WORLD> Govt Reaction
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WORLD> Govt Reaction
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No blank check for the Wall Street
By Xin Lian (Chinadaily.com.cn)
Updated: 2008-11-28 11:42 In his three-page rescue plan, the US Treasury Secretary Paulson devised a mechanism with full flexibility and comprehensive authority. Yet, this former Wall Street CEO may not quite understand the checks and balances of the US political system. On the release of this bill, people become concerned that it would spoil the Treasury secretary with too much power. Lawyer Frank Razzano, a former attorney at the Securities and Exchange Commission (SEC) said, according to hexun.com, "there are some controversial fragments in his proposal", "for example, the decision of the Treasury Secretary may not be reviewed by any court of law or any administrative agency; the Secretary has the power of appointing asset managers", "this gives the Treasury Department the dictatorial power unchecked by the third branch of government, the courts. We are taking a huge leap of faith." "One of the most valuable experiences of the United States in its 230 years history is the accountability system and the division of power among the executive, the legislative and the judicial branches," Said Frank Razzano, "President Lincoln didn't even get absolute power from the congress in the civil war. Now, the Treasury Secretary, an appointed cabinet member, may get dictatorial power to decide the future of America and the country's economic policies in the coming decade." Supporters of this plan, in and out of Capitol Hill, argued that time was running out. With the upcoming general election, the Congress had but 6 weeks to make a decision. They said that those delaying the bailout would be the culprits for the devastation of the United States. However, other congressmen insisted on protecting taxpayers in the package, no matter how urgent the situation was. Thomas Jefferson once said, "Every government degenerates when trusted to the rulers of the people alone. The people themselves are its only safe depositories." The more pressing the situation, the greater caution is needed. Republican senator Shelby who sits in the Banking Committee stressed that "the congress shouldn't be a mere token" in this biggest ever rescue effort. In the second congress vote four days later, most legislators changed their mind dramatically. They succumbed to huge pressure from their constituency amid the escalating crisis. The oversight was highlighted in the new Emergency Economic Stability Act 2008, which prescribed the executive mechanism and a four-layered oversight mechanism for the Troubled Assets Relief Program. According to this version, the Treasury would be in charge of its execution, subject to the oversight of other institutions. The Treasury Must Report According to the executive mechanism, the Treasury would have multiple reporting obligations, including disclosure of any toxic asset purchase within two business days and monthly or case-specific reports to the competent committees of the Congress and the Congressional Oversight Panel. The Quintet Rules On the federal level, a Financial Stability Oversight Board would be established, comprised of the Fed Chairman, the Treasury Secretary, the Director of the Federal Home Finance Agency, the SEC Chairman and the Secretary of Housing and Urban Development. This board would review implementation report by the Treasury, recommend on the implementation of the bailout plan, and report any suspected fraud, misrepresentation or abuse to the Special Inspector General for TARP. It could appoint a credit review committee to evaluate the Treasury's purchase of distressed assets. In addition, it would see to it that policies of the Treasury align with the purpose of the Act, and the interests of the country and the people. The board would meet on a monthly basis, and submit quarterly reports to competent congressional committees. Its tenure would mature at the termination of the Act. Envoy of the President The President also would have a role to play. According to the Act, a Special Inspector General for TARP can be appointed by the President, with the approval of the senate. With a skill set in accounting, planning, financial analysis, laws, management analysis, public management and investigation, the inspector was expected to audit and track the acquisition, management and sales of the bad assets, as well as the insurance scheme under the Act. Another duty would be to collect information, such as the total valuation of bad assets, the valuation of such assets held or sold by the Treasury, transaction profit and loss, the role of financial institutions in asset disposal, and the profile of individuals and institutions employed to manage those assets. The inspector must provide quarterly reports to committees of the Congress and the oversight panel. GAO on Alert According to the Act, the Government Accountability Office would continue to audit the public spending in the relief program, by scrutinizing its planning, activities, receipt, expenses, and entrusted transactions. Distrust Fuelled by Partisan Feud When the rescue plan was unveiled in the first place, the two parties had a hot debate. Democrats insisted on helping home owners. Frank, Democratic Chairman of the Financial Services Committee, held that relief efforts for the borrowers should be codified as soon as possible. Most Republicans opposed the rescue plan. For instance, Richard Shelby, an Alabama Republican senator, believed in the role of the market. He said that government intervention would get the taxpayers heavily indebted. Carefully staying out of the troubled water, Paulson offered a battlefield for the donkey and the elephant. The proposed Congressional Oversight Panel would have 5 members, 4 of whom to be nominated by the House Speaker, the House Majority Leader, the Senate Majority Leader, and the Senate Minority Leader respectively, and the 5th jointly by the House Speaker and the Senate Majority Leader after consulting with the House Majority Leader and the Senate Minority Leader. This bipartisan panel would submit a monthly report to the congress on the implementation of the Act and its influence on the financial market, financial institutions, market transparency, deleveraging efforts and the taxpayers. Fighting its way through the sophisticated checks and balances system, this bill was finally passed. Paulson expressed his gratitude to the congress and the congressmen all heaved a sigh of relief. The gigantic American political machine kept moving in its orbit. |
