Democrats Want Additions to $700 Billion Financial Bailout Package
September 22, 2008 - 8:55 AMTreasury Secretary Hank Paulson says mortgage relief for struggling homeowner is important, but it shouldn't be part of the financial bailout package.
Some Democrats also are demanding that any deal include limits on executive compensation.
How about it, Fox News Sunday anchor Chris Wallace asked Treasury Secretary Henry Paulson on Sunday: "Since we're bailing out these banks and investment firms, do you limit executive salaries?" Wallace asked Paulson.
No, Paulson said -- although he didn't use that word. Paulson said the point of the bailout is to protect taxpayers by protecting financial institutions on the brink of failure. If the bailout is designed to be "punitive" -- by limiting executive compensation -- "institutions aren't going to participate [and] this won't work the way we need it to work," Paulson said.
Paulson agreed that there have been "excesses" in executive salaries. "But we need this [bailout] to work," he said. "The reforms need to come afterwards."
"And my whole objective with the plan we have is to give us the maximum ability to make it work."
What about including mortgage relief in the bailout package? Wallace asked. Will the Bush administration insist on a clean bill?
"Yes," Paulson said. "[W]e want this to be clean and we want it to be quick, and it's urgent that we get this done. So, you know, it's very important that it be done that way."
Paulson indicated that while a mortgage relief component is important, it shouldn't be part of the bailout package.
But Democrats insist they'll fight for Main Street, not Wall Street: "If you don't solve the mortgage crisis, you're not going to solve the financial crisis. We need to put the taxpayers first," Sen. Chuck Schumer, chairman of the Joint Economic Committee, told "FOX News Sunday."
Schumer described the bailout plan as a "foundation" that needs a few changes. Appearing on Fox News Sunday, Schumer listed three concerns that must be addressed before the bailout plan passes.
"Taxpayers. They have to come first (ahead of bondholders, stockholders, executives). Homeowners. We have to do something about the mortgage crisis, not just foreclosures but the price of housing, which is affecting everyone on Main Street. And oversight. We need some accountability here.
If we can do those three things, and I think we can do them fairly quickly, we can get this done," Schumer said.
(House Speaker Nancy Pelosi said Democrats will work with the Bush administration on a "swift" response to the financial crisis. But she also insisted that the proposal must be strengthened. Democrats want to "keep people in their homes by reducing mortgage foreclosures," Pelosi said. She also mentioned government accountability -- and an economic recovery package "that creates jobs and returns growth to our economy.")
"Are you going to "Christmas tree" this bill?" Wallace asked Schumer.
"No, we will not "Christmas tree" this bill," Schumer replied. "The times are too urgent. Everyone has their own desires and needs. It's going to have to wait."
But in the next breath, Schumer called for a second economic stimulus package. "Many of us believe we need a stimulus package. Many of us believe this is the appropriate time to do it before Congress adjourns. We can't wait three months." He said the stimulus package "doesn't necessarily have to be part of the bailout," but it should run alongside, he said.
Sen. Jon Kyl (R-Ariz.), appearing with Schumer on Fox News Sunday, said Democrats and Republicans must unite to deal with the crisis for the sake of the American people -- "and not try to bring on all of our political agendas."
"First, let's put the fire out, and then we can go deal with our favorite solutions to all of these problems," Kyl said.
"I think the chances are better than 50-50 that we'll get it (the bailout package) done by the end of the week, and hopefully it won't be bogged down with too many extraneous and costly provisions," Kyl added.
Schumer repeated that taxpayers have to come first, but he admitted the urgency of the situation. "Well, look. We have a patient whose arteries are clogged, and the first thing you want to do is avoid a heart attack. So we have to do something. And I think the odds are even higher than 50 percent we'll get something done."
Cost to the taxpayer
The Bush adminsitration is asking Congress for $700 billion to buy risky mortgage securities "from financial institutions that are employing people and are an important part of our economy," Paulson said.
"What guarantees are there that these securities will ever be worth anything, that taxpayers won't end up holding billions of dollars of bad paper?" Wallace asked the Treasury secretary.
"Well, Chris, there are no guarantees, and the taxpayer is at risk," Paulson said. But he emphasized that the bailout is not a spending program.
"This is a program where the government would buy illiquid assets, hold those assets and sell those assets, and the funds would come back into the Treasury, and it would be extraordinary circumstances — highly unlikely — that the cost would be anything like the amount you spend for the assets," Paulson said.
"And the cost will be determined by how quickly the economy recovers and how quickly housing prices stabilize. And again, I don't like the fact that we have to do this. I hate the fact that we have to do it. But it's better than the alternative."
Once the markets are stabilized, then it's time to "take actions to make sure this doesn't happen again," Paulson said. "There's a lot of work that needs to be done, a lot of reform that needs to be done. But first we need to stabilize the system and move quickly."
The cost of the bailout is estimated at $6,500 per family -- or $2,000 per person, according to WashingtonWatch.com.
Moreover, the draft legislation would raise the public debt limit to $11.3 trillion dollars. That's $116,000 per family, or $37,000 per person, in total governmental debt, said WashingtonWatch.com, which uses government predictions about the costs or savings from proposed laws to calculate the bottom line for average Americans.