Members of Congress are demanding more taxpayer protections and more congressional oversight be included in the $700 billion bailout plan that is being debated to rescue failing U.S. financial institutions.
Lawmakers voiced their concerns as negotiations with the Bush administration continue, and drafts of legislation Congress could consider as early as Wednesday circulated on Capitol Hill.
Under legislation Congress will consider, the federal government would spend hundreds of billions to purchase de-valued assets, particularly U.S. mortgage debt, that has weighed down key financial companies.
Holding a copy of the three page proposal originally given to Congress by Treasury Secretary Henry Paulson, Oregon Democrat Peter DeFazio said it would have placed American taxpayers in a vulnerable position:
"Secretary Paulson wants to set it up so that the taxpayers at best, and in all likelihood this couldn't happen, might break even some day. No, we need to take an equity assurance in these firms or we need to extend them loans. Have them mark down this junk to market it, there is a market for it, it's about 22 cents on the dollar, make them mark it down."
Congress needs to apply a more targeted and deliberative approach requiring more than a few days of work, DeFazio said, adding the world will wait for a thoughtful plan.
Criticism was also heard from Republicans, such as Florida Republican Cliff Stearns, who said the original proposal gave the Treasury Secretary unprecedented authority while offering virtually no oversight. Stearns expressed alarm over the cost:
"This plan increases our excessively high national debt to $11.3 trillion while also allowing foreign banks which hold U.S. mortgage debt to benefit from the billions provided by this bail out. This plan constitutes the largest government bailout in history yet it does nothing to protect the taxpayers," he said.
Describing the administration's initial proposal as a starting point but by no means the final product, Senate Democratic leader Harry Reid echoed calls for more accountability in any legislation Congress approves. "We will not let haste abandon good judgment in the process. The Bush administration has called on Congress to rubber stamp its bailout bill without serious debate or efforts to improve it. We can't let that happen," he said.
Amid public anger over multi-million dollar salaries paid to executives of failing financial firms, lawmakers have also added provisions that would place limits on executive compensation.
Briefing reporters Monday, House Financial Services Committee chairman Barney Frank agreed that the initial bill gave the Treasury Secretary much too much authority.
He says lawmakers are building in provisions to provide more accountability, including judicial review of government asset purchase decisions, and creation of a special board which have a powerful oversight although not operational role. "We are talking about a very powerful board with its own budget and funding that will get all of the reports and all the information, but won't have any operational role, [but will ask] what are you buying, what is your assumption about how you are buying, what kind of companies are you buying it [assets] in?"
Representative Frank says differences remain with the Bush administration over the executive pay issue and provisions on corporate governance, saying lawmakers intend to eliminate "golden parachutes", or large payment packages for executives who leave a company.
However, the administration has agreed to provisions aimed at preventing foreclosures on property mortgages the government acquires from companies as part of the bail out plan.
Lawmakers say they hope the House and Senate will be able to consider and pass identical pieces of legislation, hopefully in the next few days.
However, in Wall Street trading Monday, the key Dow Jones average lost
371 points, reflecting continuing market volatility in the absence of
a final deal and legislation to address the U.S. financial crisis.