Lawmakers chide Paulson for 'unchecked government power'
| Washington
Lawmakers questioning former Treasury Secretary Henry Paulson Thursday honed in on the facts of the forced marriage between Bank of America and Merrill Lynch 鈥� though for starkly different reasons.
To Republicans, the Treasury Secretary had threatened the Bank of America into a merger that no longer made business sense.
To many Democrats, Bank of America CEO Ken Lewis duped Paulson and the government into funding a private merger to the tune of $20 billion.
But throughout the day-long hearing, lawmakers on both sides of the aisle were clearly troubled by new unchecked government powers that the nation's financial crisis let loose.
鈥淥nce you have crossed the Rubicon on this interventionist mindset, you have changed the nature of the capitalist system,鈥� said Rep. Scott Garrett (R) of New Jersey.
Other Republicans called for an 鈥渆xit strategy鈥� from a world where government determined which industries and firms lived and which did not.
鈥淭his brave new world we鈥檝e entered into of nationalizing major industries really does place a strain on a system that was never designed to make these decisions 鈥� or do the oversight," said Rep. Brian Bilbray (R) of California.
"Where is the exit strategy? What date can I tell my constituents that this committee in Congress will not be discussing how we directed the decisions in at least this major industry."
Before considering any expansion of further government regulatory powers, Congress needs to understand how those powers have been used 鈥� or misused 鈥� to date, Democrats added.
鈥淎ll of this happened against a backdrop of unchecked government power, with no transparency or accountability,鈥� said Rep. Edolphus Towns (D) of New York, who chairs the House Committee on Oversight and Government Reform.
Exhibit A was a private merger that turned into a $20 billion federal bailout.
Mr. Paulson disputed the charge that the government had threatened or bullied Bank of America into accepting the merger.
鈥淚 wouldn鈥檛 use the word threat,鈥� he said. 鈥淚 intended to give a very direct, strong, clear message.鈥�
Backing out of the merger was not a 鈥渓egally viable option鈥� and threatened 鈥渟ignificant harm鈥� to the Bank of America and the financial system, he said, adding that the management and board of a regulated entity that triggered such destabilization 鈥渃ould be subject to removal by the Federal Reserve 鈥� and should be.鈥�
Some Democrats had another reading of the facts: 鈥淗e got the Treasury to cough up $20 billion of taxpayer money to help finance his merger,鈥� said chairman Towns. 鈥淚n the end, Mr. Lewis got everything he wanted.鈥�
Lawmakers also pressed Paulson on the fairness of a rescue plan that helped bailed-out financial institutions back to big bonuses but left taxpayers hurting. They noted that the investment bank Goldman Sachs, which Paulson once headed, announced second-quarter profits of $3.4 billion this week.
鈥淭he people in my district are losing their homes, their insurance, everything they鈥檝e got,鈥� said Rep. Elijah Cummings (D) of Maryland. 鈥淭hey ask me: That money those people are getting on Wall Street, is that our money?鈥�
鈥淭he thing that bothers you bothers me,鈥� said Paulson.
鈥淭he people who are paying the price had nothing to do with the problem, but the sad truth is that if these companies had gone down, they would have paid a bigger price. There would have been more foreclosures and more people unemployed,鈥� Paulson added 鈥淚f I had done nothing, it would have been worse.鈥�
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