The permanent bank bailout

Rep. Brad Sherman (D-Calif.) doesn’t like what he sees in the administration’s financial services reform bill:

In my opinion, Geithner’s proposal is “TARP on steroids.” Section 1204 of the proposal allows the executive branch to use taxpayer money to make loans to, or invest in, the largest financial institutions to avoid a systemic risk to the economy.

Geithner’s proposal reminds me of the Troubled Asset Relief Program (TARP), the $700 billion Wall Street bailout adopted last year, but the TARP was limited to two years, and to a maximum of $700 billion. Section 1204 is unlimited in dollar amount and is a permanent grant of power to the executive branch. TARP contained some limits on executive compensation and an array of special oversight authorities. Section 1204 contains absolutely no limits on executive compensation and no special oversight.

When I asked Geithner whether he would accept a $1 trillion limit on the new bailout authority (if the executive branch wanted to spend more, it would have to come back to Congress), he rejected a $1 trillion limit, insisting that the executive branch be able to respond without coming back to Congress.

Both TARP and the Treasury proposal have vague provisions under which taxpayers might possibly recover any money lost through a special tax on the financial services industry. Under the Treasury proposal, only the very largest institutions could benefit from a bailout, but the special tax, if ever collected, would fall chiefly on medium-sized institutions.

Sherman, who is a CPA and a senior member of the House Financial Services Committee, presumably knows what he’s talking about. So President Obama, to “reform” the system, actually proposes giving more money to Wall Street with less oversight than under the plan proposed by the Bush administration.

And you thought Republicans were in bed with big, evil, greedy capitalist bankers.

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