Silver lining

The Senate passed the new version of the bailout plan tonight. Many expect the House to come around on Friday.

One benefit with the new legislation involves the extension of tax credits for renewable energy.

Tech industry advocates in Washington said they were encouraged by the Senate’s addition of coveted tax incentives to the bill. Rhone Resch, president of the Solar Energy Industries Association, said his organization is targeting 80 House bailout opponents who have a significant solar industry presence in their districts.

Until Tuesday, Resch said he was pessimistic about winning passage for the eight-year extension of tax credits for renewable energies. “Ironically, the failure of the bailout Monday in the House gave us a new lease on life to get this done,” he said. “This is an opportunity we can’t lose.”

He credited Senate Majority Leader Harry Reid of Nevada with “playing his cards close to the vest, and playing them at the right time” to get the tax-extension measures in the bill.

Resch called the tax-credit extension, which also would allow utilities to take advantage of the credits, “a game-changer” that will dramatically boost the solar industry and help create new business models.

Reid, in a news conference, predicted the renewable energy tax credits “will create tens of thousands of jobs right away.”

Swisher, the wind energy advocate, expressd similar sentiments: “I was depressed this was not going to get done. Then our hearts soared when we learned how the Senate would do this.”

Congress, Swisher said, should encourage new renewable energy businesses. He said 41 factories making wind industry products have opened in the United States in the past 18 months.

It’s stunning that these tax credits would not have been passed this year without the failure of the bailout bill earlier this week. It’s critical that we continue to encourage the development of alternative fuels, and the impact on our economy and our national security cannot be overstated. We cannot continue sending billions of dollars overseas to Russia, Venezuela and the Middle East. Instead, we can keep the money at home, and generate thousands of green jobs.

  

Handing out goodies

We’re seeing some typical Washington horse-trading as lawmakers try to add enough goodies to the bailout bill to help it pass the House.

Some of these changes make sense. The Congress dropped the ball by not extending tax credits for clean energy – now these credits have been added to the bailout bill. Deposit insurance will be increased from $100,000 to $250,000, and fixes to the Alternative Minimum Tax have also been added.

Of course, this stuff will bust the budget by another $100 billion, but who’s counting at this point.

Yesterday, the SEC clarified the mark-to-market accounting rules that many have blamed for exacerbating the current crisis. It’s possible that this change will be codified in the bailout bill.

There are strong arguments on both sides of this issue. Many like Steve Forbes have argued for years that the mark-to-market rules create short-term problems as banks are forced to write down assets to fire sale levels when problems arise. This has the effect of throwing gasoline on a fire when economic problems arise. On the other hand, some write-downs are needed. Otherwise, banks can sit on depressed assets and it can take years to flush the system of bad debt. This is what happened in Japan.

It’s a complicated issue, but it appears that the latest SEC changes offer a compromise that will ease the pressure on banks while still requiring them to assess the bad debt on their books.

  

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