Hill Reaction Rolling In to Bank Nationalization
Lawmakers are beginning to release statements on Treasury's plan, reported in The Post this morning, to partially nationalize major U.S. banks in an effort to stabilize the economy.
We are looking forward to statements from the most conservative Republicans and Democrats on the partial government takeover of banks.
"The actions announced today by Treasury Secretary Hank Paulson to inject capital directly into the banking system by purchasing dividend-paying preferred stock and expanding F.D.I.C. insurance to cover small businesses' bank accounts are bold, aggressive, and necessary," said Sen. Judd Gregg (R-N.H.), one of the architects of the $700 billion Wall Street rescue/bailout plan.
"These necessary steps, coupled with the huge commitment of resources by the European nations to their financial system, will help us avoid what could potentially be a catastrophic economic meltdown," Gregg said.
"No one is excited by the need to pursue this course, but it is the right action needed at this time, and it will move us a long way down the road towards stabilizing our credit markets, restoring our economy, and protecting the jobs and retirement savings of the American people," Gregg added.
"Hopefully, this strong approach is the dynamite needed to blast through the clogged-up financial system," said Sen. Chuck Schumer (D-N.Y.). "Once that is accomplished, we must make sure that this new capital is used to strengthen traditional banking practices to get the economy going again. There must be checks to prevent these dollars from being used to increase executive compensation, pay out dividends, or bankroll exotic financial instruments.
"The Treasury plan gets great marks on the first, a passing grade on the second, and an incomplete on the third," Schumer said.
Rep. Spencer Bachus (R-Ala.) applauded the nationalization and said attention should now be turned to mark-to-market accounting and short-selling.
"While it is also recognized that mark-to-market was a well intentioned attempt to address the abuses of Enron, WorldCom and others, the negative consequences in a market that is not functioning normally negate the benefits," he said. "The suspension of mark-to-market accounting would be unwarranted in a normally functioning market environment. In a full blown crisis, some alternative ought to be available to allow our financial institutions to value assets based on a reasonable expectation of anticipated payoff."
-- Lori Montgomery
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