CQ TODAY ONLINE NEWS
Jan. 25, 2009 – 12:41 p.m.
More Money for Floundering Financial Industry?
By Phil Mattingly, CQ Staff
Should the new administration seek more money from Congress to aid the ailing financial industry, House leaders would be willing to listen, Speaker Nancy Pelosi said Sunday.
Her comments come after a week that saw two senior Democrats, one from each chamber, indicate that it is likely more money will be necessary in the effort to save an industry that seemingly gets worse by the day.
“I’m open to resolving the financial crisis in our country,” Pelosi, D-Calif., said on ABC’s “This Week,” when asked about the need for more funds.
But she added, “Whatever we have to do will have to be clearly explained to Congress and to the American people as to what the purpose of the money is, why it is urgent, and then accountability for it as it is distributed.”
Lawrence H. Summers, President Obama’s top economic adviser, also indicated Sunday that the new administration is open to coming back to Congress for more money.
“We are going to be proactive,” Summers said, “and [Obama] is prepared to do what is necessary.”
Summers, appearing on NBC’s “Meet the Press,” indicated that the new administration’s full economic plan should be released soon after the pending confirmation of Treasury Secretary-designate Timothy H. Geithner.
Soon after the confirmation, he said, “He will be laying out the plans and principles behind the approach.”
A Senate confirmation vote on Geithner is scheduled Monday evening. Despite several missteps regarding a problem involving non-payment of taxes, Geithner should be confirmed easily.
Rep. Barney Frank , D-Mass., the chairman of the House Financial Services Committee, and Sen. Kent Conrad , D-N.D., chairman of the Senate Budget Committee, both said last week that Congress could be facing another decision to release more funds to the Treasury Department — sooner than most anyone in elected office would like.
Congress sent legislation to President Bush on Oct. 3 that gave the Treasury Department access to $700 billion to buy the troubled assets off the balance sheets of the nation’s financial institutions (PL 110-343). The money was provided in two tranches, each $350 billion. Congress would have the opportunity to block the second half of the money should they have significant issues with Treasury’s allocation of the first tranche.
The House passed a resolution of disapproval Jan. 22 designed to block release of the second half of the bailout fund but the vote will have no substantive effect. The 270-155 vote, serving as part political protection and part statement of discontent, adopted the resolution (
Members of Congress — and much of the public — remain furious with the former Treasury Secretary Henry M. Paulson Jr. , who made a sharp pivot on the plan just days after it was signed into law. Instead of the initial plan to purchase bad assets, Paulson instead crafted a program to inject $250 billion directly into both healthy and troubled banks in an effort to provide an immediate fix to a lending freeze that was paralyzing the country.
Though it effectively slowed the industry’s collapse, the lack of transparency and accountability attached to the program has made Paulson and his plan the No. 1 enemy for politicians dealing with angry constituencies.
“If [the administration] comes back there’s going to have to be a justification because people will be very, very disappointed in how his money was dealt with at first,” Pelosi said Sunday.
The House, prior to its vote on the resolution of disapproval, passed a bill that would impose tight restrictions on the second half of the fund.
That measure (
Frank, the bill’s sponsor, acknowledged that his measure is unlikely to be considered by the Senate. But he said it will be available for action in the other chamber if Congress is not satisfied with the Treasury Department’s management of TARP going forward. The bill, which would require increased transparency, a minimum of $40 billion for foreclosure mitigation and tighter executive compensation conditions, could serve as the blueprint Treasury would need to follow, should they come back for more money, Frank said Jan. 21.
“I don’t think many people at the top of the Treasury or the Fed thinks this is the last amount of money they’re going to need to deploy,” Frank added.
Conrad told reporters late last week that all signs were pointing towards the need for more funds and, should that be the case, the time is now to ask for more money.
Should the administration come back to Congress with another funding request, it also will have to deal with a group of members who, burned by the allocation TARP, don’t find it politically tenable to give Treasury access to more funds.
A total of 99 Democrats voted for the resolution of disapproval on Jan. 23, including all but five of the 33 freshmen.
House Republicans will be an even harder sell. Only four Republicans voted against the resolution last week.
“The banks have problems,” said House Minority Leader John A. Boehner , R-Ohio, on NBC’s “Meet the Press.” “But the administration needs to come to us and say, OK, here’s the problem” before they can expect Republican support.
No matter when or if a request comes, with unemployment expected to grow and economic forecasts looking increasingly dreary, experts and the new administration seem to agree on one thing:
“The next few months are, no question, going to be very, very difficult,” Summers said.
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