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US Congress balks at huge financial bailout

(Agencies)
Updated: 2008-09-24 10:35

A demonstrator holds up a sign behind US Treasury Secretary Henry Paulson (L) and Federal Reserve Board Chairman Ben Bernanke (R) during a hearing before the Senate Banking, Housing and Urban Affairs Committee on Capitol Hill in Washington, DC, September 23, 2008. [Agencies]

 

But the proposal to give the Treasury unprecedented authority to borrow US$700 billion to buy toxic mortgage-related assets from struggling financial institutions faced stiff opposition in Congress.

"This massive bailout is not a solution. It is financial socialism and it's un-American," said Senator Jim Bunning, a member of Bush's Republican Party.

Another Republican lawmaker, Representative Jeb Hensarling, said other options must be explored: "We are concerned that the plan will put the taxpayer on the hook for a trillion dollars and still might not solve the problem."

The ranking Republican on the Senate Banking Committee, Senator Richard Shelby, seemed to agree with Dodd.

"I have a lot of concern with the proposal," said Shelby. "Seven hundred billion dollars is a lot of money to me; it's a lot of money for taxpayers."

New York Democratic Senator Chuck Schumer, a member of the panel, told CNBC television during a break in the hearing: "There are a whole lot of questions and a good deal of skepticism, certainly about a blank check, on both sides of the aisle."

In opening remarks at the Senate hearing, Dodd called the government plan "stunning and unprecedented" in its scale and sweeping powers.

"What troubles me most is that we have been given no credible assurances that this plan will work. We could very well spend 700 billion dollars or one trillion dollars and not resolve the crisis," Dodd said.

"Before I sign off on something of this magnitude, I would want to know that we have exhausted all reasonable alternatives. ... I do not believe, however, we can solve this crisis by spending a massive amount of money on bad securities."

US stocks closed sharply lower, following steep falls on Asian and European equities markets amid growing doubts about the prospects for the US bailout's swift passage and whether it would work.

Bush told worried world leaders that his administration was working to avert a financial meltdown.

"I can assure you that my administration and our Congress are working together," he said in his farewell address to the UN General Assembly in New York. "I'm confident we will act in the urgent time frame required."

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