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Paulson Faces Skepticism From Senate Banking Committee
Treasury Secretary Hank Paulson faced a tough crowd Monday in the Senate. Appearing before the Senate Banking Committee with Federal Reserve Chairman Ben Bernanke, Paulson withstood criticism from Senators on both sides of the aisle who were almost universally skeptical of his bailout plan and the short timeframe in which he wants to see it passed.
Senator Elizabeth Dole (R-N.C.) said that Paulson's three-page plan, which asks for $700 billion to buy distressed assets from failed banks but contains no provisions for oversight and demands little in return from financial institutions receiving aid, was "hastily concocted." Senator Daniel Akaka (D-Hawaii) said Congress "must not give Treasury a blank check." Echoing senators from both parties, he said, "we must do more to keep people in their homes."
The suspicion surrounding Paulson's plan was bipartisan. While everyone agreed that a bailout was necessary, senators from both parties asked Paulson and Bernanke why Congress was being asked to "rush into" a bailout. Senator Jon Tester (D-Mont.) demanded to know why Congress had just a week to allocate $700 billion dollars or face financial Armageddon. Who was supposed to see this coming? he asked. And why didn't they?
The taxpayers were everyone's foremost concern. How will the Treasury assure that Americans get a good deal when the federal government buys the distressed assets from failed banks? Will the taxpayers make a profit—or reap any benefit at all—when those assets are sold off down the road? Could Congress give the Treasury a smaller sum to work with, and then reconvene in a few months to evaluate progress and distribute a little more?
The other concern was oversight. Again, members from both parties found common ground. Senator Wayne Allard (R-Colo.) said he "invite[d] the administration to be more forthcoming" about how the bailout would work. Senator Mel Martinez (R-Fla.) stated plainly that the Republicans embraced this key Democratic talking point. "You are not asking for a blank check," he told Paulson. "We will not give you a blank check. There will be oversight." Paulson didn't try to fight it. "I welcome oversight," he said.
The more contentious issues—the ones that will actually put Democrats and Republicans at loggerheads and possibly delay passage of the bill—were treated gingerly.
Multiple Democrats brought up the idea of limiting executive compensation. Why, they asked, were Wall Street honchos taking home millions in bonuses ($39 billion collectively among The Street's five biggest firms in 2007) while simultaneously asking the American taxpayers to help their companies out of a jam of their own creation?
Paulson, a former chairman and CEO of Goldman Sachs who is smart enough to recognize that economic populism is the style of the day, said, "I share your frustration. I feel that frustration. Those practices throughout America also upset me." But he wouldn't offer his support to legislation that did anything about those practices. "I would respectfully submit that we can't do those as quickly as we need to," he said, to get the bailout package out the door in time to stabilize the markets.
The other ideas that Democrats are going to try and push into any bailout bill are a provision providing bankruptcy judges with the power to restructure mortgages for homeowners in foreclosure and, possibly, an additional middle class stimulus. On these, Paulson only said that the bailout should happen "quickly and cleanly," and that Congressional action should "avoid slowing it down with provisions that are unrelated."
Paulson and Bernanke can afford to quietly tip-toe around the Democrats' pet provisions. They don't need to argue against them. The fights over these measures are political ones — they will be fought by Democrats and Republicans in Congress and will have little bearing on whether or not Treasury gets the money it seeks.
And that, ultimately, may be the only positive Paulson and Bernanke can take out of the hearing today. Their plan was widely panned. They may not get their funds as quickly as they would like. When they do receive the money, it will have strings attached they did not desire. The White House that backs them has no political capital and demands no respect.
But, in the face of an economic crisis of historic proportions, the money will be there, and likely in massive sums. For all of the criticism Paulson faced today, no one threatened the most important part of his plan.
I keep hearing lawmakers and the administration claiming they are worried about the taxpayers. Yet,they want to take our money and give it to the banks and help contribute to CEOs golden parachutes.
Perhaps it would be better to give every man, woman and child in the US a check for $100,000. The money would go back to the people who worked hard for it and could be spent on paying off mortgages, car loans, credit cards, student loans and money would flood the economy.
At least we would know where the money is going and it would be in the hands of the people who earned.
Interesting idea nnorman51. i ran across this article last night. http://www.truthdig.com/report/item/20080922_socialism_for_dummies/
In the comments you will find similar things suggested. Give the money to the people, who can then use it to pay off their debts. That way it gets back to the banks in a way that alleviates the problem for everyone affected. Why just bail out the banks and leave their victims hanging?
Here is my bailout plan:
Take the 700 billion dollars and invest in the failing MORTGAGES instead of the mortgage-backed securities. Any homeowner-occupied house facing foreclosure gets mortgage subsidized by government. If the economic meltdown is due to bad mortgages, the government supporting the mortgages should eliminate the worthlessness of the mortgage-backed securities.
Look at the math:
$700B bailout
$264K mean house price
Thus we could BUY 3 million houses for the $700B.
Now, I'm not promoting buying the houses, but we could do it like unemployment and prevent millions of foreclosures.
Trickle-up theory will prevent the bank failures.
