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closeAmericans who are not well versed in the intricacies of U.S. economic policy no doubt feel themselves pulled in many directions by the proposal to use $700 billion in taxpayer dollars to bail out Wall Street.
On the one hand, government officials in the thick of this crisis, including Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, say Congress must hastily approve the plan or risk deeper recession. Bernanke warned lawmakers Tuesday that unless they act on the Bush plan this week, they risk a recession with higher unemployment and more home foreclosures.
"The financial markets are in quite fragile condition, and I think absent a plan they will get worse," Bernanke said. "I believe if the credit markets are not functioning, that jobs will be lost, that our credit rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover in a normal, healthy way."
But some lawmakers -- liberals and conservatives alike -- are saying, not so fast. A rush to judgment and a blank check for the executive branch could present different risks down the road.
Some conservative critics, such as U.S. Sen. Jim DeMint, R-S.C., say they won't support any plan that uses public money to buy up bad private debt to keep banks solvent. They say an unfettered free market should be allowed to right itself without heavy-handed government interference, which, they claim, is akin to socialism.
Unfortunately, however, the lack of governmental oversight is one of the reasons the nation is in this mess. It could be said that reality reared up and slapped the face of free-market ideology.
In effect, by rejecting any governmental role, DeMint has opted out of the debate altogether. His fellow South Carolina senator, Lindsey Graham, and others on both sides of the aisle have a different point of view. They regard the bailout as hard to stomach but necessary to avert a financial meltdown.
In the meantime, a number of lawmakers are seeking ways to make government more accountable in how it manages the bailout and to get more for taxpayers in return. Both Graham and U.S. Rep. John Spratt, D-S.C., chairman of the House Budget Committee, favor an independent oversight board to monitor the bailout.
They also support caps on executive compensation for Wall Street executives whose firms would be rescued with public money.
"The last thing we need is an executive of a failed firm walking away with millions," said Graham.
Leading senators of both parties, meanwhile, are increasingly skeptical about supporting the plan without some alterations. Language in Section 8 of the plan has raised concerns for many critics: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."
This is reminiscent of the whirlwind passage of the Patriot Act. Many lawmakers no doubt assumed that they would support the Patriot Act in the name of national security and then go back later and fix any objectionable parts.
But reversing elements of that act has proved to be extremely difficult. Getting it right the first time would have been preferable.
And -- despite the need for urgency in shoring up the economy -- members of Congress should ensure they get it right before giving Paulson the go-ahead. At least strike the abominable Section 8 from the plan.
IN SUMMARY
While there is urgency in passing abailout plan, Congress must act with caution.
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