Bailout Chief Faces Angry Lawmakers
Kashkari, Paulson, White House blamed for helping Wall St. and hurting Main St.
Nov. 14, 2008— -- The government's bailout czar had a rough morning on Capitol Hill Friday as a panel of angry lawmakers berated him for the administration's perceived failure to stem the foreclosure crisis while rapidly deploying hundreds of billions of dollars to shore up U.S. banks.
Both Republicans and Democrats on the House Oversight and Government Reform Committee's domestic policy subcommittee blasted Neel Kashkari; his boss, Treasury Secretary Henry Paulson; and the White House for pushing Congress to approve $700 billion to buy troubled mortgage assets, only to switch course weeks later and commit $250 billion to banks and other financial institutions.
The result, they said, was that Wall Street got help while millions of Americans lost their homes and their jobs.
"We've got people holding on, hoping against hope somebody's going to help them," Rep. Dennis Kucinich, D-Ohio, who chaired the hearing, told Kashkari. "All of a sudden, the Treasury sent a signal to the banks: 'Forget about it -- we're going to give you the money you want, and you do what you want with it.'"
"I guess you get a taste for how Mel Gibson felt in the last scene of 'Braveheart,'" Rep. Brian Bilbray, R-Calif., joked darkly with a visibly struggling Kashkari, whose full title is interim assistant secretary of Treasury for financial stability.
Incidentally, Gibson's character in "Braveheart" does not actually appear in the film's final scene -- and offscreen he probably isn't feeling too great: That's because he has already been killed, his body has been beheaded and quartered, and its pieces have been scattered around England.
Kucinich, who chaired the hearing, accused Paulson of "gutting" the Emergency Economic Stabilization Act, which Congress passed and President Bush signed into law Oct. 3.
Rep. Darrell Issa, R-Calif., said the administration had been "disingenuous" and was "ignoring congressional intent and reversing course on its original request."
"For weeks, Secretary Paulson and others within the administration begged Congress for the authority to spend $700 billion," mostly to buy mortgage-related securities, said Issa.
Instead, they have bought stakes in financial institutions, Issa said. "What we have not seen is a plan to mitigate foreclosures."
The 35-year-old Kashkari worked to answer questions, frequently thanking the lawmakers for their inquiries and saying he respected or shared their concerns. He explained that his office had switched course shortly after receiving the funding approval because markets had "rapidly deterioriated" in October, putting the entire financial system at risk.
Kashkari's timeline differed from the one his boss gave the PBS Newshour's Jim Lehrer Thursday night.
"The situation worsened, as [the bailout bill] took a good while to get through Congress," Paulson told Lehrer.
"By the time we had that legislation passed" Oct. 2, Paulson said, he had already decided not to immediately buy troubled assets but to inject the money directly into banks by buying preferred stock.
In his testimony Friday, Kashkari said the stock buys had started to make an impact.
"Credit markets were largely frozen," he said. "Financial institutions were under extreme pressure ... investor confidence in our system was dangerously low."
"Hello, are we in a different universe here?" asked Kucinich. "The same situation prevails today."
He accused Kashkari of suggesting, "We're just merrily skipping along our way."
When Kashkari tried to explain that he and Paulson were "passionate" about helping homeowners as well as banks, Kucinich replied in disbelief: "He is? Where? What country?"
Rep. Elijah Cummings, D-Md., who has become one of the most vocal congressional critics of Wall Street executives' incorrigible behavior during the crisis, had sharp words for Kashkari.
"Life is short, and I don't have time to hear ring-around-the-rosie answers," he snapped.
"I live in the inner city of Baltimore," he said. "When I go to the supermarket tonight, when I take my daughter to the movies, I promise people are going to ask me about you. ... 'What can he tell me today? I do not want a handout. I just need a hand -- I want to pay my mortgage. ... Did he say something to help me know how I can help my family?' They are in pain."
"I appreciate you, and I share your perspective," Kashkari said, explaining that his efforts to stabilize the financial system and "prevent a complete financial collapse" was not just to help Wall Street but "to help every American."
That sentiment didn't appear to win over the panel.
"I don't think anyone questions, Mr. Kashkari, that you're working hard," said Kucinich in his closing remarks. "Our question is who you're working for."