Amid Bailout, Some Lawmakers Skeptical

The debate over a proposed $700 billion bailout of the nation's financial system has intensified. Lawmakers, including Ohio Sen. Sherrod Brown, say they want answers to how the situation became so dire. Brown says there's going to be no blank check.

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MICHELE NORRIS, Host:

Financial Socialism. Neither workable nor comprehensive. Stunning and unprecedented in its scope and lack of detail. Those are just a few examples of how skeptical lawmakers have described what could be the biggest financial bailout in American history. Among those expressing doubt today is Senator Sherrod Brown of Ohio, who joins us now. Senator, welcome back to the program.

NORRIS: Michele, nice to be on. Thank you.

NORRIS: What's fueling your skepticism?

NORRIS: Well, people have been warning about this for some time, as early as 2001. And the administration really has not heeded any of these warnings. As late as 2007, when we asked Chairman Ber - we asked Secretary Paulson to intervene and move the government on some of the issues of subprime, he said things were going to work their way out by summer. And clearly they haven't. That was a year and a half ago. So now this is - he's now asking for $700 billion with - sort of with no rules. Just give me $700 billion. I'll let you know what I did with it. And there's going to be no blank check, for sure.

NORRIS: Now, you say that this is $700 billion with no strings. But there have been some additions made to the plan, including creating an independent oversight board, aid for homeowners facing foreclosure. Are there other things that you need to see to raise your comfort level?

NORRIS: The secretary of Treasury is going to hire several people, maybe several dozen people, to negotiate these troubled assets. And some of these people that are going to be doing the negotiating could very well end up in Wall Street a year or two from now or three months from now, when the Bush administration leaves office. So we certainly need protections against conflict of interest. We need - for sure we need some limit on executive salaries.

I'm getting literally thousands of calls and emails in my office. Almost nobody is supporting this, and almost everybody is particularly enraged by Wall Street bankers making - getting eight figure or $10 million and up kinds of bonuses and salaries, and we don't want to reward them. These people should pay not for purposes of vengeance, but simply because they helped to create this, and they shouldn't be rewarded for it.

NORRIS: Senator, there was this very interesting moment today when you directly asked Ben Bernanke and others if Wall Street owes taxpayers an apology. Provocative question - did you get a straight answer?

NORRIS: No, and I was - I respect Chairman Bernanke, but when his answer was, I don't think people in Middle America know how much Wall Street affects their lives - and to be sure, people absolutely in Middle America understand how Wall Street affects their lives - that's a big part of the reason. I mean, that's clearly one of the reasons that Middle America is hurting now, is because of the behavior of Wall Street.

NORRIS: Timing. You've been told time and time again by Henry Paulson and Chairman Bernanke that you need to move quickly. Will lawmakers take care of this before they go into recess?

NORRIS: I think we stay as long as we need to. I don't think there should be a time limit. This administration likes it this way. They like us to have to move fast and move in secret, and do it exactly their way. That's what happened with the Iraq War. Look at the consequences. That's what happened with the Patriot Act. We're not going to let it happen here.

NORRIS: You noted that you've been getting a lot of calls from your constituents. What are they saying?

NORRIS: People overwhelmingly oppose this. I think people are saying that - how are you going to right this ship without having the Bush-Cheney-McCain-Paulson Wall Street bias instead of looking out more for Main Street? And my goal is looking out for Main Street and looking out for the middle class in this package.

NORRIS: I heard an interesting phrase in your answer, the Bush-Cheney-McCain administration. Is that a fair assessment of this administration and the backing for this plan?

NORRIS: Well, so much of the root of this problem has been banking deregulation. And banking deregulation may have been brought to us by Dick Cheney and George Bush, but it was conceived by, in many cases, by Phil Gramm and John McCain. I mean, it was - it's their economic philosophy writ large on our society. And, you know, whether you want to put it with George Bush and Dick Cheney, or John McCain and Phil Gramm, or Henry Paulson, it's clear they're all singing off the same page, and it brings us situations like this, pure and simple.

NORRIS: Speaking there like a good Democrat, Senator?

NORRIS: It's also the truth.

NORRIS: Senator Sherrod Brown...

NORRIS: Thanks, Michele.

NORRIS: Thanks for being with us.

NORRIS: Thank you, Michele.

