Populism MIA in Bailout Plan

By Dan Froomkin
12:11 PM ET, 02/10/2009

David Cho and Lori Montgomery write in The Washington Post: "Treasury Secretary Timothy F. Geithner this morning announced a rescue program for the hard-hit U.S. financial system that may commit up to $1.5 trillion in public and private funds....

"Geithner announced a public-private partnership that would seek to finance the purchasing of toxic bank assets that are at the heart of the credit crisis. The program would initially raise $500 billion in public and private funds to offer low-cost financing to encourage investors to buy the toxic assets, and could eventually include as much as $1 trillion in funds...

"A second initiative will broaden the scope of a Federal Reserve program aimed at unclogging the markets for auto, student and other consumer loans. That initiative may expand to as much as $1 trillion, using $100 billion from the Treasury's rescue funds, and include aid for commercial real estate markets.

"A third program would offer direct help to the nation's largest banks. The government plans to conduct a review of major financial firms to determine how much they may need. Any federal aid would come with conditions that would give the firms incentives to pay the money back as soon as possible. The review would determine the ultimate price tag of this program."

So where did all the populism go?

Stephen Labaton and Edmund L. Andrews write in the New York Times: "The Obama administration’s new plan to bail out the nation’s banks was fashioned after a spirited internal debate that pitted the Treasury secretary, Timothy F. Geithner, against some of the president’s top political hands.

"In the end, Mr. Geithner largely prevailed in opposing tougher conditions on financial institutions that were sought by presidential aides, including David Axelrod, a senior adviser to the president, according to administration and Congressional officials.

"Mr. Geithner...successfully fought against more severe limits on executive pay for companies receiving government aid.

"He resisted those who wanted to dictate how banks would spend their rescue money. And he prevailed over top administration aides who wanted to replace bank executives and wipe out shareholders at institutions receiving aid...

"[O]fficials said Mr. Geithner worried that the plan would not work — and could become more expensive for taxpayers — if there were too much government involvement in the affairs of the companies."

© 2009 The Washington Post Company