Both Democratic and Republican members of the Senate Banking Committee lambasted the Bush administration’s proposed $700 billion bailout plan Tuesday. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke repeatedly clashed with almost every senator on the committee, all of whom focused on Wall Street’s culpability for the crisis. Many also brought up executive pay and emphasized the need for oversight of the Treasury. [includes rush transcript]
This is a rush transcript. Copy may not be in its final form.
AMY GOODMAN: Both Democratic and Republican members of the Senate Banking Committee lambasted the Bush administration’s proposed $700 billion bailout on Tuesday. Treasury Secretary Henry Paulson, Federal Reserve Chair Ben Bernanke repeatedly clashed with almost every senator on the committee, all of whom focused on Wall Street’s culpability for the crisis. Many also brought up executive pay and emphasized the need for oversight of the Treasury.
Section 8 of Secretary Paulson’s bailout proposal explicitly denies any check on his powers. It says, "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."
Paulson was defensive about this point in his opening statement to the committee. He said he did not want to be presumptuous and include an oversight mechanism in the bailout plan.
HENRY PAULSON: We gave you a simple three-page legislative outline, and I thought it would have been presumptuous for us on that outline to come up with an oversight mechanism. That’s the role of Congress. That’s something we’re going to work on together. So if any of you felt that I didn’t believe that we needed oversight, I believe we need oversight. We need oversight. We need protection. We need transparency. I want it. We all want it. And we need to do that in a way that lets this system — lets this program work effectively, quickly, because it needs to work effectively and quickly, and it needs to — and it needs to get the job done.
Now, the market turmoil we are experiencing today poses great risk to US taxpayers. When the financial system doesn’t work as it should, Americans’ personal savings and the abilities of consumers and businesses to finance spending, investment and job creation are threatened. The ultimate taxpayer protection will be the market’s stability, provided as we remove the troubled assets from our financial system. Don’t forget that. If this system has to work, it has to work right, and that will be the ultimate market protection.
I am convinced that this bold approach will cost American families far less than the alternative, a continuing series of financial institution failures and frozen credit markets unable to fund everyday needs and economic expansion. Again, I’m frustrated. The taxpayer is on the hook. The taxpayer is already on the hook. The taxpayer already is going to suffer the consequences if things don’t work the way they should work. And so, the best protection for the taxpayer and the first protection for the taxpayer is to have this work.
AMY GOODMAN: Treasury Secretary Paulson, speaking before the Senate Banking Committee. Federal Reserve Chair Ben Bernanke also tried to sell the bailout to skeptical committee members. He warned of a definite recession in the absence of a bailout.
BEN BERNANKE: The financial markets are in quite fragile condition, and I think, absent a plan, they will certainly get worse. But even at the current state, they are not serving the necessary function to support the economy. Credit is not being provided. Secretary Paulson mentioned non-financial companies are not able to finance themselves overnight. Credit is just not going to be available. It’s going to also affect savers, because the value of their assets that they have. So, even in the current condition, even if things don’t get severely worse — but I think they would get worse without some kind of an action — this will be a major drag on the US economy and will greatly impede the ability of the economy to recover in a healthy way.
AMY GOODMAN: But Congress did not appear to be easily swayed. Senate Banking Committee Chair Chris Dodd of Connecticut said he found Paulson’s proposal "unacceptable."
SEN. CHRIS DODD: Barely seventy-two hours ago, Secretary Paulson presented a proposal that he believes, and others do as well, is urgently needed to protect our economy. This proposal is stunning and unprecedented in its scope and lack of detail, I might add. It would allow the Secretary of the Treasury to intervene in our economy by purchasing at least $700 billion of toxic assets. It would allow the Secretary to hold onto those assets for years and to pay millions of dollars to handpicked firms to manage those assets.
It would do nothing, in my view, to help a single family save a home, at least not upfront. It would do nothing to stop even a single CEO from dumping billions of dollars of toxic assets on the backs of American taxpayers, while 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. And it would allow the Secretary and his successors to act with utter and absolute impunity, without review by any agency or a court of law. After reading this proposal, I can only conclude that it is not just our economy that is at risk, but our Constitution, as well.
AMY GOODMAN: The committee’s leading Republican, Senator Richard Shelby of Alabama, also did not mince words in his criticism of Paulson’s, quote, “ad hoc” plan.
SEN. RICHARD SHELBY: We’re now facing the most serious economic crisis, as Chairman Dodd said, in a generation. So far, the Treasury Department’s and the Fed’s response to the crisis has been a series of ad hoc measures. First came the bailout of Bear Stearns, which we were told was unavoidable. Then came Lehman Brothers, which was allowed to fail. And then, just last week, the Fed and Treasury organized a bailout of AIG. I believe the absence of a clear and comprehensive plan for addressing this crisis has injected additional uncertainty into our markets, and it has undetermined the ability of our markets to tackle this crisis on their own.
