 661a(5)), the cost of each 
guarantee of a mortgage-backed security under this title shall be 
calculated by--
            (1) adjusting the discount rate in section 502(5)(E) (2 
        U.S.C. 661a(5)(E)) for market risks; and
            (2) using the difference between the current estimate, 
        consistent with subparagraph (b)(1) under the terms of the 
        insured mortgage-backed security and the current estimate 
        consistent with subparagraph (b)(1) under the terms of the 
        insured.

SEC. 509. REPORTS TO CONGRESS.

    Within 60 days of the first exercise of the authority set forth in 
section 101(a), and semiannually thereafter, the Secretary shall report 
to the Committees on the Budget, Financial Services, and Ways and Means 
of the House of Representatives and the Committees on the Budget, 
Finance, and Banking, Housing, and Urban Affairs of the Senate with 
respect to the authorities exercised under this title and the 
considerations required by section 102.

SEC. 510. DEFINITIONS.

    For purposes of this title, the following definitions shall apply:
            (1) Financial institution.--The term ``financial 
        institution'' means any institution including, but not limited 
        to, banks, thrifts, credit unions, broker-dealers, insurance 
        companies, and the trustees administering mortgage-backed 
        securities trusts, having significant operations in the United 
        States; and, upon the Secretary's determination in consultation 
        with the Chairman of the Board of Governors of the Federal 
        Reserve, holds or has issued applicable mortgage-backed 
        securities.
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.
            (3) Mortgage-backed security.--The term ``mortgage-backed 
        security'' means securities, obligations, other instruments, or 
        other securities, other than those guaranteed by the Government 
        National Mortgage Association, as shall be based on and backed 
        by a trust or pool composed of mortgages that in each case was 
        originated or issued on or before September 24, 2008.
            (4) United states.--The term ``United States'' means the 
        States, territories, and possessions of the United States and 
        the District of Columbia.

SEC. 511. ANNUAL REPORT AND AUDIT BY THE GOVERNMENT ACCOUNTABILITY 
              OFFICE.

    (a) Annual Report on the Mortgage-Backed Securities Fund.--The 
Secretary shall annually submit to Congress a full report of its 
operations, activities, budget, receipts, and expenditures for the 
preceding 12-month period. The report shall include, with respect to 
the Mortgage-Backed Securities Fund, an analysis of--
            (1) the current financial condition of such fund;
            (2) the purpose, effect, and estimated cost of each 
        resolution action taken for payment of insurance during the 
        preceding year;
            (3) the extent to which the actual costs provided to, or 
        for the benefit of, resulting from insurance during the 
        preceding year exceeded the estimated costs of such costs 
        reported in a previous year, as applicable;
            (4) the exposure of the Mortgage-Backed Securities Fund to 
        changes in those economic factors most likely to affect the 
        condition of that Fund;
            (5) a current estimate of the resources needed for the 
        Mortgage-Backed Securities Fund to achieve the purposes of this 
        title;
            (6) an analysis of the sufficiency of the premium 
        collections, actual and projected, in meeting the costs of the 
        Fund; and
            (7) any findings, conclusions, and recommendations for 
        legislative and administrative actions considered appropriate 
        to future activities of the Mortgage-Backed Securities Fund.
    (b) Special Report.--Within 45 days of the enactment of this Act, 
the Comptroller General shall provide to the committees of Congress 
referred to in subsection (d), and other relevant committees, an 
initial report on the Fund.
    (c) Annual Audit of the Mortgage-Backed Securities Fund.--
            (1) Audit required.--The Comptroller General shall audit 
        annually the financial transactions of the Mortgage-Backed 
        Securities Fund (the ``Fund'') in accordance with generally 
        accepted Government auditing standards.
            (2) Access to books and records.--All books, records, 
        accounts, reports, files, and property belonging to or used by 
        the Department of the Treasury that are directly related to the 
        operations and determination as to the amounts in the Fund, or 
        by an independent certified public accountant retained to audit 
        the Fund's financial statements, shall be made available to the 
        Comptroller General.
    (d) Report of the Audit.--A report of the audit conducted under 
subsection (c) of this section shall be made by the Comptroller General 
to the Congress not later than July 15th of the year following the year 
covered by such audit. The report to the Congress shall set forth the 
scope of the audit and shall include a statement of assets and 
liabilities and surplus or deficit of the Fund; a statement of surplus 
or deficit analysis; a statement of income and expenses; a statement of 
sources and application of funds and such comments and information as 
may be deemed necessary to inform Congress, together with such 
recommendations with respect thereto as the Comptroller General may 
deem advisable. The report shall also show specifically any program, 
expenditure, or other financial transaction or undertaking observed in 
the course of the audit, which, in the opinion of the Comptroller 
General, has been carried on or made without authority of law. A copy 
of each report shall be furnished to the President, to the Secretary of 
the Treasury, and to Committee on Banking, Housing, and Urban Affairs, 
the Committee on the Budget, and the Committee on Finance of the Senate 
and the Committee on Financial Services, the Committee on the Budget, 
and the Committee on Ways and Means of the House of Representatives.
    (e) Assistance in Audit.--For the purpose of conducting such audit 
the Comptroller General is authorized in his discretion to employ by 
contract, without regard to section 5 of title 41 of the United States 
Code, professional services of firms and organizations of certified 
public accountants, with the concurrence of the Secretary, for 
temporary periods or for special purposes.

