Congress: second thoughts on that financial bailout
By Peter Grier | 09.23.08
Bailout mania! Catch the feeling!
Or, maybe not. Whoa – $700 billion, you say? Maybe even 1 trillion? That’s a heap o’ taxpayer cash, Mr. Paulson. We could build a bridge to every nowhere in America for that.
Washington has had two work days now to absorb the details of the Bush administration’s proposed financial rescue package, and the city’s mood is swinging back and forth like a pendulum. Or a teenager before the prom.
Shock and awe at the problem, and a sort of gratitude that somebody was doing something about stuff few people on Capitol Hill understood, has been replaced by cold sweat about the cost. Plus a worry about how much power, exactly, lawmakers might be handing over to an unelected Treasury-based bureaucracy.
The bottom line: That bailout bill may not get whooped through Congress in a few days, after all.
It’s not just Democrats who are voicing opposition. It was Rep. Jeb Hensarling (R) of Texas, leader of the conservative Republican Study Committee, who criticized what he called the “bailout mania” sweeping Washington.
And here’s Richard Shelby, top-ranking Republican on the Senate Banking Committee: The Bush plan is “neither workable nor comprehensive, despite its enormous price tag.”
Meanwhile, liberal Democrats have two main talking points: 1. These are the same people who brought us Iraq. 2. Henry Paulson seems like a nice man, but didn’t he used to work on Wall Street?
There is one point that already seems to draw a bipartisan consensus, and that is that those Wall Street executives – the ones with bonuses the size of subcommittee appropriations, who get driven in Ferraris by supermodel chauffeurs to their loft apartments in the Hamptons – have to pay. In some painful manner.
Both House and Senate are working on provisions to prevent payment of bonuses to executives who took “excessive” risk. Wall Street titans who are counting on floating down to earth via their golden parachutes (big severance packages) also might want to plan another way to earth, just in case Congress limits those, too.
Think tank position papers are a good way to see which way the partisan winds are blowing. The liberal Center for Economic and Policy Research in a piece titled “Progressive Conditions for a Bailout” says “There should be serious efforts to severely restrict executive compensation at any companies that directly benefit from the bailout.”??
CERP also pumps for a new financial-transaction tax and strict limits on leverage for all financial institutions. You can read the full text of their proposals here.
The conservative Heritage Foundation agrees that Wall Street severance packages should be at risk. The new bailout institution “should be allowed to refer cases to the Justice Department for civil suits to recover bonuses or termination compensation” for overpaid execs, says its bailout analysis.
The government should not just be a passive holder of damaged assets, says Heritage. Instead, it should be allowed to restructure them or take any other action to protect taxpayers’ interest.
But Heritage takes issue with the idea – currently bubbling up in Congress – for the government to get equity in companies themselves in return for help.
“Bureaucrats should not have a say in the management of any firm,” says Heritage. You can read their proposals here.
Hearings on the bailout this week in Congress should provide a good idea of how strong any opposition to the bailout is and what changes House and Senate leaders will try to make.
Will the markets read delay as a negative and tank further? That might put further pressure on Congress to drop objections and move faster. We’ll see in the next few days.
| MainComments
2. Michael J Billings | 09.23.08
Mabey we should just have another recession and wake us all up to the fact that our military spending should be on our soil!!
Mike
Marquette MI USA!
3. Steve Hammons | 09.23.08
Food for though on this topic in the two articles …
Wall Street’s special offer – but you must act now!
AmericanChronicle.com
September 23, 2008
http://americanchronicle.com/articles/75216
Let’s bail out the greedy, the crooks, the suckers
AmericanChronicle.com
September 22, 2008
5. nevermind | 09.24.08
http://www.huffingtonpost.com/2008/09/22/dirty-secret-of-the-bailo_n_128294.html
6. Disgruntled taxpayer | 09.25.08
This current problem took years to create. We can’t fix it in a week!!!!!!!!!!!!!
7. smcvey | 09.27.08
Bailout legislation should require any bank/mortgagee that wants to participate in the plan to at least:
1. Write down all losses so their true value is know to the government.
2. Cause executive salaries to be capped at SES-4 levels for at least two years with no bonuses.
3. Send 80% of profits to the government when distressed assets get sold.
4. Have a business plan in place before any funds are leased.
5. Accept a moratorium on campaing contributions to any candidate or party.
6. Give the government a first place lien on any capital assets.
The plan should not provide $700 billion off the bat. Money should be loaned out in stages.
The government should guarantee bank deposits up to $500,000 to tap that source of liquidity.
Thank you
8. steve francis | 09.28.08
why do you blame wall street for the crisis. I personally blame consumers, who keep on living beyond their means. Always spending more than they make.
9. Pissed off tax payer | 09.29.08
Where did all of the money go that was behind Wall St. What the government needs to do is to find a way to charge taxes on the big corporations to help pay the debt off. What is up with all of these executives getting paid $65 million to quit a job. This is rediculous how actors/athletes are getting paid millions to do nothing. Our country needs to pull its head out of [the sand] and start to live more conservatively.
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1. Cheryl | 09.23.08
There are several taxpayers and economist that do not agree with this bailout for economic reasons and because it is not the President’s thru his Treasury Sec but the Congress who is to remain responsible for the purse strings according to the Constitution….Otherwise, there need not be a Congress only a President and his cabinet….I think this is no longer a representative democracy but a dictatorship!!! Why is the Congress never listens to the taxpayers…..if this burden is put on us, maybe it is time to change our constitution so Congress and the Presidency only get one term each…live a civic duty of a juror….then they can return to reality where the rest of us live!