Tuesday, Sept. 23, 2008 | 2:09 a.m.
It is commendable that Democrats in Congress are putting at least a short hold on the Bush administration’s latest proposal to revive the economy.
The proposal, however necessary, goes way beyond anything ever seen in this country. It would give Treasury Secretary Henry Paulson authority over $700 billion in taxpayer money.
He would use money from this fund to buy mortgage-related bad debt from financial companies, theoretically enabling them to resume making home loans at a normal pace — to presumably qualified borrowers this time.
This would renew demand and relieve one of the economy’s core problems — sagging home prices.
Government reaction to the economy has been piecemeal — interest rate cuts, a stimulus bill, taking control of Fannie Mae and Freddie Mac and arranging bailouts for venerable but collapsing financial companies.
Yet banks and other financial institutions critical to the national and world economy remain vulnerable — mostly because of risky mortgages lenders approved by the millions for short-term profit that were bundled and sold as if they were viable long-term investments.
The $700 billion proposal signals a turn for the Bush administration from frequent emergency measures to one overriding plan. The administration wanted quick approval so badly that even before it was formally presented Saturday, Paulson and Federal Reserve Chairman Ben Bernanke were busy lobbying members of Congress.
Democrats, however, were right to say “Not so fast” on such a monumental proposal. Although they agree with its necessity in principal, they did not agree to its one-sidedness.
If such a proposal must be approved, more than financial institutions should benefit. Democrats are holding out for mortgage relief for homeowners, restrictions on executive pay and bonuses, congressional oversight of Paulson’s use of the money and payback provisions for taxpayers.
It was irresponsible lending and borrowing that caused the economy to plunge. Care must now be taken to avoid irresponsibility in crafting solutions.
Join the Discussion:
Check this out for a full explanation of our conversion to the LiveFyre commenting system and instructions on how to sign up for an account.
Full comments policy