Congress Passes $168 Billion Stimulus Package

By Jason Simpkins
Associate Editor

Congress passed $168 billion economic stimulus packages Friday, in an attempt to buoy a beleaguered U.S. economy.

The legislation will dispatch tax rebate checks to more than 111 million households, Bloomberg News reported. The checks should being mailing in May.

Individuals who earn less than $75,000 a year and couples who earned less than $150,000 a year [and pay federal income taxes] are eligible for as much as $600 and $1,200, respectively, plus $300 for every dependent child.

The package will also send $300 tax rebate checks to citizens who did not pay income tax, but whose Social Securities benefits, veteran's disability payments or earned income totaled at least $3,000 last year.

It will also double the amount of equipment costs a small business can expense in the first year to $250,000 and allows a 50% bonus depreciation for businesses that buy major equipment.

In addition to rebates and business incentives, the bill will increase the size of mortgage loans that government-backed finance companies Fannie Mae (FNM) and Freddie Mac (FRE) can buy.

Fannie Mae and Freddie Mac, which own or guarantee 40% of the $11.5 trillion home loan market, will be authorized to buy loans worth as much as $729,750 until Dec. 31, 2008. The previous loan limit was $417,000. The adjustment is intended to help homeowners refinance large mortgages at a lower interest rate.

Freddie Mac and Fannie Mae were created by congress in 1970 to ensure stability and liquidity in the U.S. housing market. The companies increase mortgage financing by buying loans from lenders and profit by holding mortgages and mortgage-based assets as investments.

Other provisions - extended unemployment benefits and boosted funding for home heating assistance - were left off the bill to ensure its speedy passage through congress. Both Democratic and Republican lawmakers have left the door open for further talks involving proposals that were cast aside in last week's compromise.

"What's most important is that we do not suspend our efforts to provide relief to the unemployed and heating assistance to low-income families," Sen. Olympia Snowe (R-Maine), told Bloomberg. "The work of the United States Congress is far from over."

The bill will cost the U.S. Treasury approximately $151.7 billion this year, and $16.3 billion in 2009.

News and Related Story Links: