Congressional Democrats want to use the Bush administration’s $700 billion rescue plan for US financial companies to curb executive pay, spur the economy with infrastructure spending and help people avoid foreclosures, setting the stage for a possible fight with Republicans and the Bush administration.
Republicans object to adding extras to Treasury Secretary Henry Paulson’s proposal, which would authorise the administration to spend an amount almost 50 per cent larger than the Pentagon’s annual budget to buy banks’ bad mortgage debt.
“This proposal is, and should be kept, simple and clear,” Senate Minority Leader Mitch McConnell of Kentucky said in a statement yesterday. “Now is not the time for partisan plans or pet projects.” Both sides risk getting blamed for delaying passage of the bill.
Senator Charles Schumer, a New York Democrat, said yesterday that the US could “risk a depression” without the measure. “They should be feeling the fire,” said Jennifer Duffy, of the Cook Political Report in Washington. “If they put it off they’ll be playing a game of chicken to see who blinks first.”
Democratic lawmakers including House Speaker Nancy Pelosi of California and Schumer promised to act on the plan by end of next week. So far no leader has voiced objections to what Pelosi called the “sweeping and unprecedented powers,” such as barring courts from reviewing actions taken by the Treasury under the measure, that Paulson is asking for.
‘Good Foundation’: “The package that Secretary Paulson presented was a good foundation that can stabilise our markets quickly but it does not fill in what we’re going to do to protect the taxpayer and to protect the homeowner,” Schumer said yesterday at a news conference in New York.
The Treasury yesterday asked Congress for unchecked power to buy $700 billion in bad mortgage investments from US financial companies to help stabilise the financial system. In the last two weeks the government has seized three major firms, Fannie Mae, Freddie Mac and American International Group Inc, while watching another, Lehman Brothers Holdings Inc, go bankrupt.
Lawmakers yesterday had already begun work adapting the Treasury proposal.
“What we’re spending our time doing now is writing language into the Treasury proposal that will beef up taxpayer protections,” Steve Adamske, a spokesman for House Financial Services Committee Chairman Barney Frank, said in a telephone interview.
Executive Pay: The Democratic proposal will include curbs on executive pay for the companies whose assets the government will be buying, Adamske said. It also will include a plan to stem foreclosures, which may involve tapping the loan-modification abilities of the Federal Housing Administration, the Federal Deposit Insurance Corp, and Freddie Mac and Fannie Mae, he said.
Pelosi said Congress would ensure more accountability than in the Treasury plan by “implementing strong oversight mechanisms, and establishing fast-track authority for the Congress to act on responsible regulatory reform.”
Senate Banking Committee Chairman Christopher Dodd said any plan should “promote home ownership.”
“The stakes could not be higher, and there is no time to waste, but I am hopeful that we will be able to achieve these important objectives,” Dodd, a Connecticut Democrat, said in a statement.
McConnell was joined by his House counterpart, Minority Leader John Boehner of Ohio, in calling for “straightforward” legislation.
“Efforts to exploit this crisis for political leverage or partisan quid pro quo will only delay the economic stability that families, seniors, and small businesses deserve,” Boehner said. “I hope we all can agree that we should keep any legislation as straightforward as possible while doing everything we can to protect American taxpayers.”
