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Paulson to Congress: Pass bailout ASAP
Treasury Secretary Henry Paulson, Federal Reserve Board Chairman Ben Bernanke, Chairman of the Securities and Exchange Commission Christopher Cox, and director of the Federal Housing Finance Agency James Lockhart III, testify during a hearing before the Senate Banking, Housing and Urban Affairs Committee today.
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TEXT OF STORY
Stacey Vanek-Smith: Treasury Secretary Henry Paulson and Federal Reserve chief Ben Bernanke are on capital hill this morning. They're answering questions about the $700 billion plan to bail out financial markets. But so far, lawmakers don't seem to be convinced. Senate Banking Committee Chairman Christopher Dodd said the money seems to be going to the wrong people.
Christopher Dodd: It would do nothing in my view to help a single family save a home, at least not up front. It would do nothing to stop even a single CEO from dumping billions of dollars of toxic assets on the backs of American taxpayers. But at the same time, do nothing to stop the very authors of this calamity to walk away with bonuses and golden parachutes worth millions of dollars.
But Treasury Secretary Henry Paulson had one message for lawmakers: Get moving already. Paulson said government regulation and other parts of the plan will need further debate, but that lawmakers need to put differences aside and pass the bill ASAP.
Henry Paulson: We must have that critical debate, but we must get through this period first. Right now, all of us are focused on the immediate need to stabilize our financial system. And I believe we share the conviction that this is in the best interests of all Americans. Now let's work together to get it done.
The plan would create a government entity that would buy up hundreds of billions of dollars worth of bad mortgages. Could be hard to rush this plan. Seven hundred billion dollars is a lot of money, after all. And this being Washington, everybody has a pet stipulation. Marketplace's Steve Henn reports.
Steve Henn: In their own bills, lawmakers have pushed to limit CEO compensation, change bankruptcy laws to help homeowners and give tax payers an equity stake in the companies they help. All these provisions make Wall Street bankers a bit uneasy, but Congress has also taken some steps they like. Scott Talbott's a lobbyist for the Financial Services Roundtable.
Scott Talbott: Who can participate and what assets are eligible for purchase by treasury are the heart of the matter and they are still a little bit in flux.
He says one version of the bailout bill allows the feds to buy any troubled assets from banks, not just mortgage loans.
Talbott: Are auto loans included? Are student loans included? Are credit card loans included
Henn: I mean troubled assets seems pretty broad.
Talbott: It is; it is.
Henn: But it's not a done deal.
Talbott: So there is still some uncertainty.
And Talbott and financial markets around the world are listening closely as Bernanke and Paulson and Congress hash out the details and try to end the uncertainty.
In Washington, I'm Steve henn for Marketplace.
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This is unconstitutional and treasonous. Paulson is a criminal, like the rest of the Bush gang. See www.worldreports.org for extensive documentation of the criminal off-the-book trading that led to this mess.
A copy of a letter I just sent to Charles Schumer.....
Dear Senator Schumer,
The NY Times quotes you today as follows:
“We were told that markets knew best, and that we were entering a new world of global growth and prosperity,†Mr. Schumer said as the committee greeted Mr. Bernanke, who is testifying on Capitol Hill for a second consecutive day. “We now have to pay for the greed and recklessness of those who should have known better.â€
Those who should have know better?
Mr. Schumer I spent almost 30 years in corporate America. I was not a high level executive, but due to my almost 3 decades of tenure with the same firm I made the acquaintance of numerous execs. I cannot and will not believe that the heads of these many institutions of American finance didn't know that this "crisis" was coming. The auditors had to know the the investment value was unknowable, or that the risk profile was flawed.
Since the Federal Reserve has opened the discount window to the banks, why can't they borrow from the Fed at low rates to shore up their balance sheets?
If we allow this "bailout"....why do we need to authorize $700,000,000,000.00? Why can't we authorize funding in stages so that we have time to look at this problem and examine various solutions.
