Paulson To Spend Second Installment of $700 Billion Bailout?
Change of Course Comes Just Two Weeks After He Told Congress He Wouldn't Need It
December 3, 2008
Posted by Matt Dempsey matt_dempsey@inhofe.senate.gov
As Senator Inhofe predicted when Congress was in session two weeks ago, Treasury Secretary Henry Paulson may very well be on his way to spending the second installment of the $700 billion bailout plan.
As reported in the Wall Street Journal and Politico, as well as many other news outlets, while Congress was in session, Paulson testified that he would likely not need to tap into the second installment. Now, as reported in the Wall Street Journal, Paulson is back to suggesting he may need it. Under current law, with Congress out of session, Secretary Paulson may submit a plan to Congress but does not need the Congress's approval. Senator Inhofe introduced bi-legislation (S.3683), together with Senator Sanders, DeMint, Roberts, Vitter, Enzi, Wicker to ensure that if Paulson asked for the second installment, that Congress would have to vote for it.
As news of Paulson's latest change is being reported, the Government Accountability Office is telling us that the Department of Treasury's bailout is not well planned and could lead to a lot of mismanagement and waste.
Paulson Today...
The Wall Street Journal: Paulson Debates Second Infusion - Hostile Lawmakers, Competing Bailout Demands and GAO Criticism Pose Dilemma
http://online.wsj.com/article/SB122826667852274509.html
By DEBORAH SOLOMON and MICHAEL R. CRITTENDEN DECEMBER 3, 2008
WASHINGTON -- U.S. Treasury Secretary Henry Paulson is debating whether to ask Congress for the second installment of the $700 billion bailout package, concerned about competing demands for the funds and a potentially hostile reaction from lawmakers. Mr. Paulson's dilemma was thrown into relief Tuesday by a report from the Government Accountability Office, the investigative arm of Congress, which criticized the Treasury Department's handling of the Troubled Asset Relief Program, or TARP. Besides lawmakers threatening to deny a request for the additional money, Mr. Paulson is also grappling with confusion stemming from the transition to a new administration...On Capitol Hill, there is little appetite to grant access to the second $350 billion. The skepticism that almost torpedoed the original legislation in September has turned into full-blown revolt amid distrust over implementation and frequent changes to the program."Paulson is a big part of the problem because they don't have a coherent plan," said Rep. Virginia Foxx (R., N.C.).Rep. Foxx is one of a number of lawmakers who have laid the groundwork to block access to the second half of the bailout funds. Last month, Rep. Foxx and 15 House colleagues introduced a resolution that would be considered if Treasury does make a request. For Mr. Paulson to obtain the funds, the administration must submit a detailed report to Congress outlining how Treasury would use the money. Congress can deny the funds by passing a resolution like the one already introduced, disapproving of Treasury's plan within 15 days. If Congress doesn't act, the funds are released.House Minority Leader John Boehner (R., Ohio) has told Mr. Paulson that there aren't enough votes in favor of releasing the funds, according to people familiar with the matter. Critics in the Senate, where anger is also running high, are also moving to block a potential Treasury request. Perhaps the biggest sticking point is whether to use TARP funds to aid homeowners, a move the administration has been reluctant to take because of the complexity of designing such a program. Rep. Joseph Crowley (D., N.Y.) said "serious consideration" would have to be given to making sure part of the second tranche is used to help homeowners.
