ON CAPITOL HILL
Lawmakers Left On the Sidelines As Fed, Treasury Take Swift Action
Thursday, September 18, 2008
The frenetic pace of the financial crisis has forced the Treasury Department and Federal Reserve to make rapid-fire decisions in recent days, leaving Capitol Hill lawmakers effectively impotent -- and frustrated.
Lawmakers on both sides of the aisle expressed concern yesterday that they have had no control over when and how federal money has been used to curb the panic on Wall Street. While many have been convinced that the moves so far have been necessary to prevent a wider financial meltdown, they said they felt confined to the sidelines as power to make momentous decisions has been concentrated in very few hands.
House Speaker Nancy Pelosi (D-Calif.) said she has dispatched Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, to determine whether Federal Reserve Chairman Ben S. Bernanke should retain authority to unilaterally bail out failing firms, as he did Tuesday with a loan of $85 billion to insurance giant American International Group.
Congressional leaders learned of the rescue late Tuesday during a hastily called meeting in the Capitol with Bernanke and Treasury Secretary Henry M. Paulson Jr., who explained the deal after it was done.
"My instincts and my gut tell me they made the wrong move. But I don't have all the information they do," said Rep. Paul D. Ryan (R-Wis.), the senior Republican on the House Budget Committee, who yesterday fielded furious calls from constituents. "People are angry because they see this as their tax dollars bailing out Wall Street speculators. And in some cases, it is."
Paulson and Bernanke have taken the lead not only from lawmakers but from President Bush. Bush has left direct management of the crisis to them and other advisers, and has limited his public remarks on the economy. On Tuesday, he canceled plans to brief reporters after meeting with his economic advisers.
Yesterday, asked by reporters why Bush had not addressed the issue of the economy more directly in the midst of a crisis, White House spokeswoman Dana Perino said Bush was wary of holding news conferences in general because he didn't want to distract from the presidential campaign.
"I grant you that it's been a while," she said, "and I understand that people want to hear from the president during this time." Last night, the White House said Bush called off a scheduled trip to Alabama and Florida today to meet with his economic team.
Republicans in the House have scheduled a news conference for today to protest the string of bailouts that began in March with Wall Street investment bank Bear Stearns and extended in recent weeks to mortgage-finance giants Fannie Mae and Freddie Mac, as well as AIG. The latest decision was particularly hard to swallow, some lawmakers said, because it came just one day after Paulson refused to intervene to save Lehman Brothers Holdings and indicated that further rescues were unlikely.
"Just how long can the poor beleaguered taxpayer be expected to bear all the losses and bear all the risk?" said Rep. Jeb Hensarling (R-Tex.), one of the protest's organizers. "Lehman Brothers must have the worst lobbyist in town, since they are the only ones that appear to have lost out on the bailout mania."
Republicans and Democrats alike said the crisis is in part the result of insufficient government regulation on Wall Street. Frank and Rep. Henry A. Waxman (D-Calif.), chairman of the House Committee on Oversight and Government Reform, both plan hearings aimed at exposing regulatory failures and developing a new system for managing the bad assets of financial institutions collapsing under the burden of their investments in a plummeting housing market.
With Congress scheduled to adjourn next week, no one expects quick action, and there's a good reason for that, said Senate Majority Leader Harry M. Reid (D-Nev.).