pushback against bailout growing, politicians perhaps regretting haste

With more evidence coming in to support the conclusion that the financial institutions receiving billions of dollars from the federal government have no intention of using said billions to extend credit to their customers, a growing chorus of Americans is beginning to question the wisdom of the $700 billion deal approved recently, after little debate, by Congress. The following clip comes from an editorial in today’s New York Times:

…The problem is that the Treasury has refused to put conditions on the banks’ use of the bailout funds, allowing them, in effect, to make purchases of banks that are not on the verge of failure. That could help to maximize the banks’ profits — a worthy goal when the capital they are using is from private investors.

However, when they’re using taxpayer-provided capital, as they are now, Congress and the public have every right to require that the money be used to benefit the public directly, even if doing so crimps the banks’ profits. If Treasury won’t impose conditions, Congress must, including a requirement that banks accepting bailout money increase their loans to creditworthy borrowers and limit their acquisitions to failing banks, such as those listed as troubled by the Federal Deposit Insurance Corporation. The bailout should not be an occasion for banks to make a killing.

An even bigger problem is that the bailout was sold as a way to spur loans. If that never was — or no longer is — the primary aim, Congress and the public need to know that. Lawmakers should not release the second installment — $350 billion — until they have answers and guarantees that the bailout money will be spent in ways that put the public interest first…

While Americans are no doubt angered by the fact that home loans, car loans, and the like aren’t being offered, a bigger concern on Main Street seems to be the fact that up to 10% of these bailout funds are going to be spent on executive pay and bonuses. And, finally, some lawmakers are beginning to listen.

Earlier this week, Congressman Henry Waxman, the chair of the House Committee on Oversight and Government Reform, sent out a letter to nine U.S. banks, asking for details concerning their plans to pay bonuses. Here’s how the letter begins:

Earlier this month, the Treasury Department announced plans to invest $125 billion of taxpayer funds in nine major banks, including yours, as an emergency measure to rebuild depleted capital. According to recent public filings, these nine banks have spent or reserved $108 billion for employee compensation and bonuses in the first nine months of 2008, nearly the same amount as last year…

Waxman, who voted for the bailout, isn’t the only person now looking for answers, and perhaps regretting the haste with which the bailout was constructed and passed. Andrew Cuomo, the New York attorney general, is beginning to ask questions as well. Today, he gave the same banks one week to provide “detailed accounting regarding (their) expected payments to top management in the upcoming bonus season.”

There were apparently a lot of letters flying around today. There was another one sent by House Speaker Nancy Pelosi of California and Senate Majority Leader Harry Reid of Nevada urging Secretary of the Treasury Hank Paulson to put restrictions on the “golden parachutes” being offered to executives at the banks being assisted.

And, the Presidential contenders aren’t aren’t staying quiet on the matter either. They’re feeling the heat from voters, and they’re responding… at least rhetorically. Yesterday, in Pennsylvania, Barack Obama said, “They might call that a bonus on Wall Street, but here in Pennsylvania, we call it an outrage–and they shouldn’t be allowed to get away with it.” And today in Miami, John McCain spoke of the need to do something about the “greed and corruption of Wall Street.”

Neither man, as far as I can tell, offered a solution, however, as to how, specifically, the situation might be remedied.

It’s also worth pointing out that both McCain and Obama, as Senators, voted to approve this $700 billion bailout package, which we the people are now demanding be looked at again. This thing is a mess from top to bottom and our leaders should be ashamed at what they’ve allowed to happen. Our treasury was looted in broad daylight while they stood by. I understand that they, fearing worldwide depression, were motivated to do something quickly, but how could they not at least build in provisions stipulating that bonuses not be paid, and that funds actually be used to make loans to Americans?