[NEWS] Editorial - Trust Me
Editorial- Trust Me
NY Times Published: September 22, 2008
The nation’s financial mess was caused to a great degree by a culture of lax
regulation and even less oversight, in which ordinary Americans were told to
trust the government and Wall Street to do the right thing.
President Bush’s proposed solution, which he wants Congress to authorize
immediately, tells taxpayers to write a check for $700 billion and trust the
government and Wall Street to do the right thing — with inadequate
regulation and virtually no oversight.
We agree with Senator Barack Obama that the administration’s plan lacks
regulatory muscle, and we agree with Senator John McCain when he said: “When
we’re talking about a trillion dollars of taxpayer money, ‘trust me’ just
isn’t good enough.”
bailout. The financial system, gorged on its own excesses, cannot stabilize
without intervention. The $700 billion would be used to buy up the bad assets
that are presumably clogging the system.
To protect the American taxpayer, Congress must ensure that the bailout comes
with clear ground rules and vigilant oversight. In an appalling, though
familiar fashion, the ground rules proposed by the Bush administration are
wholly unacceptable — as are its tactics.
At 1 o’clock in the morning on Saturday, the Treasury Department released
its “Legislative Proposal for Treasury Authority to Purchase
Mortgage-Related Assets.” The witching hour timing seemed designed to
underscore the urgency of the effort.
The proposal, which is now being negotiated with Congressional leaders, would
give the Treasury secretary the authority to buy any assets from any
financial institution at any price that he deemed necessary to provide
stability to the financial markets. And it asserts that neither the courts
nor any administrative agency would be allowed to question or review those
decisions.
We’ve seen this kind of over-reaching from the Bush administration before.
It has usurped far too many powers under a banner of urgency — think
wiretapping — and abused those powers. Now, Congress and the American people
are being told that unless they quickly approve sweeping executive powers for
the bailout, capitalism may collapse. Even if this administration weren’t so
untrustworthy, rushing ahead would be a bad idea.
No one is saying the financial crisis is not serious and urgent. We know that
it will be hard for lawmakers to resist White House pressure — especially if
the Dow continues to drop. But it is essential that Congress takes the time
to get the bailout right, even if it cuts into lawmakers’ campaigning.
Treasury Secretary Henry Paulson must craft and execute the bailout in a way
that persuades Wall Street and the global financial system that they will be
saved while protecting the American taxpayers’ $700 billion investment.
Balancing those complex mandates is made more difficult by the fact that Mr.
Paulson hails from Wall Street and could, if he wanted to, return to Wall
Street.
The only way to avoid the appearance of a conflict of interest is for Mr.
Paulson to welcome full and transparent legislative and judicial review.
A counterproposal now being developed by the Democrats would require firms
that sell their troubled assets to the Treasury to give the government stock
— an idea that has populist appeal but also needs to be vetted carefully. It
also would try to help homeowners, who are left out of the administration’s
plan entirely, allowing them to have their mortgages modified under
bankruptcy court protection. That step that should have been taken long ago
to avert the foreclosures and house price declines that are at the root of
the crisis.
Senator Christopher Dodd, chairman of the Senate Banking Committee, is also
calling for an oversight board of federal officials and other experts. We
believe that is still not enough. But all of the competing proposals provide
interesting starts for a serious debate.
There is time to have it.
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