rssBand of Dems Blasts Geithner Plan
Friday, October 30, 2009 at 6:00 am
- 26 Comments
Treasury Secretary Timothy Geithner (WDCpix)
Appearing before a House panel on Thursday, Treasury Secretary Tim Geithner made his best pitch for legislation granting the White House broad new powers to seize Wall Street firms when their collapse might torpedo others in the industry.
It didn’t go so well.
[Congress1]A number of Democrats on the House Financial Services Committee unfurled a laundry list of charges against the proposal, including the prominent concern that the bill would empower the president — and future presidents — with unlimited bailout authority to prop up “too-big-to-fail” institutions at the expense of taxpayers.
“Mr. Secretary, I’m not a man that fears this administration or you,” Rep. Paul Kanjorski (D-Pa.) told Geithner. “But I do fear the accumulation of power exercised by someone in the future that can be extraordinary.”
Rep. Brad Sherman (D-Calif.) echoed those concerns, arguing that the bill represents “the most unprecedented transfer of power to the executive branch to make decisions about both spending and taxes in history — all without congressional approval.”
The tone of the comments could foreshadow a tough road ahead, not only for the White House, but for Financial Services Chairman Barney Frank (D-Mass.), who introduced legislation this week that grants the Treasury’s request to broaden the president’s “resolution authority.” The bill is one of the final pieces of the finance-reform puzzle that Frank has been putting together all year. But by conceding most of the administration’s requests, the Massachusetts Democrat — who asked no questions of Geithner Thursday — has riled others on his panel, who want to see more taxpayer protections in the bill.
Frank’s proposal would create an oversight commission to monitor and regulate Wall Street’s investment houses and other non-bank institutions to ensure that they’re on solid footing. Federal regulators could, for example, force companies to increase capital reserves or decrease the amount of debt they’re holding, if the scenario was deemed a threat to topple the firm.
The bill would also empower the White House to swoop in and dismantle failing Wall Street institutions in order to minimize the impact on the finance system as a whole — a strategy modeled on the authority of the Federal Deposit Insurance Corporation to intervene when commercial banks are threatening to fall.
To protect taxpayers, Frank’s bill aims to have failed-company shareholders and creditors cover the cost of the government help. If more money is needed, taxpayers would initially pick up the tab, to be reimbursed later by an after-the-fact tax levied against other large Wall Street institutions that would presumably benefit from the stabilizing effects of the government intervention.
Supporters maintain that the proposal does not empower bailouts at all, but would simply allow the government to manage the deaths of failed companies so they don’t drag down the financial system with them — a kind-of controlled euthanasia designed to protect consumers from the hubris of the finance industry.
“If we do have to step in, it will be very painful for those companies” Frank told MSNBC Thursday. “They will be put out of business. The CEOs will be fired. Shareholders will be wiped out. We are not going to have a situation where people can expect to be bailed out and live happily ever after.”
Geithner, for his part, denied that the proposal authorizes the White House to tap federal coffers at all. Asked by Rep. Maxine Waters (D-Calif.) if the bill grants “the authority to spend the taxpayers’ money to bail them out if you deem that to be a good way of handling that situation,” the Treasury secretary answered with one word: “No.”
Yet the House bill empowers the administration to make loans, buy assets, and invest in failing institutions if regulators determine those steps are required to prevent “serious adverse effects on financial stability or economic conditions in the United States.” To do so, of course, the White House would use taxpayer funds. And no monetary limits are specified.
And while the bill aims to recover the taxpayer dollars within 60 months of the bailout, Sherman notes that the White House would also have the authority to extend that deadline indefinitely.
“It could be 60 years,” he said.
That these bailout protections are limited only to those institutions whose failure is deemed a system-wide threat is another source of criticism on Capitol Hill. Many lawmakers and finance experts contend that that stipulation creates an unfair advantage for big firms over their smaller competitors. For example, they could get capital at lower rates if lenders know they have access to some level of federal lifeline. That dynamic, critics argue, would act to promote “too-big-to-fail” institutions, rather than reining them in.
“Why should the American people have to sit out there and see us creating mammoth organizations that nobody says we have the authority to control or limit, but we have the authority to help them when they get into trouble?” asked Kanjorski.
There are still other concerns. For example, some lawmakers are attacking the proposed bailout tax on large institutions, arguing that it should be collected beforehand as a type of insurance fund, rather than imposed after a competitor goes under.
“No more TARP. No more bailouts,” said Rep. Luis Gutierrez (D-Ill.). “Let them [the companies] create the fund, the systemic risk fund, that will guarantee that the American taxpayer will no longer have to be involved should they cause such a crisis ever again.”
