DORGAN SAYS TREASURY SECRETARY'S BAILOUT IS SHORTCHANGING TAXPAYERS AND DOING LITTLE TO FIX THE ECONOMY

Senator outlines plan to protect taxpayers

Monday, November 3, 2008

CONTACT: Justin Kitsch
or  Brenden Timpe
PHONE: 202-224-2551

(MINOT, N.D.) – U.S. Senator Byron Dorgan (D-N.D.) had harsh words today for Treasury Secretary Hank Paulson at a service club speech in Minot, N.D.

“The Treasury Secretary has pushed over $125 billion of ‘no strings attached’ money to the nine largest banks in the hope that buying capital in those banks would free up some lending in the credit market.

“But now we have learned that the Secretary made no requirements the banks use the money to expand their lending. And even more troublesome, the Secretary made no effort to prohibit the same firms from using the money to give big bonuses to executives. So, the American people are now reading news stories about the billions of dollars in bonuses some of these same banks are about to distribute to executives. These banks will also be allowed to continue their dividend payments, instead of using funds to expand credit.

“And in a final insult to good sense, the Treasury Department is urging more mergers and concentration among the banks.

“The Secretary announced that the capital infusion for big banks was for the purpose of getting some lending moving in the economy again. But, the Secretary sent taxpayers’ money out to the banks without the conditions that were necessary to begin fixing the credit problem. That is a blockheaded mistake that has put taxpayers’ money at risk while doing little or nothing to repair the financial wreckage that has occurred to our economy.”

Dorgan was especially critical of statements by Treasury officials who have supported more mergers and consolidation in the banking industry.

“The banks that are already considered to be too big to fail are going to be made bigger? They think that’s progress? I think that’s nuts.”

Dorgan, who voted against the $700 billion bailout bill pushed by Paulson last month, said today that Paulson has had a constantly changing and confusing message about America’s economy for this entire year.

“First he told us the economy was fine. Then he said there was a full-scale financial crisis that required a massive bailout immediately. Then he said the bailout had to be $700 billion to purchase toxic assets from the balance sheets of financial institutions. Then he said that he changed his mind, and instead he would use the money to have the government invest capital in the biggest banks. Then he pushed the banks into taking the capital infusion whether or not they wanted it or needed it.

“I want the Treasury Secretary to succeed, but his inconsistent actions over the last month hardly inspire confidence. I know that this is a crisis and it is difficult, but the course he’s steering has been inconsistent and filled with mistakes. We deserve better.”

Dorgan proposed several immediate steps that he said are necessary to protect taxpayers while the Treasury Secretary is doling out federal funds:

• Take immediate action to prohibit the payment of big bonuses in the firms that are getting federal money.

• Attach conditions to any money that is being used for the bailout to make sure the funds are used for the purpose intended.

• Put an end to further mergers by big banks. It was many of the big banks that caused the financial wreckage, while smaller community banks largely steered clear of the reckless behavior in high finance.

• Form a blue ribbon federal investigative task force to immediately begin the investigations that are necessary to establish accountability for the financial crisis. The Treasury Department should not be giving federal funds to financial firms that still employ some of the same fast-buck artists that helped cause this crisis. Criminal behavior should be investigated and prosecuted.

—END—