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Last week, the Bush administration proposed a three-page bill to bail out Wall Street to the tune of $700 billion. It died in the U.S. House of Representatives earlier this week.

On Friday, though, the House approved a far bigger, broader, and beefier version of the bill–which has ballooned to a remarkable 442 pages. The vote was 263 to 171, with the bulk of the opposition coming from Republicans. Because the Senate already approved the measure, it immediately went to President Bush, who signed it into law.

On the theory that this would be a way to convince previously skeptical Democrats to approve the measure, one large chunk of the bailout bill is devoted to renewable energy, energy-efficient appliances, and so on (the “Energy Improvement and Extension Act of 2008”). The authors lured Republicans with protections from the alternative minimum tax (via the “Tax Extenders and Alternative Minimum Tax Relief Act of 2008”).

That includes, as the New York Postpointed out, millions in tax breaks and related pork for kids’ wooden arrows, Puerto Rican rum producers, auto race tracks, and corporations operating in American Samoa. (The likely explanation for the latter: StarKist has a large tuna-canning operation in American Samoa. And StarKist’s parent company happens to be located in the district of House Speaker Nancy Pelosi.)

The bill has become, in other words, something almost unrelated to the business of bailing out Wall Street. The Beltway term for this is a “Christmas tree bill,” meaning everyone gets to hang their favorite spending projects on it–though by the time Congress gets it through, it more closely resembles a slop bucket.

“We will not Christmas-tree this bill,” Sen. Chuck Schumer, a New York Democrat promised a few days ago. “The times are too urgent. Everyone has their own desires and needs. It’s going to have to wait.”

So much for that idea.

Here’s a look a some of thegreen-tech measures:

• One-year extension for wind and refined coal energy tax credits. A production credit for electricity produced from renewable marine energy sources (meaning through wave power and river power, or by exploiting the differences in ocean temperature). Energy credits for “small wind properties,” geothermal heat pump systems, and energy-efficient residential properties.

• New renewable-energy bonds. Up to $800 billion in energy bonds may be offered to the public, with a third from “public power providers,” a third from governments, and the remainder from “cooperative electric companies.”

• Tax credits for “cellulosic biofuels” and for “carbon dioxide sequestration.” An extension of an alternative fuel credit. Tax credits for “new qualified plug-in electric-drive motor vehicles.” Bicycle commuters get a nod, as do regulations aimed at “residential top-loading clothes washers.”

IRS undercover operations: Privacy invasion?
The bailout bill also gives the Internal Revenue Service new authority to conduct undercover operations. It would immunize the IRS from a passel of federal laws, including permitting IRS agents to run businesses for an extended sting operation, to open their own personal bank accounts with U.S. tax dollars, and so on. (Think IRS agents posing as accountants or tax preparers and saying, “I’m not sure if that deduction is entirely legal, but it’ll save you $1,000. Want to take it?”) That section had expired as of January 1, 2008, and would now be renewed.

Starting with the so-called Anti-Drug Abuse Act in 1988, the IRS has possessed this authority temporarily, with occasional multiple-year lapses. A 1999 internal report said the IRS had 126 “trained undercover agents” working in field offices at the time. This is the first time that such undercover authority would be made permanent.

Sens. Max Baucus (D) and Chuck Grassley (R) have been pushing to make it permanent for a while, claiming (PDF) in April that: “Undercover operations are an integral part of IRS efforts to detect and prove noncompliance. The temporary status of this provision creates uncertainty, as the IRS plans its undercover efforts from year to year.”

There’s another section of the bailout bill worth noting. It lets the IRS give information from individual tax returns to any federal law enforcement agency investigating suspected “terrorist” activity, which can, in turn, share it with local and state police. Intelligence agencies such as the CIA and the National Security Agency can also receive that information.

The information that can be shared includes “a taxpayer’s identity, the nature, source, or amount of his income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments, or tax payments, whether the taxpayer’s return was, is being, or will be examined or subject to other investigation or processing, or any other data received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return.”

That provision had already existed in federal law and automatically expired on January 1, 2008.

What’s a little odd is that there’s been little to no discussion of the IRS sections of the bailout bill, even though they raise privacy concerns. Treasury Secretary Henry Paulson said this week: “I will continue to work with congressional leaders to find a way forward to pass a comprehensive plan to stabilize our financial system and protect the American people by limiting the prospects of further deterioration in our economy.” He never mentioned the necessity of additional IRS undercover operations.

The bailout: Details, controversy, and loopholes
As my colleagues over at CBSNews.com reported on Friday, the law authorizes the Treasury Department to create a so-called Troubled Assets Relief Program, or TARP, as well as a separate insurance fund.

