White House Officials Defend Bailout Package
Friday, October 31, 2008
Top White House officials yesterday defended the Bush administration's handling of the federal bailout package, but warned that it will take time for the plan to have a clear impact on the struggling economy.
Edward P. Lazear, chairman of the president's Council of Economic Advisers, also said the White House remains skeptical of Democratic proposals for a second economic stimulus package this year. "We don't believe that's the right way to go," he said.
The remarks followed Commerce Department figures released yesterday showing that the U.S. economy shrank by 0.3 percent in the third quarter, confirming an economic slowdown already evident through job losses and declining consumer sales.
Bush administration officials say that the contraction was expected and argue that continued implementation of the $700 billion federal rescue plan that Congress approved last month will eventually stabilize the chaotic credit markets at the heart of the financial crisis. The bailout plan, Lazear said, is "the appropriate stimulus right now."
Lazear and other officials also sought to defend their handling of the rescue plan so far, responding to reports in The Washington Post yesterday that banks receiving money from the Treasury will be allowed to make dividend payments to shareholders. In a media briefing, Lazear emphasized that the bailout legislation does not bar participating banks from continuing to pay dividends at current levels.
"The law was quite specific on what rules to follow," he said, adding that "we're going to follow the law and make sure there are not abuses, but we want to make sure we get the economy going."
White House press secretary Dana Perino said dividends are an important source of income for a wide variety of investors, including pension funds and small-business owners.
"Some people believe that only rich people get dividend payments," she said. "That is not the case. . . . A lot of people could suffer if they don't have dividend payments."
The Post reported yesterday that U.S. banks receiving more than $163 billion from the Treasury Department for new lending are on pace to pay out more than half of that sum in dividends to their shareholders, with government permission, over the next three years.
The U.S. approach contrasts with decisions by foreign governments, including those of Britain and Germany, to require banks that accept public investments to suspend dividends until the government is repaid. The U.S. government similarly required Chrysler to suspend such payments in 1979 as a condition of a bailout.