                  TITLE VI--UNLEASHING PRIVATE CAPITAL

SEC. 601. 5-YEAR CARRYBACK OF LOSSES.

    (a) In General.--Subparagraph (H) of section 172(b)(1) of the 
Internal Revenue Code of 1986 is amended to read as follows:
                    ``(H) 5-year carryback of certain losses.--
                            ``(i) Taxable years ending during 2001 and 
                        2002.--In the case of a net operating loss for 
                        any taxable year ending during 2001 or 2002, 
                        subparagraph (A)(i) shall be applied by 
                        substituting `5' for `2' and subparagraph (F) 
                        shall not apply.
                            ``(ii) Taxable years ending during 2007, 
                        2008, and 2009.--In the case of a net operating 
                        loss for any taxable year ending during 2007, 
                        2008, or 2009--
                                    ``(I) subparagraph (A)(i) shall be 
                                applied by substituting `5' for `2';
                                    ``(II) subparagraph (E)(ii) shall 
                                be applied by substituting `4' for `2'; 
                                and
                                    ``(III) subparagraph (F) shall not 
                                apply.''.
    (b) Temporary Suspension of 90 Percent Limit on Certain NOL 
Carrybacks and Carryovers.--
            (1) In general.--Subclause (I) of section 56(d)(1)(A)(ii) 
        of such Code is amended--
                    (A) by inserting ``and 2007, 2008, or 2009'' after 
                ``2001 or 2002''; and
                    (B) by inserting ``and 2007, 2008, and 2009'' after 
                ``2001 and 2002''.
            (2) Conforming amendment.--Subclause (I) of section 
        56(d)(1)(A)(i) of such Code is amended by inserting ``amount of 
        such'' before ``deduction described in clause (ii)(I)''.
    (c) Anti-Abuse Rules.--The Secretary of the Treasury or the 
Secretary's designee shall prescribe such rules as are necessary to 
prevent the abuse of the purposes of the amendments made by this 
section, including antistuffing rules, antichurning rules (including 
rules relating to sale-leasebacks), and rules similar to the rules 
under section 1091 of the Internal Revenue Code of 1986 relating to 
losses from wash sales.
    (d) Effective Dates.--
            (1) Subsection (a).--
                    (A) In general.--Except as provided in subparagraph 
                (B), the amendments made by subsection (a) shall apply 
                to net operating losses arising in taxable years ending 
                in 2007, 2008, or 2009.
                    (B) Election.--In the case of any taxpayer with a 
                net operating loss for a taxable year ending during 
                2007 or 2008--
                            (i) any election made under section 
                        172(b)(3) of the Internal Revenue Code of 1986 
                        may (notwithstanding such section) be revoked 
                        before October 15, 2009; and
                            (ii) any election made under section 172(j) 
                        of such Code shall (notwithstanding such 
                        section) be treated as timely made if made 
                        before October 15, 2009.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall apply to taxable years ending after December 31, 2006.

