Bailout divides our members of Congress
By Mark Wineka
Words such as “frustrated,” “infuriated” and “skeptical” sprang from N.C. congressmen and candidates for their offices as Washington lawmakers continued discussions Tuesday on a proposed $700 billion federal bailout of an ailing financial industry.
If it has to come to a bailout, U.S. Rep. Howard Coble, R-N.C., said, “You don’t want to do it sloppily or recklessly.”
Coble predicted Congress may stay in session into next week before reaching a decision.
Meanwhile, e-mails and faxes to the congressman’s office over the past two days have overwhelmingly opposed a federal bailout.
Coble Press Secretary Ed McDonald said he would be hard-pressed to find one message from a constituent saying, “Vote for this.”
The messages are coming from individuals and officials tied to community banks in the state’s 6th Congressional District, McDonald said. Local banking officials are stressing that supporters of the bailout are falsely framing the proposal as a rescue of banks, when the vast majority of banks are well-capitalized and solid financially.
Coble, frustrated by a lack of details, said philosophically he would object to the federal bailout.
“It’s a powerful amount of money for starters,” he said. “… You ask, ‘Who’s going to bail out the taxpayers?’ ”
On Tuesday, Federal Reserve Chairman Ben Bernanke told the Senate Banking Committee, of which U.S. Sen. Elizabeth Dole, R-N.C., is a member, that failure to pass a federal bailout plan would lead to recession, higher unemployment and more housing foreclosures.
In the Senate Banking Committee hearing, Dole said she had “very strong concerns that this ‘rescue’ proposal will unfairly hold taxpayers responsible for the costly and reckless decisions of investment bankers on Wall Street.”
“I, like the North Carolinians I am hearing from, am very skeptical of this proposal, and frankly, I’m extremely frustrated that we find ourselves in this position.”
Bernanke and Treasury Secretary Henry Paulson pushed for Congress to pass bailout legislation sometime this week. It would be designed to allow the government to buy bad debts (mortgages and other “toxic assets”) held by endangered financial institutions.
Coble said there’s a lot of blame to go around ó for lenders, borrowers, Republicans and Democrats. The problem, he said, is the Bush administration is offering Congress the bailout package or nothing ó there’s no alternative.
Coble was one of the Republican lawmakers who met privately with Vice President Dick Cheney and Bush budget administrator Jim Nussle Tuesday morning. Coble said he didn’t get much out of that meeting.
Dr. Teresa Sue Bratton, Coble’s Democratic opponent from Greensboro, said it is essential to the security of the United States that its financial markets are stable and liquid.
“We must do what has to be done to achieve this,” she said. “But, in return for providing this security and taking on this risk, we, the American people, have the right to demand more supervision of our financial institutions and more moderation in compensation of the leaders of these institutions.”
She agreed with Coble there’s plenty of blame to go around.
“We can look to politicians who relaxed regulation and failed to provide adequate funds for proper oversight,” she said, “to the financial community who showed a lack of a sense of moral responsibility and ethical behavior in the pursuit of financial gain and to those of us who took out mortgages that we could not afford or that we did not understand.”
At the Senate Banking Committee hearing, Dole blamed much of the turmoil ó the credit crisis, housing slump, bankruptcies and dissolving of major financial institutions ó on the mismanagement of Fannie Mae and Freddie Mac, “which was made possible by weak oversight and little accountability.”
Dole said she was one of a handful of senators who had pushed for stronger oversight of those agencies, having introduced legislation to that effect with Sens. Chuck Hagel, John Sununu, Mel Martinez and Richard Shelby.
“I’ve raised the issue in Banking Committee hearings time and time again,” she said.
The bill Dole and others had tried to introduce up to five years ago was finally made part of the Housing Stimulus Package two months ago.
“Now my constituents, and indeed taxpayers across the nation, are asking how we arrived at this crisis,” Dole said. “It is infuriating.”
But state Sen. Kay Hagan, Dole’s Democratic opponent from Guilford County, said Dole shirked her responsibilities and rubber-stamped President Bush’s failed economic policies “when she remained silent in over 60 Banking Committee meetings.”
Hagan said Dole should oppose any bailout package that does not include independent oversight of the bailout program, limits on compensation packages to chief executive officers, mechanisms to reduce foreclosures “that are at the root of the crisis” and protections to minimize taxpayer risk “and make sure taxpayers get more for their money than just bad debts at high prices.”
Dole said the country needs to end the existing structure of “an implied government guarantee.”
It’s painfully obvious, Dole said, the federal government’s system for monitoring the financial sector is “fatally flawed.”
“And I am not at all convinced that this bailout plan, which appears incredibly expensive and hastily concocted, is the answer,” Dole said.
A Hagan press release said Dole and other lawmakers should oppose any blank check proposal “that puts Wall Street before Main Street and leaves working families to pay the ultimate price for this mess.”
Christopher Cole, the Huntersville Libertarian running against Dole and Hagan, said he opposes the bailout for several reasons. First, he said, it is a rescue of big banks that smaller community banks can’t qualify for.
By keeping weak banks from going out of business, Cole said, the bailout would preserve assets in weak performers, which stronger companies could have bought.
“That will result in a long-term weakening of the economy, slower economic growth, reduced job creation and stunted income growth,” Cole said. “It is an exchange of short-term political pandering for long-term weakness.”
Cole also argued that bailouts will let investors think they can take excessive risks and assume the government will save them.
Cole blames the need for a bailout on “the massive expansion of the money supply by the Federal Reserve since 9/11.”
“That policy produced the housing bubble, credit-based investment adventurism and false market expectations,” Cole said. “The bubble-based assets are now being exposed as the empty promises that they really were.”
Government created the problem, and bankruptcy and collapse of weak companies are the only long-term solutions, according to Cole.