So much outrage over yesterday's bailout rejection by the House of Representatives swarmed the market that many seemed to forget that the original plan got a drastic facelift over the weekend, which should have put to rest a handful of the complaints laid upon Hank Paulson's original plan.

No, the plan wasn't perfect, and I'll throw in my two cents where a few holes resided, but here are some of the more notable changes made over the weekend:

  • An up-front $250 billion injection, rather than the originally proposed $700 billion lump sum. The president could then issue an additional $100 billion at any time, while an additional $350 billion could be made available upon Congressional approval. This was a pretty big step for the proposal, since it would give the Treasury room to test the bailout on a smaller scale instead of jumping in head-first with a $700 billion shopping spree. 
  • Taxpayers would get at least some reassurance that they won't be completely pillaged of their hard-earned money, with a new clause that grants permission to come after the financial industry to make up for any shortfall five years down the road. The clause goes on to say it's being implanted, "… to ensure the [bailout] does not add to the budget deficit or the national debt." That's all good news, but of course, it relies on the assumption that the companies that benefit from the bailout will be healthy enough to pay in five years. After Washington Mutual (NYSE:WM) and Wachovia's (NYSE:WB) recent demises, that seems like a shot in the dark. 
  • Salary caps would be placed on executives taking part in the plan … sort of. Any company that benefits from the bailout wouldn't be allowed to deduct more than $500,000 per executive as an expense. Companies could still pay them more than that amount -- they just can't deduct it from their tax liabilities.
  • An oversight board would be created to make sure the program doesn't run astray. The board would include the chairman of the Federal Reserve (Ben Bernanke), the Treasury secretary (Hank Paulson), the chairman of the SEC (Chris Cox) the director of the Federal Home Finance Agency, and the secretary of Housing and Urban Development. Having oversight would certainly take some of the uncertainty out of the plan, but remember, these are completely uncharted waters we're navigating. Regardless of who's on the oversight board, mistakes will be made along the way.
  • The ability to take an equity stake in any company that participates in the plan, just as AIG (NYSE:AIG), Fannie Mae (NYSE:FNM), and Freddie Mac (NYSE:FRE) had to give up in the past few weeks. Forcing companies to forfeit equity when they use the bailout program will likely scare away banks that don't necessarily need much help, such as Wells Fargo (NYSE:WFC) and JPMorgan Chase (NYSE:JPM). When a company has to pay a hefty price for taxpayers' assistance, only banks that are struggling for survival should ask for help, which is exactly the way it should be

Investors and taxpayers alike should have been pretty pleased with these developments; they're all steps in the right direction, particularly since enormous steps were taken to ensure taxpayers aren't getting completely hosed. Stay tuned.

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