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Bernanke and Paulson: Congress must move now
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WASHINGTON (AP) - Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson urged Congress on Tuesday to quickly pass a $700 billion financial bailout, warning that letting problems Read Story.


Analysis
Some experts not buying bailout
Economists worry about lack of details -- and Paulson's role
Tuesday, September 23, 2008 3:35 AM
By Peter S. Goodman
The New York Times


As economists puzzle over the proposed details of what may be the biggest financial bailout in American history, the initial skepticism that greeted its unveiling has only deepened.


Some are horrified at the prospect of putting $700 billion in public money on the line. Others are outraged that Wall Street, home of the eight-figure salary, may get rescued from the disastrous consequences of its real-estate bender, even as working families relinquish houses to foreclosure.


Most economists accept that the nation's financial crisis has reached such perilous proportions that an expensive intervention is required. But the Treasury's proposal for a bailout is being challenged as fundamentally deficient.


"At first it was, 'Thank goodness the cavalry is coming,' but what exactly is the cavalry going to do?" asked Douglas W. Elmendorf, a former Treasury and Federal Reserve Board economist, and now a fellow at the Brookings Institution in Washington. "What I worry about is that the Treasury has acted very quickly, without having the time to solicit enough opinions."


The common denominator to many reactions is a discomfort with giving Treasury Secretary Henry Paulson -- himself a product of Wall Street -- carte blanche to relieve major financial institutions of bad loans choking their balance sheets, all on the taxpayer's tab.


Many economists argue that taxpayers ought to get an ownership stake in the companies on the receiving end.


But an underlying source of doubt about the bailout stems from who is doing the asking. The rescue is being sold as a must-have emergency measure by an administration with a controversial record when it comes to asking Congress for special authority in time of duress.


"This administration is asking for a $700 billion blank check to be put in the hands of Henry Paulson, a guy who totally missed this, and has been wrong about almost everything," said Dean Baker, co-director of the liberal Center for Economic and Policy Research in Washington.


Paulson has said the powers he seeks are necessary to chase away the wolf howling at the door: a potentially swift unraveling of the American financial system. That would be catastrophic for everyone, he says, not only banks, but also ordinary Americans who depend on their finance to buy homes and cars, and to pay for college.


Some are suspicious of Paulson's characterizations.


"This is scare tactics to try to do something that's in the private but not the public interest," said Allan Meltzer, a former economic adviser to President Reagan and an expert on monetary policy at the Carnegie Mellon Tepper School of Business. "It's terrible."


The biggest point of contention is over whether and how taxpayers would benefit if the bailout succeeds in righting the financial system.


In Paulson's plan, the Treasury would have the right to buy as much as $700 billion worth of troubled investments, with the taxpayer recouping the proceeds when those investments are sold over coming years.


The government could then sell off that stock at a profit when conditions improve.



Others argue that any bail- out must pinch the people who have run the companies now needing rescue along with their shareholders, addressing the unseemly reality that executives have amassed beach houses and fat bank accounts while taxpayers are stuck with the bill for their reckless ways.


"It absolutely has to be punitive," Baker said. "If they sell us the junk, then we own the company. This isn't a way to make these companies and their executives rich."


Ohioans wary of bailout plan
Tuesday, September 23, 2008 3:34 AM
By Jonathan Riskind and Jack Torry
THE COLUMBUS DISPATCH


WASHINGTON -- Quick action is needed by the federal government to prevent a crisis on Wall Street from creating chaos on Main Street, Ohio lawmakers said yesterday.


Democrats and some Republicans raised questions about whether Congress should require greater oversight and more protection for taxpayers as part of the Bush administration's $700 billion bailout proposal. But there was little disagreement about the need to respond in dramatic fashion, and little doubt that lawmakers are convinced that protracted partisan bickering and delay could spark financial catastrophe.


"This financial crisis is not just about Wall Street; it's about Main Street. That's why Congress must take quick action," said Rep. Charlie Wilson, D-St. Clairsville, a member of the House Financial Services Committee.


"Without swift intervention, this emergency threatens Americans' retirement savings, home mortgages, college loans and even car loans. Without the right lines of credit, small businesses won't be able to grow, and that would effectively stop job creation. We can't allow that to happen."


Rep. Deborah Pryce, R-Upper Arlington, said: "Restoring liquidity in the market helps us protect payrolls and pensions."


GOP Rep. Pat Tiberi, R-Genoa Township, said lawmakers need to make sure the package they are being asked to approve will do more good than harm to ordinary Americans.


"Congress ... has a responsibility to fully understand the details of the stabilization plan and the long-term impact of the included provisions," Tiberi said.


Congressional Democratic leaders and Sen. Barack Obama, the Democratic presidential nominee, are pushing to alter the Bush bailout plan -- even as they acknowledge the need to act -- by mandating more oversight of how the Treasury secretary spends $700 billion or more to buy up bad debt.


Some Democrats, including Obama, also want to limit compensation packages for CEOs of bailed-out companies and to offer more aid to individual homeowners facing foreclosure.


A number of Republicans also say that more accountability and transparency need to be added to the White House's proposal. They include GOP nominee John McCain, who also endorsed capping the compensation of executives of bailed-out companies.


House Minority Leader John Boehner, R-West Chester, expressed the growing sentiment on Capitol Hill and from the presidential campaigns by insisting that Treasury Secretary Henry Paulson not be given unlimited authority to buy failed assets.


Noting that Congress is a "co-equal branch of the federal government," Boehner said in a statement that Congress would "need a serious oversight role in the process."


Boehner suggested a joint congressional committee "as the mechanism for that oversight, but I am open to other suggestions."


Democratic Sen. Sherrod Brown of Ohio said that Congress can't give Paulson and the Bush administration "a $700 billion blank check without fighting for Main Street."


GOP Sen. George V. Voinovich of Ohio, in Columbus yesterday to talk to housing and redevelopment specialists about the foreclosure crisis, was asked whether he supports the bailout. "I guess I do," he said.


But he angrily said he will do everything he can to make sure executives at the institutions the government is bailing out don't receive golden parachutes.


Voinovich lamented the increasing amount of the nation's debt and the burden that's putting on future generations. "We are behaving irresponsibly and immorally," he said.


Rep. Jim Jordan, R-Urbana, said he is "real skeptical" about the Treasury plan and wants to hear more details. "This is approaching a three-quarter-trillion-dollar taxpayer bail-out."


Dispatch staff reporter Mark Ferenchik contributed to this story.


jriskind@dispatch.com jtorry@dispatch.com


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