As I write this, Treasury Secretary Henry Paulson is testifying before the Senate Banking Committee. In his opening statement, he appeared to depart from prepared remarks to respond to statements from Senators calling for independent monitoring of Paulson’s actions in any bailout proposal.
A defensive Paulson suggested last week he wasn’t trying to ram through a bill that would give him unfettered power, merely that it would have been “presumptuous” of him to come up with an “oversight system” because that’s a congressional matter.
Whether or not you take Paulson’s explanation at face value, it’s tangible evidence that the growing the public backlash against a $700,000,000,000 blank check is being heard.
Of course, it’s standard political tactic to high-ball your initial position, propose something you know is outrageous and will provoke anger, so when you give up a little, it is perceived as some great concession for glorious compromise.
We must not be pawns in such a game. Instead of letting Paulson dictate the debate, we must have a set of common sense principles to guide any legislation and the overall debate.
And also today, Campaign for America’s Future is delivering to Congress a “Call for Common Sense,” detailing the six core principles that should gird the bailout:
1. Public Oversight. This kind of power can never be centralized in a single individual – much less one who did not even stand for election. Any funds must be controlled by an independent entity, with consumers and workers given seats on its board. Congress should be empowered to name independent monitors and to approve all board members.
2. Protect The Taxpayer. The Treasury bill would have taxpayers buying paper that nobody else wants at prices far above its current value. If a firm wants to auction off its toxic paper to the US Government, taxpayers should get equity in that firm equal to any amount paid in excess of the paper’s value. This will deter profitable firms from using the government as a dumpster for their toxic paper. And it will insure that if the bailout works and the firms become profitable, taxpayers, not simply bankers, benefit from the upside.
3. Curb The Casino. This crisis was caused because sensible regulations of the banking system that worked for dozens of years were dismantled or went unenforced. No bailout can go forward without requiring the necessary regulation to insure this does not happen again. Any institution which receives assistance should agree to come under a microscope going forward in terms of disclosure requirements, and it should have stringent capital requirement imposed upon it.
4. Invest In The Real Economy. Ending the bankers strike is not sufficient to avoid the recession into which we have been driven. Major public investment for investment in new energy and conservation, rebuilding schools and infrastructure, extending unemployment and food stamps, helping states avoid crippling cuts in police and health services – is vital to get the real economy moving and put people back to work. No bailout should proceed without being linked to support for a major public investment plan to get the economy going.
5. Hold CEOs and Boards of Directors Accountable. Wall Street CEOs shouldn’t be pocketing millions while taxpayers are forced to bail them out. Any firm that applies for relief must agree to cancel all stock option programs and CEOs should have stringent limits placed on their compensation until the Company has repaid all taxpayer assistance.
6. Aid The Victims, Not Just The Predators. Both bankers and home owners made foolish bets that home prices would keep rising. Many homeowners, however, were misled by predatory lenders into taking mortgages that they didn’t understand and couldn’t afford. It would be simply obscene to help the predators and not those that they preyed upon. No bail out of the banks should take place without measures to help people in trouble stay in their homes. Explicit provisions should ensure use of the full array of financial and legal tools available to the government to stop foreclosures and restructure home mortgage loans for ordinary Americans. Where workouts are not feasible, people should be allowed to stay in their homes as renters.
As you can see, independent monitoring of any bailout activity is only one part of what’s required to pick up the deregulated, derailed economy and get it back on track.
This isn’t Paulson’s money, or Bush’s money, or Wall Street’s money. It’s our taxpayer money that being asked for, and in America, there is not supposed to be taxation without representation. So, Bush and Paulson don’t set the terms of this debate. We do.
And we’ve got the Bush administration on its heels. So keep pushing.