SEC. 602. INCENTIVES TO REINVEST FOREIGN EARNINGS IN UNITED STATES.

    (a) In General.--Section 965 of the Internal Revenue Code of 1986 
is amended to read as follows:

``SEC. 965. DEDUCTION FOR DIVIDENDS RECEIVED.

    ``(a) Deduction.--
            ``(1) In general.--In the case of a corporation which is a 
        United States shareholder and for which the election under this 
        section is in effect for the taxable year, there shall be 
        allowed as a deduction an amount equal to the applicable 
        percentage of cash dividends which are received during such 
        taxable year by such shareholder from controlled foreign 
        corporations.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1)--
                    ``(A) In general.--Except as provided by 
                subparagraph (B), the term `applicable percentage' 
                means 85 percent.
                    ``(B) Distressed debt.--In the case of dividends 
                received with respect to which the requirements of 
                subsection (b)(4)(B) are met, such term means 100 
                percent.
            ``(3) Dividends paid indirectly from controlled foreign 
        corporations.--If, within the taxable year for which the 
        election under this section is in effect, a United States 
        shareholder receives a cash distribution from a controlled 
        foreign corporation which is excluded from gross income under 
        section 959(a), such distribution shall be treated for purposes 
        of this section as a cash dividend to the extent of any amount 
        included in income by such United States shareholder under 
        section 951(a)(1)(A) as a result of any cash dividend during 
        such taxable year to--
                    ``(A) such controlled foreign corporation from 
                another controlled foreign corporation that is in a 
                chain of ownership described in section 958(a); or
                    ``(B) any other controlled foreign corporation in 
                such chain of ownership, but only to the extent of cash 
                distributions described in section 959(b) which are 
                made during such taxable year to the controlled foreign 
                corporation from which such United States shareholder 
                received such distribution.
    ``(b) Limitations.--
            ``(1) In general.--The amount of dividends taken into 
        account under subsection (a) shall not exceed the greater of--
                    ``(A) $500,000,000;
                    ``(B) the amount shown on the applicable financial 
                statement as earnings permanently reinvested outside 
                the United States; or
                    ``(C) in the case of an applicable financial 
                statement which fails to show a specific amount of 
                earnings permanently reinvested outside the United 
                States and which shows a specific amount of tax 
                liability attributable to such earnings, the amount 
                equal to the amount of such liability divided by 0.35.
        The amounts described in subparagraphs (B) and (C) shall be 
        treated as being zero if there is no such statement or such 
        statement fails to show a specific amount of such earnings or 
        liability, as the case may be.
            ``(2) Dividends must be extraordinary.--The amount of 
        dividends taken into account under subsection (a) shall not 
        exceed the excess (if any) of--
                    ``(A) the cash dividends received during the 
                taxable year by such shareholder from controlled 
                foreign corporations; over--
                    ``(B) the sum of--
                            ``(i) the dividends received during the 
                        base period year by such shareholder from 
                        controlled foreign corporations;
                            ``(ii) the amounts includible in such 
                        shareholder's gross income for the base period 
                        year under section 951(a)(1)(B) with respect to 
                        controlled foreign corporations; and
                            ``(iii) the amounts that would have been 
                        included for the base period year but for 
                        section 959(a) with respect to controlled 
                        foreign corporations.
                The amount taken into account under clause (iii) for 
                the base period year shall not include any amount which 
                is not includible in gross income by reason of an 
                amount described in clause (ii) with respect to a prior 
                taxable year. Amounts described in subparagraph (B) for 
                the base period year shall be such amounts as shown on 
                the most recent return filed for such year; except that 
                amended returns filed after June 30, 2007, shall not be 
                taken into account.
            ``(3) Reduction of benefit if increase in related party 
        indebtedness.--The amount of dividends which would (but for 
        this paragraph) be taken into account under subsection (a) 
        shall be reduced by the excess (if any) of--
                    ``(A) the amount of indebtedness of the controlled 
                foreign corporation to any related person (as defined 
                in section 954(d)(3)) as of the close of the taxable 
                year for which the election under this section is in 
                effect; over
                    ``(B) the amount of indebtedness of the controlled 
                foreign corporation to any related person (as so 
                defined) as of the close of September 26, 2008.
        All controlled foreign corporations with respect to which the 
        taxpayer is a United States shareholder shall be treated as one 
        controlled foreign corporation for purposes of this paragraph. 
        The Secretary may prescribe such regulations as may be 
        necessary or appropriate to prevent the avoidance of the 