Unfortunately, the Treasury Department’s latest proposal continues, I believe, its ad hoc approach, but on a much grander scale. The Treasury’s plan has little for those outside of the financial industry. It is aimed at rescuing the same financial institutions that created this crisis, with the sloppy underwriting and reckless disregard for the risks they were creating, taking or passing on to others. Wall Street bet that the government would rescue them if they got into trouble. It appears that bet may be the one that pays off.
Once again, what troubles me most is that we have been given no credible assurances that this plan will work. We could very well spend $700 billion or a trillion and not resolve the crisis.
AMY GOODMAN: Kentucky Republican Senator Jim Bunning said the Treasury’s bailout plan is tantamount to, quote, "financial socialism."
SEN. JIM BUNNING: We cannot make bad mortgages go away. We cannot make the losses that our financial institutions are facing go away. Someone must take those losses. We can either let the people who made the bad decisions bear the consequences of their actions, or we can spread that pain to others. And that is exactly what the Secretary’s proposal is to do: take Wall Street’s pain and spread it to the taxpayers. The Paulson plan will not help struggling homeowners pay their mortgages. The Paulson plan will not bring — the Paulson plan will spend $700 billion worth of taxpayers’ money to prop up and clean up the balance sheets of Wall Street. This massive bailout is not a solution. It is a financial socialism, and it’s un-American.
AMY GOODMAN: Ohio Democratic Senator Sherrod Brown grilled Paulson and Bernanke about how those who lost their homes in the mortgage crisis feel about the bailout.
SEN. SHERROD BROWN: I don’t think a single call to my office on this proposal has been positive. I don’t believe I’ve gotten one yet of the literally thousands of emails and calls we’re getting. Part of this reflects outrage by taxpayers making $30,000, $40,000, $50,000, $75,000, $100,000 a year bailing out people whose country club memberships cost many times that. Part of it is, I think, an attitude. Wall Street, to most people in my state, I think, certainly to many of them, Wall Street didn’t care one bit what it was doing to neighborhoods in Cleveland and Dayton and Toledo. It didn’t see the devastation. It didn’t feel the pain. And my question for each of you is, do you think that — do you think Wall Street owes the American people an apology?
BEN BERNANKE: Wall Street made a lot of mistakes. Regulators made a lot of mistakes. We’re going to have to go through all that. But let me just say this: people on Main Street who think that Wall Street is somewhere far away and has — whatever happens there has no implications to their lives are just misinformed, because if Wall Street and credit markets freeze up —-
SEN. SHERROD BROWN: I No, Mr. Chairman, people know that what happens on Wall Street has an effect on their lives. That’s not the question. The question is, does Wall Street owe the American people an apology?
BEN BERNANKE: Wall Street itself is an abstraction. There are many people who made big mistakes and many regulators who made mistakes, and we need to figure out what those were and make sure they don’t happen again.
SEN. SHERROD BROWN: Secretary Paulson?
HENRY PAULSON: Yeah, you know, I share the outrage that people have. It’s embarrassing to look at this, and I think it’s embarrassing for the United States of America. There’s a lot of blame to go around, a lot of blame, and a lot of blame with the big financial institutions that engaged in -— that’s where I’ve started, with this irresponsible lending; the overly complicated complex securities that no one understood as well as they should and, it turns out, they didn’t understand them themselves; the rating agencies that rated those securities; blame to the people that made loans they shouldn’t have made; to some people that took out loans they shouldn’t have taken out; there’s — to regulators. So, there is no doubt about that.
But what we’re focused on now is, and what I think your constituents want to hear is, let’s fix the problem in the way that is going to have the least negative impact on them, and then let’s go out and deal with all these problems and figure out how to make sure that we minimize the likelihood they will happen again.
SEN. SHERROD BROWN: No disrespect, Mr. Secretary, but they understand much of that. They do want a solution, but they don’t want the same people that have helped to inflict this pain on the American people to get the opportunity, because of our reluctance on executive compensation and our reluctance to do accountability, to inflict more pain.
AMY GOODMAN: Ohio Democratic Senator Sherrod Brown reminding Treasury Secretary Henry Paulson and Federal Reserve Chair Ben Bernanke of the price Main Street is paying for both Wall Street’s excesses and now the bailout.
When we come back from break, we will turn to Naomi Klein, author of The Shock Doctrine: The Rise of Disaster Capitalism, and then we’ll be joined by leading children’s rights advocate in this country, Marian Wright Edelman. Stay with us.