Global financial markets are immensely complicated and it is hard to understand all the ins and outs of what the Treasury Department and the Federal Reserve are trying to do. We all do our best. Take an institution like Bank of America. Their CEO Ken Lewis says that he took more TARP money than he should have. What does that mean?
From the government’s perspective it wasn’t good enough to give Bank of America the bare minimum amount of money it needed to avoid immediate insolvency. The main reason to keep the bank afloat is so that it can resume lending money, and to do that they need capital reserves. And, remember, we’re operating on the assumption (alternatively, the fantasy) that these banks aren’t really insolvent, so there isn’t any easily definable amount of money that any of them need. For the government the question is “how much money do you need to resume/increase lending?” Bank of America comes up with an answer and the government responds to it.
Because a key priority of the TARP (and various Fed) program(s) was to fix the credit crunch, some or many of the banks that received funding probably did not need money to avoid insolvency. They were asked to take the money anyway, just in case, and to help them build up their capital reserves. But banks that took money without necessarily needing money did not want that information shared with the public because it would damage their reputation and their share price. Lord knows they didn’t expect to be treated like they are in receivership and be told how much compensation they can provide to their executives.
It’s all a fine mess and no one feels sorry for anyone, but along come guys like Rep. Alan Grayson and Sen. Bernie Sanders to gum up the works. They want to know who the recipients of TARP (and Fed) money are and what they’re doing with the money. And that screws up the plan. Sen. Sanders, for example, just had the following modest amendment passed into the budget bill.
SA 875. Mr. SANDERS submitted an amendment intended to be proposed by him to the concurrent resolution S. Con. Res. 13, setting forth the congressional budget for the United States Government for fiscal year 2010, revising the appropriate budgetary levels for fiscal year 2009, and setting forth the appropriate budgetary levels for fiscal years 2011 through 2014; as follows:
On page 48, line 24, insert “including the identity of each entity to which the Board has provided such assistance, the value or amount of that financial assistance, and what that entity is doing with such financial assistance,” after “2008,”.
It’s a basic reporting requirement for the Board of Governors of the Federal Reserve. Sanders wanted them to tell Congress what they are doing with our money and now I guess they will have to do that. It’s instructive to look at the vote on this amendment which passed 59-39, but which also deeply split the two caucuses. Here are the Democrats that voted against it, basically voting to let the Fed loan money with no transparency.
Baucus (D-MT), Bayh (D-IN), Bennet (D-CO), Bingaman (D-NM), Carper (D-DE), Dodd (D-CT), Gillibrand (D-NY), Johnson (D-SD), Kaufman (D-DE), Kohl (D-WI), Lautenberg (D-NJ),
Lieberman (ID-CT), Menendez (D-NJ), Nelson (D-NE)
Reed (D-RI), Schumer (D-NY), Shaheen (D-NH), Udall (D-CO), Warner (D-VA)
Notice that the senators from Connecticut, New York, New Jersey, and Delaware all voted against it. That’s banking interests in their home states dictating the outcome. The same thing probably influenced Sen. Reed of Rhode Island and Sen. Johnson from South Dakota. The rest of this group is just Blue Dogging it for big business.
How about Republicans that voted for Sanders’ amendment?
Brownback (R-KS), Bunning (R-KY),
Burr (R-NC), Coburn (R-OK), Collins (R-ME), Cornyn (R-TX), Crapo (R-ID), DeMint (R-SC), Ensign (R-NV), Graham (R-SC), Grassley (R-IA), Hutchison (R-TX), Inhofe (R-OK), McCain (R-AZ), Risch (R-ID), Roberts (R-KS), Sessions (R-AL),
Snowe (R-ME), Specter (R-PA), Thune (R-SD), Vitter (R-LA)
These folks don’t vote with the unabashedly socialist Bernie Sanders too often. Some of them like Hutchison and Brownback are running for governor in 2010 and probably are afraid of populist blowback. The same is true for endangered incumbents like Bunning, Burr, Specter, and Vitter. The rest are just movement conservatives that really don’t give much of a crap about Wall Street because they’re either safe in their seats or they get enough money from the religious right.
And, to get back to the point at the top, it isn’t even unambiguously true that Sanders’ amendment is a good idea. Transparency is good…no question. But everyone that has testified about this before Congress from either the Bush or Obama administration has agreed that it will discourage participation to insist on full disclosure. Of course, it doesn’t have to be an either/or situation. Retroactive disclosure would discourage criminal acts. Or, we could treat it the same way we do sensitive national security information and designate a bipartisan handful of congressmembers to be ‘read-in’ to the program. There are middle grounds between no oversight, accountability, or transparency and a totally ineffective program. Sanders’ amendment might satisfy that requirement or it might not.
What’s depressing is how predictable Congress is in how they vote. Vulnerable senators cave to populism while liberal Democrats cave to their banking constituents.
