Lawmakers Blast Paulson's Management of Bailout
Wednesday, November 19, 2008
Lawmakers accused Treasury Secretary Henry M. Paulson Jr. yesterday of haphazardly managing the $700 billion financial rescue, as fault lines widened over what the government should try next to contain the fallout of the financial crisis.
The heated hearing before the House Financial Services Committee offered a preview of the pressures the Obama administration will face from Congress. Democrats, who are urgently pressing for aid to homeowners at risk of foreclosure as well as to the auto industry, said Paulson gave Congress a misleading sales job about how he would use the bailout.
"You seem to be flying a $700 billion plane by the seat of your pants," said Rep. Gary L. Ackerman (D-N.Y.), in the hearing.
Paulson, in his first congressional testimony since the rescue package was passed in early October, launched a spirited defense.
With Federal Reserve Chairman Ben S. Bernanke and Federal Deposit Insurance Corp. Chairman Sheila C. Bair at his side -- who both received far less aggressive questioning -- Paulson argued that what congressional critics considered an inconsistent response was instead a reaction to a fast-moving situation.
"There is no playbook for responding to turmoil we have never faced," Paulson said. "We adjusted our strategy to reflect the facts of a severe market crisis."
Lawmakers are none too pleased with the way Paulson and his colleagues so far are handling the powers they were granted under the rescue plan. "There's a lack of confidence, it seems to me, both in this body and in the general population," said Rep. Paul E. Kanjorski (D-Pa.). "Do we have a plan? Where are we going?"
Paulson repeatedly tried to draw a distinction between actions that are meant to arrest the deep financial crisis that has clogged all manner of lending worldwide -- for which the rescue package was designed -- and those meant to bolster parts of the economy.
"The purpose of the financial rescue legislation was to stabilize our financial system and to strengthen it. It is not a panacea for all our economic difficulties," Paulson said in prepared testimony. "The crisis in our financial system had already spilled over into our economy and hurt it."
Even members of Congress who have had good working relationships with Paulson were frustrated that he has resisted their calls to use money in the Troubled Asset Relief Program, or TARP, to provide foreclosure relief.
"When the program was passed, very explicit language was included to provide for mortgage foreclosure," said committee Chairman Barney Frank (D-Mass.). "It is essential that we do something to use some of the TARP funds for the diminution of the rate of mortgage foreclosures."
Some lawmakers are going further: Rep. Maxine Waters (D-Calif.) said she is personally helping 26 people renegotiate their mortgages, and described spending an hour on hold waiting for help and escalating her complaints to the chairman of Wells Fargo to get resolution.