Click to play videoWashington: The $700 billion financial bailout plan proposed by US Treasury Secretary Henry Paulson may have failed, but the Republican Party is coming up with an alternative bailout plan.
According to CNBC US, an alternative plan would require the Treasury Department to provide a guarantee up to 100 per cent of bank losses resulting from failed mortgage-backed securities.
The development of the alternative plan comes as members of the Senate consider voting on the original financial rescue plan on Wednesday.
The plan would also allow companies to carry back losses arising in tax years ending in 2007, 2008, or 2009 back five years thus generating a tax refund and immediate capital.
The plan also wants to suspend the capital gains tax rate for two years and enact new rules prohibiting excessive salaries or 'Golden parachutes' to executives of failed companies.
The plan 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 also 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 (GSE).
Among other things it also proposes suspension of "mark-to-market" accounting until the Securities Exchange Commission (SEC) 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.
Both US Presidential hopefuls, Barack Obama and John McCain, say they will be present for the Senate vote on the bill on Wednesday as they both realise that Bush's successor will inherit an economic mess.
(With inputs from PTI)
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