Paulson, Bernanke Report To Capitol Hill
MADELEINE BRAND, host:
From the studios of NPR West, this is Day to Day. I'm Madeleine Brand.
ALEX CHADWICK, host:
I'm Alex Chadwick. On the show today, the big bailout. Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke outlined their plans for rescuing the failing financial system.
BRAND: Henry Paulson urged Congress to quickly approve a plan to spend as much as 700 billion dollars to purchase so-called toxic assets from troubled investment firms.
Mr. HENRY PAULSON (Treasury Secretary): This troubled asset relief program has to be properly designed for immediate implementation, and be sufficiently large to have maximum impact and restore market confidence.
CHADWICK: Many members of the Senate Banking Committee said they understood the urgency and are ready to try to prevent a financial collapse, but most were unhappy about huge amounts of taxpayer money for Wall Street bankers who made bad investments. Here's Republican Richard Shelby of Alabama.
Senator RICHARD SHELBY (Republican, Alabama): 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.
BRAND: As the committee was meeting in Washington this morning, President Bush was at the U.N. General Assembly in New York. He said the administration now has a strategy that will help protect not only U.S. financial institutions, but world markets.
President GEORGE W. BUSH: I can assure you that my administration and our Congress are working together to quickly pass legislation approving this strategy.
BRAND: Joining us now for some analysis of the events on Capitol Hill is NPR's Jim Zarroli. And Jim, tell us more about how Paulson and Bernanke tried to sell this bailout to Congress this morning.
JIM ZARROLI: Well, they really are trying to just convey the urgency of the situation. You know, people see the stock market fluctuating and they think this is a Wall Street problem. Secretary Paulson said it's not just that. He - these are really serious, comprehensive overall threats to the economy. He said we have to quickly enact a plan to stabilize our financial system.
Mr. PAULSON: We must do so in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten American families' financial wellbeing, the viability of businesses, both small and large, and the very health of our economy.
ZARROLI: He went on to say that the problem right now, has been all along, that we have a big housing market downturn. As a result of that, mortgage-backed securities have lost a lot of value, and that is just choking off the flow of credit, and we see that happening more and more every week.
BRAND: And what has been the reaction so far from the senators?
ZARROLI: He and Ben Bernanke just got a bipartisan drubbing on - it's a really angry reaction. Hawaii Senator Daniel Akaka had a typical reaction. He said taxpayer money is at stake, we're not going to give a blank check to the Treasury Department. That the oversight issue is a very important one, there is a lot of concern about the fact that, you know, Henry Paulson is asking permission basically to hand out this money without anybody there to look over his shoulder.
Bob - Senator Bob Corker of Tennessee criticized the entire way, the whole way this has been handled up to now, this financial crisis. He said he knew that Bush administration officials and people from the Fed were trying hard in what is a very dangerous and difficult situation.
Senator BOB CORKER (Republican, Tennessee): And I get a sense that it's with more of a deer-in-the-headlights mentality. This is a much bigger undertaking, this bailout. And I don't, by the way, criticize you for not knowing exactly what to do, but this is being done on the fly.
ZARROLI: And Corker was one of the friendlier ones. Some of the toughest criticism today came from Republicans. Senator Elizabeth Dole of North Carolina said she's just getting barraged by angry calls from her constituents. They're mad about the, what she called the costly and reckless behavior. Christopher Dodd, a Democrat from Connecticut, criticized the bailout plan. He said it was un - stunning and unprecedented in its scope and lack of detail, so just a barrage of complaints.
BRAND: Yeah, well, so how did they react there to all this criticism, what did Hank Paulson say?
ZARROLI: Well he - the interesting thing was, he departed several times from his prepared remarks to answer some of the things that had been said, so you could see this was starting to get to him a little bit. I mean, he's a pretty mild-mannered guy in general. But he said, you know, for instance there's been a lot of criticism from Democrats, mainly about CEO salaries, Democrats demanding that something be put in the legislation to control them. Paulson reminded them that a lot of CEOs, you know, the CEO of AIG and Fannie Mae, they've lost their jobs, it's not like they haven't suffered. He also said, you know, you should be glad, he said, that you gave us the big bazooka to handle the Fannie Mae and Freddie Mac problem because, if you hadn't, it would have just been a much bigger calamity for the entire housing market.
He also addressed this question of oversight. He said, you know, there was no oversight in the plan, it was just a, you know, a short plan, but it was intended to be that, and the details are supposed to be worked out later. He said, I never intended that there would be no oversight of this plan from Congress.
BRAND: So does it sound as though the members of Congress will actually approve this bailout, or are they going to try for something else?
ZARROLI: Well, I don't think anyone wants to stop it, but there is a sense of slowing down the process, asking more questions. This is Senator Bob Menendez of New Jersey.
Senator BOB MENENDEZ (Democrat, New Jersey): So how many times can the administration be wrong and still instill confidence? This is why, while I need to know, and I think we need to act, and I agree we need to act, I am not going to be stampeded into rubberstamping this proposal.
ZARROLI: So I think the senators are just caught in a bad place. I mean, they know the situation is dire, but they also have a lot of angry constituents who are asking questions about why this has to go through.
BRAND: NPR's Jim Zarroli watching the hearings on Capitol Hill, the hearings on this 700 billion dollar bailout of Wall Street. Jim, thank you.
ZARROLI: You're welcome.