Paulson, Bernanke Face Skepticism In Congress

On Capitol Hill, Treasury Secretary Henry Paulson tried to sell his rescue plan for financial institutions. Joined by other top finance officials, he defended the $700 billion request to buy bad debt. They faced some skepticism from senators.

Copyright © 2008 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

MELISSA BLOCK, Host:

This is All Things Considered from NPR News. I'm Melissa Block.

BLOCK: $700 billion Treasury Secretary Henry Paulson wants Congress to authorize. That would allow the government to buy bad debts and take them off the hands of financial companies.

BLOCK: Joining Paulson before a confrontational Senate Banking Committee today were the heads of the Federal Reserve, the Securities and Exchange Commission, and the Federal Housing Finance Agency. They faced bipartisan skepticism and, at times, borderline hostility.

BLOCK: We do have to act, but we have to act smartly, wisely and relevantly. We need to act.

BLOCK: I am not going to be stampeded into rubber-stamping this proposal.

BLOCK: The Paulson proposal is an attempt to do what we so often do in Washington, D.C.: Throw money at a problem.

BLOCK: I have very strong concerns that this rescue proposal will unfairly hold taxpayers responsible for the costly and reckless decisions of investment bankers on Wall Street.

: We just heard Democrats Charles Schumer and Robert Menendez, and Republicans Jim Bunning and Elizabeth Dole.

BLOCK: And Montana Democrat Jon Tester summed up lawmakers' frustration when he asked this.

BLOCK: Why do we have one week to determine $700 billion that has to be appropriated, or this country's financial systems go down the pipes?

: Well, here's a sampling of the answers.

BLOCK: This is in the best interest of all Americans.

BLOCK: That's Treasury Secretary Paulson. He said it's not about rescuing Wall Street; it's about protecting Main Street.

BLOCK: Every American business depends on money flowing through our system every day, not only to expand their business and create jobs, but to maintain normal business operations and to sustain jobs.

BLOCK: And Fed Chairman Ben Bernanke was uncharacteristically blunt.

BLOCK: I believe if the credit markets are not functioning, that jobs will be lost, the unemployment rate will rise, more houses will be foreclosed upon, GDP will contract. The economy will just not be able to recover in a normal, healthy way no matter what other policies are taken. I therefore think this is a precondition for a good, healthy recovery by our economy.

BLOCK: That's Fed Chairman Ben Bernanke before Congress today.

Copyright © 2008 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

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.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.