        purposes of this paragraph, including regulations which provide 
        that cash dividends shall not be taken into account under 
        subsection (a) to the extent such dividends are attributable to 
        the direct or indirect transfer (including through the use of 
        intervening entities or capital contributions) of cash or other 
        property from a related person (as so defined) to a controlled 
        foreign corporation.
            ``(4) Requirements.--
                    ``(A) Requirement to invest in united states.--
                Except as provided by subparagraph (B), subsection (a) 
                shall not apply to any dividend received by a United 
                States shareholder unless the amount of the dividend is 
                invested in the United States pursuant to a domestic 
                reinvestment plan which--
                            ``(i) is approved by the taxpayer's 
                        president, chief executive officer, or 
                        comparable official before the payment of such 
                        dividend and subsequently approved by the 
                        taxpayer's board of directors, management 
                        committee, executive committee, or similar 
                        body; and
                            ``(ii) provides for the reinvestment of 
                        such dividend in the United States (other than 
                        as payment for executive compensation), 
                        including as a source for the funding of worker 
                        hiring and training, infrastructure, research 
                        and development, capital investments, or the 
                        financial stabilization of the corporation for 
                        the purposes of job retention or creation.
                    ``(B) Distressed debt.--The requirements of this 
                subparagraph are met if amounts repatriated are 
                invested in distressed debt (as defined by the 
                Secretary) for at least 1 year.
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Applicable financial statement.--The term `applicable 
        financial statement' means--
                    ``(A) with respect to a United States shareholder 
                which is required to file a financial statement with 
                the Securities and Exchange Commission (or which is 
                included in such a statement so filed by another 
                person), the most recent audited annual financial 
                statement (including the notes which form an integral 
                part of such statement) of such shareholder (or which 
                includes such shareholder)--
                            ``(i) which was so filed on or before June 
                        30, 2007; and
                            ``(ii) which was certified on or before 
                        June 30, 2007, as being prepared in accordance 
                        with generally accepted accounting principles; 
                        and
                    ``(B) with respect to any other United States 
                shareholder, the most recent audited financial 
                statement (including the notes which form an integral 
                part of such statement) of such shareholder (or which 
                includes such shareholder)--
                            ``(i) which was certified on or before June 
                        30, 2007, as being prepared in accordance with 
                        generally accepted accounting principles; and
                            ``(ii) which is used for the purposes of a 
                        statement or report--
                                    ``(I) to creditors;
                                    ``(II) to shareholders; or
                                    ``(III) for any other substantial 
                                nontax purpose.
            ``(2) Base period year.--
                    ``(A) In general.--The base period year is the 
                first taxable year ending in 2007.
                    ``(B) Mergers, acquisitions, etc.--
                            ``(i) In general.--Rules similar to the 
                        rules of subparagraphs (A) and (B) of section 
                        41(f)(3) shall apply for purposes of this 
                        paragraph.
                            ``(ii) Spin-offs, etc.--If there is a 
                        distribution to which section 355 (or so much 
                        of section 356 as relates to section 355) 
                        applies during the base period year and the 
                        controlled corporation (within the meaning of 
                        section 355) is a United States shareholder--
                                    ``(I) the controlled corporation 
                                shall be treated as being in existence 
                                during the period that the distributing 
                                corporation (within the meaning of 
                                section 355) is in existence; and
                                    ``(II) for purposes of applying 
                                subsection (b)(2) to the controlled 
                                corporation and the distributing 
                                corporation, amounts described in 
                                subsection (b)(2)(B) which are received 
                                or includible by the distributing 
                                corporation or controlled corporation 
                                (as the case may be) before the 
                                distribution referred to in subclause 
                                (I) from a controlled foreign 
                                corporation shall be allocated between 
                                such corporations in proportion to 
                                their respective interests as United 
                                States shareholders of such controlled 