Politico: Treasury wants rest of bailout money
By: David Rogers November 25, 2008 01:22 PM EST
http://dyn.politico.com/printstory.cfm?uuid=D45C90BC-18FE-70B2-A86E945F0836C759
After a rush of new commitments, Treasury is now making preparations to ask Congress for clearance to tap into the second half of the massive $700 billion financial markets rescue fund approved prior to November's elections. A final decision has not been made, but this is a marked change of tone from just a week ago, when Secretary Henry Paulson was giving interviews suggesting he had enough of a cushion that the second $350 billion could be left to the incoming Obama administration in January. Between the Citigroup rescue over the weekend and a $20 billion Treasury contribution Tuesday to a new facility to shore up consumer loans, Paulson appears to be down to his last $15 billion. Under the law enacted in October, Paulson had easy access to the first $350 billion of the $700 billion fund. But asking for the second half triggers an expedited procedure in which Congress must vote up-or-down on a resolution of disapproval - free of any filibuster threat but still requiring a two-thirds majority in both houses to be effective and overcome a veto by President Bush. Given the market turmoil - and the White House transition - few expect that the money will be blocked. But it reopens debate on the future of the rescue fund and could increase the pressure on Paulson to devote more resources to forestall mortgage foreclosures on homeowners - a major priority for Democrats.
Paulson Then...
Treasury's Paulson say no plans to further tap TARP funds: WSJ
http://www.reuters.com/article/ousiv/idUSTRE4AH48P20081118
Tue Nov 18, 2008 7:57am EST - NEW YORK (Reuters) - The U.S. financial system is stabilizing and the government does not plan to tap the remaining $410 billion of a financial rescue fund unless a further need arises, Treasury Secretary Henry Paulson told the Wall Street Journal in an interview published on Tuesday. Paulson said he was unlikely to use the remains of the $700 billion bailout to launch substantial new programs, preferring to keep money in reserve for unforeseen emergencies and to preserve flexibility for the Obama administration. "I'm going to do what we need to do to keep the system strong and to react the ways we need to react during the nine weeks I'm here, but I'm not going to be looking to start up new things unless they're necessary or it's just clear that they need to be done or that they make great sense," the Journal quoted Paulson as saying. "I want to preserve the firepower, the flexibility we have now and those that come after us will have." Paulson could be in for some tough questioning on Capitol Hill later Tuesday after saying last week he no longer planned to buy bad loans from banks and instead would use the congressionally approved bailout to inject capital directly into banks. Citing comments he prepared for the testimony, the Journal said Paulson plans to say that after investing $250 billion in banks, the Treasury "didn't have enough left to make a meaningful impact." He told the Journal that he is working with the Federal Reserve to develop a lending facility that would encourage investors to buy some of these assets. Paulson, Federal Reserve Chairman Ben Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair are scheduled to testify before the U.S. House Financial Services Committee on the Troubled Asset Relief Program at 0930 EDT.. Separately, in an op-ed piece in the New York Times, Paulson wrote: "If we have learned anything throughout this year, we have learned that this financial crisis is unpredictable and difficult to counteract. "We decided it was prudent to reserve our TARP money, maintaining not only our flexibility, but also that of the next administration.
Paulson Will Keep Reserve to Stay Flexible for Future
http://online.wsj.com/article/SB122695439734334685.html
By DEBORAH SOLOMON NOVEMBER 18, 2008 - WASHINGTON -- Treasury Secretary Henry Paulson is unlikely to use what remains of the $700 billion Wall Street rescue fund to launch substantial new programs, preferring to keep money in reserve for unforeseen emergencies and to preserve flexibility for the Obama administration. In an interview Monday, Mr. Paulson said the financial system is stabilizing, and he is thinking about how the remaining $410 billion could be best utilized, but that he doesn't plan to tap it unless a further need arises. Treasury Secretary Henry Paulson defended the Bush Administration's $700-billion bailout plan, telling WSJ's Alan Murray he doesn't think he's doing FDR-like experimentation with liquid assets. (Nov. 17) "I'm going to do what we need to do to keep the system strong and to react the ways we need to react during the nine weeks I'm here, but I'm not going to be looking to start up new things unless they're necessary or it's just clear that they need to be done or [that they] make great sense," Mr. Paulson said. "I want to preserve the firepower, the flexibility we have now and those that come after us will have."
Yet Big Questions Remain on Oversight of Bailout Plan...