NORRIS: Sherrod Brown is a senator from Ohio.

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Lawmakers Skeptical Of Bailout Plan

Treasury Secretary Henry Paulson, Fed Chairman Ben Bernanke and others prepare to testify. i i

Treasury Secretary Henry Paulson (from left), Federal Reserve Board Chairman Ben Bernanke, Securities and Exchange Commission Chairman Christopher Cox and Federal Housing Finance Agency Director James Lockhart III prepare to testify during a hearing before the Senate Banking Committee on Tuesday. Alex Wong/Getty Images hide caption

itoggle caption Alex Wong/Getty Images
Treasury Secretary Henry Paulson, Fed Chairman Ben Bernanke and others prepare to testify.

Treasury Secretary Henry Paulson (from left), Federal Reserve Board Chairman Ben Bernanke, Securities and Exchange Commission Chairman Christopher Cox and Federal Housing Finance Agency Director James Lockhart III prepare to testify during a hearing before the Senate Banking Committee on Tuesday.

Alex Wong/Getty Images

The fate of the largest economic bailout in American history appeared less certain Tuesday, as lawmakers said the plan still lacked detail and had not yet been properly explained.

While some version of the proposal is still likely to receive congressional approval, lawmakers appeared to balk at having any plan finalized this week as well as at other key details.

"This proposal is stunning and unprecedented in its scope and lack of detail," said Connecticut's Christopher Dodd, chairman of the Senate Banking Committee.

"It is not just our economy at risk but our Constitution as well," Dodd said, because the plan would allow the Treasury Department to spend $700 billion "with impunity."

Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson urged the Senate Banking Committee to quickly pass a $700 billion financial bailout, warning that a delay could be disastrous to the U.S. and global economy.

Both regulators made the case that the proposal would be cheaper for taxpayers than letting financial markets further collapse.

"I'm angry by the things that got us here," Paulson said. But "by far the greatest protection for the American taxpayers is having this be effective. The consequences if we don't do anything are worse."

The Bush administration wants lawmakers to approve the bailout package by the end of the week, although that appeared ambitious even before Tuesday's testy hearing.

Some lawmakers expressed skepticism about the size of the bailout; one called it a "bet" that a governmental infusion of capital into the economy would help abate the mortgage crisis at the root of the current crisis.

Sen. Mike Enzi (R-WY) said the plan would cost $2,300 per taxpayer. "This committee would not be doing its job if that were allowed to happen," Enzi said.

Essentially, the Bush administration's rescue plan would give the Treasury Department broad authority to buy as much as $700 billion worth of mortgage assets held by banks, Wall Street firms and other financial institutions. It would also allow the Treasury secretary to oversee the assets in any way he or she sees fit. That includes the ability to go outside normal government contracting practices to hire private companies to manage them. Lastly, the plan would require the government to report to Congress within three months and every six months thereafter, but it would shield the program from judicial review.

Paulson has left out many details of how he expects the historic plan would be implemented, saying it's imperative that the administration be allowed to hit the ground running and not be stymied by additional congressional restrictions or mandates.

Still, lawmakers hammered away on several key questions: How bad are the assets the government is being asked to buy? Would the plan allow the government to take an equity position in companies that participate in the bailout? Why should the Treasury secretary be given nearly unfettered oversight of the process?

Throughout the hearing, Paulson stood his ground. He said approval of the plan would "avoid a continuing series of financial institution failures and frozen credit markets that threaten American families' financial well-being, the viability of businesses both small and large, and the very health of our economy."

Next up: the House Financial Services Committee is hosting Paulson and Bernanke on Wednesday, where topics such as executive compensation and additional mortgage debt relief are likely to get more attention.

Democratic presidential nominee Barack Obama said Tuesday that if he is elected, the massive bailout package being negotiated to rescue Wall Street will very likely force him to delay some of the spending programs he has advocated on the campaign trail.

Obama acknowledged that some of his proposals for health care and education reform, improvement to the nation's infrastructure and investment in a new "green" energy sector might have to be phased in.

Republican nominee John McCain hasn't made specific comments about the impact of a bailout on his presidential agenda, though he did say over the weekend that he still plans to be as ambitious as before.

Stocks were up slightly Tuesday after a drop Monday caused by concerns about the bailout plan's implementation.

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