Paulson, spokesperson for the CFR, was trying to pull a fast one on the dumb elected reps. He just about got away with it. This shows the low regard the rulers have for the elected reps.
Let's put the figures into perspective. Of approximately 350 million American residents, perhaps 150 million households exist. Of those, less than half pay anything meaningful in taxes. Let's be generous and say that there are 75 million tax-paying households in America today and that the Fannie Mae/Freddie Mac bailout is limited to only $1 trillion. Yours almost certainly is one of the tax-paying households. Your share of the mortgage giant bailout, therefore, is $13,333. And that doesn't take consideration of the fact that half the tax-paying households rely upon a government paycheck, either.
Of course, you already are on the hook for twice that amount, or nearly $30,000, for the current Iraq war, which was started on a lie told by Bush and Cheney about Saddam Hussein's "weapons of mass destruction." This pre-emptive Bush doctrine is the same one now so favored by McCain/Palin and which will lead us into WWIII via Iran, most likely.
What We Can and Cannot Do:
We can't feed and clothe all of America's children, but we can afford $60 billion to bail out Bear Stearns.
We can't provide decent medical care to America's seniors, but we can give $85 billion to AIG insurance.
We can't lift one finger to help out Americans losing their homes, but we can hand over up to $1 trillion to Fannie Mae and Freddie Mac.
We haven't the funds to provide proper care and support to American veterans, but we can afford up to $600 billion to buy pledged Lehman Brothers assets.
We can't do a thing to stanch to flow of jobs offshore and alleviate the suffering of out-of-work Americans, but we can hand $700 billion over to a guy who, until two years ago, ran the main problem-creating company: Goldman Sachs.
We can't afford to properly educate our children to fit into a changing America, but we can afford $1 trillion for a war that Cheney and Bush knowingly lied us into.
What's troubling me is that as soon as Goldman Sachs comes up as the next failure prospect, Paulson, GS's ex-CEO with a significant amount of GS stock, suddenly wants a ton of money with no strings attached to bail out "the industry".
hmmmmmmm
I warned you it was coming.
Months ago, in the debates, but it was a topic nobody wanted to have brought up, let alone discussed.
Two weeks ago, financial analyst Jim Rogers said the bailout of Fannie Mae and Freddie Mac made America more communist than China! "This is welfare for the rich," he said. "This is socialism for the rich. It's bailing out the financiers, the banks, the Wall Streeters."
That describes the current bailout package to a T. And we're being told it's unavoidable.
The claim that the market caused all this is so staggeringly foolish that only politicians and the media could pretend to believe it. But that has become the conventional wisdom, with the desired result that those responsible for the credit bubble and its predictable consequences - predictable, that is, to those who understand sound, Austrian economics - are being let off the hook. The Federal Reserve System (read: Private Bankers) is actually positioning itself as the savior, rather than the culprit, in this mess!
The Treasury Secretary is authorized to purchase up to $700 billion in mortgage-related assets at any one time. That means $700 billion is only the very beginning of what will hit us.
Financial institutions are "designated as financial agents of the Government."
Then there's this:
"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency." Translation: the Secretary can buy up whatever junk debt he wants to, burden the American people with it, and be subject to no one in the process.
There goes your country.
Our one-party system is complicit in yet another crime against the American people. The two major party candidates for president themselves initially indicated their strong support for bailouts of this kind - another example of the big choice we're supposedly presented with this November: yes or yes. Now, with a backlash brewing, they're not quite sure what their views are. A sad display, really.
I hope whichever candidate of the One Party System you elect as your next president has fun with all this, because it's certain the taxpayer won't.
Although the present bailout package is almost certainly not the end of the political atrocities we'll witness in connection with the crisis, time is short. Congress may vote as soon as tomorrow. With a Rasmussen poll finding support for the bailout at an anemic seven percent, some members of Congress are afraid to vote for it. Call them! Let them hear from you! Tell them you will never vote for anyone who supports this atrocity.
The issue boils down to this: do we care about freedom? Do we care about responsibility and accountability? Do we care that our government and media have been bought and paid for? Do we care that average Americans are about to be looted in order to subsidize the fattest of cats on Wall Street and in government? Do we care?
When the chips are down, will we stand up and fight, even if it means standing up against every stripe of fashionable opinion in politics and the media?
Times like these have a way of telling us what kind of a people we are, and what kind of country we shall be.
Ron Paul
nnorman51 comments: I keep hearing lawmakers and the administration claiming they are worried about the taxpayers.
Right.
Don't make me laugh!
No One in Washington, D.C. is worried about The Taxpayer! If they were, they'd be far less free in apporpriating, wasting, spending and consuming said Taxpayer's Earnings!!
Who they're Worried About is the Voter, who could well toss them out of a position where they are free to appropriate, waste, spend and consume The Taxpayer's Earnings.
Can you imagine that ousted Republicans are taking their wrath out on Paulson? Next thing you know Governor Palin will get the blame for McCain losing and, in the meantime, Bush and Cheney are counting their profits from their 8 years in office and laughing at "W."for making them look silly and cute!
Hear hear!!!
The fractional reserve banking system has to come down! The enslavement of the people shall stop!