Monday, September 22, 2008
Democrats: "We will not simply hand over a $700 BILLION blank check to Wall Street."
***UPDATE*** 11:11PM Democrats have begun to push back on the bailout plan offered by the Bush Administration, specifically with legislation that would cut the salaries of the CEO's whose firms participate in the bailout and by adding more oversight provisions. The Washington Post reports:
Congressional Democrats considering the Bush administration's emergency plan to shore up the U.S. financial system yesterday countered with their own demands, presenting draft legislation giving the government power to cut salaries of chief executives at firms that participate in the bailout and slash severance packages for their top management...
...Democrats sought to add oversight provisions and taxpayer protections to the proposal, which amounts to the largest government intervention in the private markets since the Great Depression. "We will not simply hand over a $700 billion blank check to Wall Street," House Speaker Nancy Pelosi (D-Calif.) said in a statement.
Under the proposal drafted by House Democrats, the Treasury would be required to force faltering firms that want to sell their troubled assets to the government to "meet appropriate standards for executive compensation." Those standards would include a ban on incentives that encourage chief executives to take "inappropriate or excessive" risks, a mechanism to rescind bonuses paid for earnings that never materialize and limits on severance pay.
Obama issued a "statement of principles" regarding the bailout plan. One principle it emphasized was that the plan cannot bail out Wall St. and ignore the troubles on Main St.:
"We must work quickly in a bipartisan fashion to resolve this crisis and restore our financial sector so capital is flowing again and we can avert an even broader economic catastrophe. We also should recognize that economic recovery requires that we act, not just to address the crisis on Wall Street, but also the crisis on Main Street and around kitchen tables across America...
...Taxpayers should be protected. This should not be a handout to Wall Street. It should be structured in a way that maximizes the ability of taxpayers to recoup their investment. Going forward, we need to make sure that the institutions that benefit from financial insurance also bear the cost of that insurance.
Help homeowners stay in their homes. This crisis started with homeowners and they bear the brunt of the nearly unprecedented collapse in housing prices. We cannot have a plan for Wall Street banks that does not help homeowners stay in their homes and help distressed communities.
Treasury Secretary Henry Paulson said Sunday that the nation's credit markets remain frozen and Congress must move quickly to pass a $700 billion bailout package for financial firms. But key Democrats said the legislation needs changes to provide better protections for taxpayers and homeowners in danger of losing their homes.
The AP reports that Treasury Secretary Henry Paulson said Sunday that the government should resist including households in its bailout plan despite calls from Democrats to do so:
"The credit markets are still very fragile right now and frozen," Paulson said in an interview on NBC's Meet the Press. "We need to deal with this and deal with it quickly."[...]
Democrats said they understood the need for urgency but insisted that the measure needed to provide help for homeowners threatened with losing their homes, perhaps by changes in bankruptcy laws to allow for mortgages to be modified, and by capping pay and benefit packages for executives at the huge Wall Street firms that will be selling their bad debt to the government.
"I don't want the American taxpayer to get this bad debt and then the guy (whose company once held the bad loans) gets millions of dollars on his way out the door," said House Financial Services Chairman Barney Frank, D-Mass.
Paulson and President Bush have argued that the alternative would be credit markets that remain frozen, meaning that businesses will fail because they can't get the loans they need to operate and the economy will grind to a halt because consumers, who account for two-thirds of economic activity, won't be able to get the credit they need to keep spending.
At a rally in Charlotte Sunday Obama spoke about how he believed the government needed to deal with the financial crisis when it comes to households:
We must work quickly in a bipartisan fashion to resolve this crisis to avert an even broader economic catastrophe. But Washington also has to recognize that economic recovery requires that we act, not just to address the crisis on Wall Street, but also the crisis on Main Street and around kitchen tables across America.
Read more of Obama's remarks.