The credibility of the Bush administration is just about zero in my book. Mr. Paulson may be the greatest Treasury Secretary since Hamilton, but I'm still opposed to giving any Treasury Secretary carte blanche.
As far as executive compensation is concerned lets open up this issue and set rules so that shareholders can vote directly on executive compensation. This is a problem that has been festering for years.
While I'm writing this I must tell you that I believe that there is a single, primary, underlying cause for this terrible, immoral, possibly criminal mess. Campaign Finance. There is money flowing from these institutions into the political campagn coffers of all of you in Washington. This system is broken and our nation will never rid itself of these types of excesses until meaningful Campaign Finance Reform is adopted.
Sincerely Yours,
Barton Poran
Before rushing into a top-down bailout plan, I think we should consider the merits of a bottom up approach (trickle-up economics): Buying out the nearly worthless mortgage-backed securities from failing companies is merely kicking around a dead football. They're still worthless, whoever owns them, whether the failing corporations or us, the US taxpayers. Instead of bailing out the financial industry that created the crisis, why not support actual individual mortgages? This would solve the problem by directly helping the struggling homeowners, which would help save families in crisis, save whole communities, revitalize the real estate market, and solve the root problem of the financial crisis by turning the nearly worthless mortgage-backed securities into assets of real value. This would in turn boost the financial industry out of its crisis. Here's an overly simple look: It is expected that a million homes would be foreclosed upon in the coming year. What a terrible impact those foreclosures will have on our system. Let's say we support the mortgages for two years of foreclosures, that might be two million homes. For $700 billion, figuring say, 50% for administrative costs, that leaves $350 billion for 2 million mortgages which is $175,000 available per mortgage. That would really do something! Think of the impact on those two million families, their communities, the real estate market, and the financial markets! This is a rudimentary outline of a concept, not a plan; it will take a lot of discussion to develop a good bottom up plan, and the details will not be easy. But the main point is: If we bail out from the top down, maybe we save some companies, but the families, communities and markets will still be failing. If we figure out a way to support the families, then everyone, including the financial companies and markets will benefit.
Not sure why average citizens should have to prop up the failing financial sector. THEY'RE the ones with the yachts, vacation homes, etc. At the rate things are going, I'll be lucky if I ever get to retire, instead of in the 3 years I'd hoped. And I sure won't be able to live with my kids, as some suggest. They'll be up to their necks in paying off this untenable debt.
One question, though. IF Congress (against the better judgment of all constituents who are admonishing them not to) votes to grant the Bush administration's request, where in the world will that money come from? Lots of folks bandy about the $700 trillion figure, but I've yet to hear anyone tell us EXACTLY where it will come from. Anyone betting on China?
First let me say I am not for the bail out. I think tax payers are going to end up holding the bag and being a tax payer that's one bag I don't want to hold. With that being said though, the issue is credit. When the banks holdings are in peril they stop lending money. Then new business ventures don't get funded, college students don't get loans, credit cards don't get issued, and new home loans don't get made. When that happens, our economy tanks. Then every one of us will be paying with our 401ks. Things will not get better until we can solve the issue that banks are over extended.
Does that mean we need to give them money without strings? NO WAY! Instead I say we offer a bail out for companies with nice little shockers attached... no salaries greater than $300,000, No golden parachutes, share in the banks stock, require a new CEO. These actions will be painful but a prime directive of capitalism is that the market will make those that don't do their homework pay.
I would like to see Paulson investigated for criminal wrong-doing. The fact that he slipped into this bailout bill a de facto get out of jail free card for all parties entrusted with administrating this money, along with the intent to close the deal over the weekend, reveals him as a flim flam man.
What Mr. Paulson is asking for in a basic sense is trust. At this point in his job evaluation, I would say that trust will be hard to come by.
I thought Sen. Charles Schumer suggestion of lending $50 Billion now with a re-assessment of the progress in mid-January before releasing more funds. Mr. Paulson himself stated that not all the funds would be used in the short term.
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