The TARP program permits the Treasury to purchase mortgage-backed bonds or any other “troubled assets” from financial institutions. The idea is that because banks have become so hesitant to lend to each other, this law will help unstick the gears of the modern financial economy.

Some loopholes exist. It’s possible for a bank to buy $100 billion of bad debt–perhaps in the form of subprime mortgages that are becoming quickly worthless– declare bankruptcy, and sell it to the Treasury Department for $120 billion, or $200 billion. In other words, although the Treasury Department is supposed to look out for the best interests of taxpayers, there’s no law forbidding such profits in the case of firms involved in bankruptcy, receivership, or mergers.

The Treasury Department is authorized to “guarantee” home mortgages, essentially becoming a kind of co-signer, to reduce the number of foreclosures. If the home owner stops paying his or her mortgage, taxpayers would be on the hook. The Treasury Department can also eliminate a “reasonable” amount of a home owner’s mortgage debt, under section 109 of the new law, which would likely delay the process of house prices falling.

In response to grassroots pressure from Americans upset about Wall Street executives cashing in, Section 111 is titled “Executive Compensation and Corporate Governance.”

It does not include, however, any statutory dollar limit on how high executive salaries of TARP bailout recipients can be. Instead, it lets Treasury Secretary Henry Paulson, the former CEO of Goldman Sachs, come up with “appropriate standards.” In addition, only the top five executives will have their golden parachutes limited; all the rest will remain untouched, even if their second-tier salaries and bonuses happen to be in the millions or tens of millions of dollars.

Bear Stearns CEO James Cayne made $61.3 million from selling his shares a day after the JP Morgan bailout. Daniel Mudd, CEO of Fannie Mae, was replaced last month; he made $11.6 million in 2007. Richard Syron was chairman and CEO of Freddie Mac from 2003 until last month. He made $19.8 million last year. Martin Sullivan was ousted as president and CEO of AIG this summer, and was paid a $47 million severance package.

While salaries of failed executives will have no statutory limit, TARP-participating companies will lose a tax deduction if they pay their top executives more than $500,000 a year. The $500,000 limit only kicks in if the company offloads over $300 million in assets through TARP.

Section 115 of the law says that the administration can, after notifying Congress and waiting 15 days, purchase and hold $700 billion of assets “at any one time.” (It can buy and hold $350 billion without waiting.)

This, too, is a potential loophole. It permits the Treasury Department to buy up, say, $700 billion in 2008, sell those assets off gradually over the next year at a (probable) loss, and repeat the same process in 2009. Losses to taxpayers, in other words, could exceed $700 billion. Although the Treasury Department is instructed to try to avoid losses, the text of the law does not forbid that scenario.

If the TARP ends up costing taxpayers money, the president may ask Congress to consider enacting a law to recoup “from the financial industry an amount equal to the shortfall,” presumably through higher taxes. But Congress is under no obligation to do anything; a mechanism to cover the shortfall does not exist in this law.

Even though FDIC coverage will be boosted from $100,000 to $250,000 per account through December 2009, premiums to banks may not take “into account” the higher account coverage. In other words, premiums can’t increase for that reason.

Also:

• This may be just the beginning of bailouts. California Gov. Arnold Schwarzenegger said Thursday that the state may need a $7 billion loan from the U.S. Treasury, according to a report in the Los Angeles Times. That’s because the state has spent more than it takes in through tax revenue, with an annual budget deficit of $14 billion or more, even though its individual income tax rate is arguably the highest in the nation.

• CBS News’ John Bentley reports from Arizona that Republican presidential candidate John McCain is taking some credit for the bailout’s passage: “I’m glad I suspended my campaign and went back to Washington to bring, and help bring, House Republicans to the table,” he said on Friday. Democratic presidential candidate Barack Obama described the law as “absolutely necessary to prevent an economic catastrophe.”

• Rep. Ron Paul of Texas, who correctly predicted in 2003 that taxpayers would be “forced to bail out investors,” said in a speech on the House floor that the legislation would “only further harm the economy” and was actually worse than the previous version. In a CNN interview, the former Republican presidential candidate said his colleagues are refusing to deal with the underlying problems and spending more tax dollars even though “this country’s bankrupt.”

• The Dow Jones Industrial Average (-22 percent year-to-date) and the Nasdaq composite index (-27 percent) closed on Friday down 1.5 percent, despite the bailout. Gold ended at $834.80 an ounce, slightly up for the day and the year. Crude oil futures ended at $93.88 a barrel, slightly down for the day.

• U.S. jobs fell by 159,000, a decline of 760,000 this year. Technology firms have also contemplated hiring freezes and some, including Hewlett-Packard and Dell, have already laid off employees, as my colleague Ina Fried reports in a separate article.