                                foreign corporation immediately after 
                                such distribution.
                        Subclause (II) shall not apply if neither the 
                        controlled corporation nor the distributing 
                        corporation is a United States shareholder of 
                        such controlled foreign corporation immediately 
                        after such distribution.
            ``(3) Dividend.--The term `dividend' shall not include 
        amounts includible in gross income as a dividend under section 
        78, 367, or 1248. In the case of a liquidation under section 
        332 to which section 367(b) applies, the preceding sentence 
        shall not apply to the extent the United States shareholder 
        actually receives cash as part of the liquidation.
            ``(4) Coordination with dividends received deduction.--No 
        deduction shall be allowed under section 243 or 245 for any 
        dividend for which a deduction is allowed under this section.
            ``(5) Controlled groups.--
                    ``(A) In general.--All United States shareholders 
                which are members of an affiliated group filing a 
                consolidated return under section 1501 shall be treated 
                as one United States shareholder.
                    ``(B) Application of $500,000,000 limit.--All 
                corporations which are treated as a single employer 
                under section 52(a) shall be limited to one 
                $500,000,000 amount in subsection (b)(1)(A), and such 
                amount shall be divided among such corporations under 
                regulations prescribed by the Secretary.
                    ``(C) Permanently reinvested earnings.--If a 
                financial statement is an applicable financial 
                statement for more than one United States shareholder, 
                the amount applicable under subparagraph (B) or (C) of 
                subsection (b)(1) shall be divided among such 
                shareholders under regulations prescribed by the 
                Secretary.
    ``(d) Denial of Foreign Tax Credit; Denial of Certain Expenses.--
            ``(1) Foreign tax credit.--No credit shall be allowed under 
        section 901 for any taxes paid or accrued (or treated as paid 
        or accrued) with respect to the deductible portion of--
                    ``(A) any dividend; or
                    ``(B) any amount described in subsection (a)(2) 
                which is included in income under section 951(a)(1)(A).
        No deduction shall be allowed under this chapter for any tax 
        for which credit is not allowable by reason of the preceding 
        sentence.
            ``(2) Expenses.--No deduction shall be allowed for expenses 
        properly allocated and apportioned to the deductible portion 
        described in paragraph (1).
            ``(3) Deductible portion.--For purposes of paragraph (1), 
        unless the taxpayer otherwise specifies, the deductible portion 
        of any dividend or other amount is the amount which bears the 
        same ratio to the amount of such dividend or other amount as 
        the amount allowed as a deduction under subsection (a) for the 
        taxable year bears to the amount described in subsection 
        (b)(2)(A) for such year.
            ``(4) Coordination with section 78.--Section 78 shall not 
        apply to any tax which is not allowable as a credit under 
        section 901 by reason of this subsection.
    ``(e) Increase in Tax on Included Amounts Not Reduced by Credits, 
etc.--
            ``(1) In general.--Any tax under this chapter by reason of 
        nondeductible CFC dividends shall not be treated as tax imposed 
        by this chapter for purposes of determining--
                    ``(A) the amount of any credit allowable under this 
                chapter; or
                    ``(B) the amount of the tax imposed by section 55.
        Subparagraph (A) shall not apply to the credit under section 53 
        or to the credit under section 27(a) with respect to taxes 
        which are imposed by foreign countries and possessions of the 
        United States and are attributable to such dividends.
            ``(2) Limitation on reduction in taxable income, etc.--
                    ``(A) In general.--The taxable income of any United 
                States shareholder for any taxable year shall in no 
                event be less than the amount of nondeductible CFC 
                dividends received during such year.
                    ``(B) Coordination with section 172.--The 
                nondeductible CFC dividends for any taxable year shall 
                not be taken into account--
                            ``(i) in determining under section 172 the 
                        amount of any net operating loss for such 
                        taxable year; and
                            ``(ii) in determining taxable income for 
                        such taxable year for purposes of the second 
                        sentence of section 172(b)(2).
            ``(3) Nondeductible cfc dividends.--For purposes of this 
        subsection, the term `nondeductible CFC dividends' means the 
        excess of the amount of dividends taken into account under 
        subsection (a) over the deduction allowed under subsection (a) 
        for such dividends.
    ``(f) Election.--The taxpayer may elect to apply this section to--
            ``(1) the taxpayer's last taxable year which begins before 
        the date of the enactment of this section; or
            ``(2) the taxpayer's first taxable year which begins during 
        the 1-year period beginning on such date.
Such election may be made for a taxable year only if made before the 
due date (including extensions) for filing the return of tax for such 
taxable year.''.
    (b) Clerical Amendment.--The item in the table of sections for 
subpart F of part III of subchapter N of chapter 1 of such Code 
relating to section 965 is amended to read as follows:

``Sec. 965. Deduction for dividends received.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending on or after the date of the enactment of 
this Act.

SEC. 603. GAIN OR LOSS FROM SALE OR EXCHANGE OF CERTAIN PREFERRED 
              STOCK.

    (a) In General.--For purposes of the Internal Revenue Code of 1986, 
gain or loss from the sale or exchange of any applicable preferred 
stock by any applicable financial institution shall be treated as 
ordinary income or loss.
    (b) Applicable Preferred Stock.--For purposes of this section, the 
term ``applicable preferred stock'' means any stock--
            (1) which is preferred stock in--
                    (A) the Federal National Mortgage Association, 
                established pursuant to the Federal National Mortgage 
                Association Charter Act (12 U.S.C. 1716 et seq.), or
                    (B) the Federal Home Loan Mortgage Corporation, 
                established pursuant to the Federal Home Loan Mortgage 
                Corporation Act (12 U.S.C. 1451 et seq.), and
            (2) which--
                    (A) was held by the applicable financial 
                institution on September 6, 2008, or
                    (B) was sold or exchanged by the applicable 
                financial institution on or after January 1, 2008, and 
                before September 7, 2008.
    (c) Applicable Financial Institution.--For purposes of this 
section:
            (1) In general.--Except as provided in paragraph (2), the 
        term ``applicable financial institution'' means--
                    (A) a financial institution referred to in section 
                582(c)(2) of the Internal Revenue Code of 1986, or
                    (B) a depository institution holding company (as 
                defined in section 3(w)(1) of the Federal Deposit 
                Insurance Act (12 U.S.C. 1813(w)(1))).
            (2) Special rules for certain sales.--In the case of--
                    (A) a sale or exchange described in subsection 
                (b)(2)(B), an entity shall be treated as an applicable 
                financial institution only if it was an entity 
                described in subparagraph (A) or (B) of paragraph (1) 
                at the time of the sale or exchange, and
                    (B) a sale or exchange after September 6, 2008, of 
                preferred stock described in subsection (b)(2)(A), an 
                entity shall be treated as an applicable financial 
                institution only if it was an entity described in 
                subparagraph (A) or (B) of paragraph (1) at all times 
                during the period beginning on September 6, 2008, and 
                ending on the date of the sale or exchange of the 
                preferred stock.
    (d) Special Rule for Certain Property Not Held on September 6, 
2008.--The Secretary of the Treasury or the Secretary's delegate may 
extend the application of this section to all or a portion of the gain 
or loss from a sale or exchange in any case where--
            (1) an applicable financial institution sells or exchanges 
        applicable preferred stock after September 6, 2008, which the 
        applicable financial institution did not hold on such date, but 
        the basis of which in the hands of the applicable financial 
        institution at the time of the sale or exchange is the same as 
        the basis in the hands of the person which held such stock on 
        such date, or
            (2) the applicable financial institution is a partner in a 
        partnership which--
                    (A) held such stock on September 6, 2008, and later 
                sold or exchanged such stock, or
                    (B) sold or exchanged such stock during the period 
                described in subsection (b)(2)(B).
    (e) Regulatory Authority.--The Secretary of the Treasury or the 
Secretary's delegate may prescribe such guidance, rules, or regulations 
as are necessary to carry out the purposes of this section.
    (f) Effective Date.--This section shall apply to sales or exchanges 
occurring after December 31, 2007, in taxable years ending after such 
date.

    TITLE VII--EXECUTIVE COMPENSATION ADJUSTMENTS AND MISCELLANEOUS 
                               PROVISIONS

SEC. 701. COMPENSATION ADJUSTMENT.