Geithner responded that such a system would encourage even more risky behavior from the largest companies. “If you create a fund in advance, there’s a risk you’re going to create more moral hazard,” Geithner said. “People will live the expectation where the government will come in and protect them. We don’t want to create that expectation. That’s why we think it’s better to do it after the fact.”
Meanwhile, conservatives and representatives in the finance industry are blasting the notion that solvent companies should be forced to pay to bail out the mistakes of competitors. “Should Ford bear the costs of compensating the taxpayer for what happened to G.M. and Chrysler?” asked Rep. Jeb Hensarling (R-Texas.).
Gutierrez pointed out yet another concern: Placing such broad new powers in the hands of Treasury leaders – who often arrive directly to the job from previous positions of power on Wall Street – creates the impression of the fox guarding the hen house.
“How do we know the next secretary of the Treasury won’t be the former CEO of Goldman Sachs as they have been in the past?” he asked. “They seem to be interwoven, and that’s what the American public sees.
“They see the interconnectedness in terms of their power, their influence and always to their benefit.”
26 Comments
Comment posted October 30, 2009 @ 6:48 am
It's always amazes me that America's lazy Wall Street executives never fail to rely on our incompetent ruling class political structure to save their unearned livelihoods. Wow…
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Comment posted October 30, 2009 @ 3:51 pm
We see now who really runs the Fed Gov't. Wall street. Time to vote these tools out and get back to what our country should be doing, taking care of its people.
Comment posted October 30, 2009 @ 6:29 pm
It has become clear that Obama shares the Bush family's vision of an imperial presidency.
Yes, the lunatic right is paranoid, but even paranoids have enemies.
Our over-reaching excutive branch has become the enemy of all Americans who prefer democracy to authoritarianism.
Comment posted October 30, 2009 @ 6:36 pm
That's how “laissez fare capitalism” is designed to work: The predators use government to fleece the sheep.
Americans will continued to be suckers until they get over their mindless, ignorant fear of rationally regulation of commerce and public management of necessities such as water, energy, education, and health care.
Comment posted October 30, 2009 @ 8:51 pm
Tim Geithner is devising a scheme to once again allow the corprotocracy on Wall Street to be bailed out by the taxpayers, the next time their greed gets the better of them and they find it convenient to fill their pockets with their investors' money, the taxpayers will be bound by law to bail them out again and again. Geithner is one of the foxes minding the hen house. I am amazed that the POTUS does not get this.This man cannot be trusted and believed. It is so obvious that he is working for Wall Street, and against Main Street.
Comment posted October 30, 2009 @ 9:27 pm
Your ballroom days are over
Night is drawing near
Shadows of the evening
Crawl across the years
bbc beck blitzer bolton breitbart coulter
cspan drudge gutfeld hannity huckabee imus
ingraham krauthammer kristol limbaugh malkin
north oreilly rivera rove scarborough stossel susteren
Gotta Serve Somebody by Bob Dylan
Comment posted October 31, 2009 @ 3:48 am
I'm 42 years old and kicking myself that I am once again shocked at the methods of politicians. With almost $10trillion blasted out via the fed, and nobody in gov/press who will ask a mean question, I believe the time has come for us to be more forceful: I liked Obama, up until the math was clear that he worked for Wall St like the previous president. The continuity of true allegience, with the divergence of spoken allegience, leaves me aghast at the the subterfuge.
From now on politicians work for THEM (wallstreet) until proven otherwise, Obama's cabinet may as well be a blowjob on wallstreet. I'm a liberal, and I call foul. His friends are too absurd.
Comment posted October 31, 2009 @ 4:29 am
I'm a tory-hating New England Liberal. We were independent when it wasn't cool, and even when empires didn't approve. Long past when you Tory's (typical historical right-winger) thought we should just crouch down and lick the corporate hand. We spit on the East India Company then and today as well. We never changed once, just you torys did and adjusted history in the short-term
Alas proud brother, I've come to know that Obama is a tool of Wall St, Your right wing ways are foolish politics in normal terms, yet these aren't normal terms. Our quaint arguments were better in the right/left vacuum, we lament the passing of the context as a healthy persuit, but this isn't that time.
You are our brothers and we hate that Rush has taught you to hate so, If you need it we'll admit our blindness first:
Collective=We the People, we will never be ashamed at that phrase.
Comment posted October 31, 2009 @ 4:11 pm
Nice. Unrelentless attempts to transfer private wealth to the government sector. First the banks. Then healthcare. Now this. Why doesn't Timmy boy just move to Cuba and do us all a favor.
