The skepticism expressed by lawmakers at Tuesday’s hearings into the proposed Wall Street bailout could spell trouble for the administration’s plan.
The Senate Banking Committee took testimony from the officials at the center of the controversy – Treasury Secretary Henry Paulson, Chairman of the Fed Ben Bernanke and SEC Chair Christopher Cox. And in contrast to last week’s consensus on moving forward with a rescue plan lawmakers from both parties took the opportunity to voice their profound doubts about the plan. Chair of the committee is Connecticut Senator Chris Dodd.
“It would do nothing in my view to help a single family save a home, at least not upfront. It would do nothing to stop even a single CEO from dumping billions of dollars of toxic assets on the backs of American taxpayers, but at the same time do nothing to stop the very authors of this calamity to walk away with bonuses and golden parachutes worth millions of dollars.”
In addition to help for homeowners, Democrats want to see tough independent oversight of the bailout, and limits to executive compensation in the troubled institutions. But UConn economist Fred Carstensen says even those measures don’t address the basic problems which many experts see with the proposal, that it’s almost impossible to value the assets the taxpayer would be buying.
“The Government really ought to be following the AIG model. They ought to be taking a substantial equity position and in fact the equity position with AIG for instance, guaranteed that AIG would have sufficient capital to meet its requirements. The problem for the financial institutions is not simply that they have bad assets on their books, but that they don’t have adequate capital.”
Administration officials had wanted legislation on a bailout by the end of the week. The bi-partisan skepticism laid bare by Tuesday’s hearing may put that timetable in doubt.