    (a) Compensation Adjustment Due to Government Intervention.--
            (1) In general.--An officer of an institution shall pay to 
        the Department of the Treasury any amounts received by such 
        officer during a year as a bonus or other incentive-based or 
        equity-based compensation from the institution during--
                    (A) a year in which the institution is subject to a 
                government intervention; and
                    (B) the two years prior to a year in which the 
                institution is subject to a government intervention.
            (2) Compensation adjustment defined.--For purposes of this 
        subsection, and with respect to an issuer, the term 
        ``government intervention'' means--
                    (A) the placement of the issuer under 
                conservatorship, receivership, or other assumption of 
                the management, governance, and control of the issuer 
                by the Department of the Treasury or the Board of 
                Governors of the Federal Reserve; or
                    (B) an emergency loan of public funds made to the 
                issuer by the Department of the Treasury or the Board 
                of Governors of the Federal Reserve, if the Chairman of 
                the Board of Governors of the Federal Reserve 
                determines that such a loan is necessary to prevent the 
                imminent failure of the issuer.
    (b) Effective Date.--This compensation adjustment shall take effect 
on enactment of this Act, and shall have no effect after September 30, 
2009.

SEC. 702. LIMITATIONS ON GSE SECURITIZATION AUTHORITY.

    Part 2 of subtitle A of the Federal Housing Enterprise Financial 
Safety and Soundness Act of 1992 (12 U.S.C. 4541 et seq.), as amended 
by the Housing and Economic Recovery Act of 2008 (Public Law 110-289) 
is amended by adding at the end of the following new section:

``SEC. 1327. LIMITATIONS ON GSE SECURITIZATION AUTHORITY.

    ``(a) Prohibition.--The director shall, by regulation, prohibit 
each enterprise from issuing, guaranteeing, or selling securities based 
on or backed by mortgages described in subsection (b).
    ``(b) Covered Mortgages.--The mortgages described in this 
subsection are--
            ``(1) mortgages commonly known as Alt-A or Alternative A-
        paper mortgages, as defined by the Director, which shall 
        include mortgages that the Director determines to have an 
        increased level of credit risk due to borrower's not meeting 
        traditional or standard underwriting guidelines, including 
        guidelines with respect to--
                    ``(A) documentation of amount or source of income 
                or assets;
                    ``(B) debt-to-income ratio;
                    ``(C) assets and type of property being financed;
                    ``(D) credit history;
                    ``(E) loan-to-value ratios; and
                    ``(F) occupancy of the property being financed or 
                borrower characteristics involved; and
            ``(2) mortgages having characteristics that are not typical 
        of the lending practices of the mortgages that are made to 
        comply with a provision of Federal or State law or 
        regulation.''.

SEC. 703. FINANCIAL STATEMENT REVIEW.

    (a) In General.--The Securities and Exchange Commission shall--
            (1) review any financial statements required under section 
        13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) of 
        any rescued issuer for the rescued issuer's fiscal year 2005 
        and each succeeding fiscal year up to and including the fiscal 
        year in which such issuer became a rescued issuer; and
            (2) examine each of the audits that were the basis of such 
        financial statements, and all the supporting books, papers, 
        correspondence, memoranda, or other records or materials on 
        which such audits were performed.
    (b) Additional Action.--The Commission shall--
            (1) if the Commission determines there was a material 
        misstatement made in any financial statement reviewed under 
        subsection (a), require the issuer to file with the Commission 
        a financial statement correcting such misstatement; and
            (2) take all other appropriate actions under the Securities 
        Exchange Act of 1934 (15 U.S.C. 78a et seq.).
    (c) Definition.--For purposes of this section, the term ``rescued 
issuer'' means any issuer (as such term is defined in section 3(a)(8) 
of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(8)) that has 
received, prior to the date of 5 enactment of this Act, Federal 
Government intervention through sale negotiation assistance, loan 
guarantee, placement under conservatorship or receivership, or other 
assumption of the management, governance, and control of the issuer by 
the Department of the Treasury or the Board of Governors of the Federal 
Reserve, an emergency loan of public funds made to the issuer by the 
Department of the Treasury or the Board of Governors of the Federal 
Reserve, or other similar Federal Government intervention.
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