New York Times: Bailout Monitor Sees Lack of a Coherent Plan
http://www.nytimes.com/2008/12/02/business/02tarp.html?_r=1&em=&pagewanted=print
By DIANA B. HENRIQUES - The head of a new Congressional panel set up to monitor the gigantic federal bailout says the government still does not seem to have a coherent strategy for easing the financial crisis, despite the billions it has already spent in that effort. Elizabeth Warren, the chairwoman of the oversight panel, said in an interview Monday that the government instead seemed to be lurching from one tactic to the next without clarifying how each step fits into an overall plan. "You can't just say, ‘Credit isn't moving through the system,' " she said in her first public comments since being named to the panel. "You have to ask why." If the answer is that banks do not have money to lend, it would make sense to push capital into their hands, as the Treasury has been doing over the last two months, she continued. But if the answer is that their potential borrowers are getting less creditworthy with each passing day, "pouring money into banks isn't going to fix that problem," she said...The new panel has held only a few briefings with Treasury officials so far, and Ms. Warren acknowledged that she and the other panel members were still in the early stages of their research. Treasury Department officials have never described their actions as the sole remedy. A spokesman noted that Secretary Henry M. Paulson Jr. recently testified that stabilizing the financial system was a necessary first step in any plan to address the financial and economic crisis. "Our objectives in asking Congress for a financial rescue package were to first stabilize a financial system on the verge of collapse, and then to get lending going again to support the American people and businesses,"
WashingtonPost: Bailout Not Well Planned
http://voices.washingtonpost.com/government-inc/2008/12/bailout_not_well_planned.html
Now the Government Accountability Office is telling us that the Department of Treasury's bailout of the financial system is not well planned and could lead to a lot of mismanagement and waste or, presumably, worse. Is that a surprise? Perhaps not. But Government Inc. thinks its worthy of ongoing discussion. After all, there's a lot of taxpayer money -- $150 billion, as of Nov. 25 -- and the future of our capitalist system at stake. You'll recall that the government is hiring contract auditors and such to run what's been dubbed Troubled Asset Relief Program, or TARP. No puns here, for now, about the symbolic meaning of TARP. (Is that musty already?) "GAO recognizes that TARP has existed for less than 60 days and that a new program of such magnitude faces many challenges, especially in this current uncertain economic climate. However, Treasury has yet to address a number of critical issues, including determining how it will ensure that CPP is achieving its intended goals and monitoring compliance with limitations on executive compensation and dividend payments. Moreover, further actions are needed to formalize transition planning efforts and establish an effective management structure and an essential system of internal control." We can do better people. Right? Here's the full report. Government Inc. likes the title: Additional Actions Needed to Better Ensure Integrity, Accountability, and Transparency
FDIC head: gov't rescue plan needs 'exit strategy'
http://www.google.com/hostednews/ap/article/ALeqM5iG4AAjq1C2jU_X4tjsNP0zjpXZwQD94QRNC01
By MARCY GORDON - WASHINGTON (AP) - The head of the FDIC said Tuesday the government needs to devise an "exit strategy" for its massive financial rescue plan to avoid artificially propping up banks and other institutions over the long term. Federal Deposit Insurance Corp. Chairman Sheila Bair made the comments at a conference of corporate executives. Her agency has played a key role in the financial bailout, guaranteeing potentially as much as $1.4 trillion in debt issued by banks and raising the limits on deposit insurance for bank accounts. But Bair has broken with the Bush administration by repeatedly saying more aggressive government action is needed to help millions of struggling home borrowers avoid foreclosure. "I'm a capitalist. I believe in markets," Bair said in response to questions at the conference sponsored by Fortune and Time magazines. The far-reaching government guarantees extended under the rescue program - now including $250 billion set aside for the Treasury to buy stock in U.S. banks, hundreds of billions in aid to giant financial institutions and hundreds more billions in special lending facilities to banks - must be carefully assessed, Bair said.
###
|
