Client Alert: Financial Crisis Update 1

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The prospects that the Treasury Department's proposed bank bailout legislation would be passed by Congress by the end of the week diminished considerably as the proposal received a uniformly hostile reception at a hearing before the Senate Banking Committee ("Committee").

Treasury Secretary Paulson and Federal Reserve Board Chairman Bernanke were grilled for five hours by members of the Committee, all of whom questioned the size, scope and even the need for the proposed bailout. Highlights included:

Meanwhile, liberal Democrats and conservative Republicans in the House began circulating different alternatives to the Treasury Department proposal:

Paulson and Bernanke are scheduled to defend the Treasury’s proposal before the House Financial Services Committee this afternoon, where they are expected to face an even more hostile group of lawmakers. House Financial Services Committee Chairman Barney Frank is expected to circulate a revised alternative bailout bill.

Two issues are expected to receive considerable attention at this afternoon’s House Financial Services Committee:

Today is probably the pivotal day in determining whether bailout legislation will be passed this week or in early October. If the Treasury makes some major concessions on executive compensation and mortgage foreclosure relief, a bill could be passed over the weekend. If not, it may be next week before an agreement will be reached. Most observers believe that some form of bailout legislation will pass before Congress leaves town for the elections.

Click here for Financial Crisis Update 2

Click here for Financial Crisis Update 3

Click here for Financial Crisis Update 4

This communication is for general information purposes only and does not constitute a full legal analysis of the subject matter discussed herein. The information in this email should not be relied upon as specific legal advice.