The wrong question is about healthcare.
The right question is: do we want the federal govt to take over the private sector.
He** NO!
Comment posted October 31, 2009 @ 4:14 pm
I'm an indepedent/socail conservative and I want to say both parties disgust me in how they are treating us (Main Street) like sheep to be sheared.
Where;s my bailout? My businesses bailout? NADA.
Because actual help means less potential wool to shear you average American were to simply have his debt written away.
Yet that is an answer that could reignite the economy.
Comment posted October 31, 2009 @ 4:21 pm
Timmy, just doesn't get it, he is trying to jury rig the rules so the giants survive and thrive, when the real answer is simple, kill the giants and change the rules so they don't come back!
Comment posted October 31, 2009 @ 5:53 pm
You got it in reverse, pal.
The “private sector” as you call it, has already sucked billions of private dollars down the toilet along with billions of public (taxpayer) dollars. There is no damn private sector, bud, there's private wealth and there's public debt. Your “private sector” basically gets as many government subsidies as it can, soaks consumers for as much as possible for its “products” while giving as little “product” as possible, and then, when it all goes wrong, soaks the SAME consumers AGAIN in the form of bailouts and loans funded by taxes. And they're so damn oblivious about the implications of what they've done, we have to step in and tell them “you nearly destroyed the world's economy, so let's not do the $35 million annual salary and the $5 million “performance” bonus, okay? You'll just have to find a way to live on the $500 million you've already made in the process of screwing up the economy.”
Who's transferring what where, friend?
I think it's been made pretty obvious that when it comes to screwing things up, the “private sector” has just as much talent as the Feds along with a much higher price tag.
You keep your terrific private insurance, I'll take my chances with a government plan.
Pingback posted November 1, 2009 @ 2:38 am
[...] Band of Dems Blasts Geithner Plan Washington Independent (hat tip reader John D) [...]
Comment posted November 1, 2009 @ 2:18 am
“The predators use government to fleece the sheep.”
Let us not forget that the government provides the shears to cut the fleece, and the ties that hold the sheep down.
It is important to acknowledge that the predator is powerless over us sheep without government's assistance. In fact, lacking the tools of coercion provided by the government, the predator is driven to serve the demands of us sheep in order to fulfill its lust for profit. The predator will go to extraordinary lengths to satisfy us sheep for access to our sheep-dollars.
We should we condemn the predator for doing the only thing he knows how to do? His sole purpose is the accumulation of wealth. The morality of his purpose is another subject entirely.
If we sheep assign blame, it should first fall on our elected government. Government is sworn to protect the interests of sheepkind, but instead government ignored the danger to its flock and became seduced by the treasures and charms of the predator. And so those sworn to protect us sheep tied our hands and delivered us to the predator as only government could.
Do we blame the predator for wanting our fleece? Or do we blame our shepherd, the government, for delivering us sheep into the predators foul clutches?
Pingback posted November 1, 2009 @ 2:22 am
[...] Band of Dems Blasts Geithner Plan Washington Independent (hat tip reader John D) [...]
Pingback posted November 1, 2009 @ 8:52 am
[...] Band of Dems blasts Geithner Plan to give White House broad bailout authority – Washington Independent [...]
Comment posted November 1, 2009 @ 10:35 am
rob333 you appear to be very confused. Private wealth to the govt.sector?WTF?
Comment posted November 1, 2009 @ 12:38 pm
Actually Rob,
I believe it to be middle-class private wealth –> Goverment –> elite private wealth. It's just a wealth transfer upward, the government is mearly the clearing house.
Comment posted November 5, 2009 @ 12:35 pm
“Geithner is one of the foxes minding the hen house. I am amazed that the POTUS does not get this.”
What makes you think he doesn't get it?
We have just witnessed a seamless transition of power from Bush to Obama, and it was so smooth it's hard to discern that any change occurred at all.
Comment posted November 5, 2009 @ 5:35 pm
“Geithner is one of the foxes minding the hen house. I am amazed that the POTUS does not get this.”
What makes you think he doesn't get it?
We have just witnessed a seamless transition of power from Bush to Obama, and it was so smooth it's hard to discern that any change occurred at all.
Comment posted July 30, 2010 @ 11:12 am
We should we condemn the predator for doing the only thing he knows how to do? His sole purpose is the accumulation of wealth. The morality of his purpose is another subject entirely.
Comment posted July 30, 2010 @ 11:12 am
We should we condemn the predator for doing the only thing he knows how to do? His sole purpose is the accumulation of wealth. The morality of his purpose is another subject entirely.
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