A group of Republicans are putting together an alternative to the $700-billion rescue plan proposed by US Treasury Secretary Henry Paulson, a media report said on Wednesday.
The rejection of the bailout plan on Monday by the US House of Representatives has made the group to press forward with its own plan, news broadcaster CNBC quoting sources reported on its website.
The development of the alternative plan comes as members of the Senate consider voting on the original financial rescue plan later on Wednesday, the report added.
According to sources, components of the alternative plan include a guarantee from the US treasury of up to 100 per cent for bank losses resulting from failed mortgage-backed securities originated prior to the plan's enactment, the report said.
Such insurance would provide immediate value to the securities and a foundation for which they could then be sold and the Treasury Department would finance that insurance by assessing a premium on outstanding mortgage-backed securities, it added.
The alternative plan also includes allowing companies to carry back losses arising in tax years ending in 2007, 2008, or 2009, generating a tax refund and immediate capital. While it also envisages allowing a 'repatriation window' for profits earned by US firms overseas.
Such repatriation amounts would not be taxed if invested in distressed debt (as defined by Treasury) for at least one year, the report stated.
Besides, the Republicans in their alternative plan propose to allow banks to treat losses on shares of preferred stock in Fannie Mae and Freddie Mac as ordinary losses, not as capital losses.
The alternative plan would also include suspension of capital gains tax rate for two years, limit backing of high-risk loans by Fannie Mae and Freddie Mac and schedule privatisation for these two Government Sponsored Entities.
Among other things it also proposes suspension of 'mark-to-market' accounting until the Securities Exchange Commission issues new guidelines that would allow firms to mark these assets to their true economic value.
The plan also includes stabilisation of the dollar by repealing the Humphrey-Hawkins Full Employment Act, which alternative bailout supporters say diverts the Federal Reserve's attention from long-term price stability to short-term economic growth, the CNBC report said.
The plan also requires the Treasury to write rules prohibiting excessive compensation or golden parachutes to executives of failed companies and task the SEC with regular, annual audit reports of entities, the federal government has brought under conservatorship or now owns.
