Remember this on Election Day
everybody because it ain't gonna
change all by itself.


Oct 30, 5:35 PM EDT


White House defends money for banks

By JENNIFER LOVEN
AP White House Correspondent

Banks asking for credit card debt forgiveness

WASHINGTON (AP) -- Under fire from Democrats and Republicans alike, the White House on Thursday defended giving billions of bailout dollars to banks that plan to reward shareholders and executives - or even buy other banks.

Allowing banks to engage in such normal business activities actually could help loosen lending and revive the sagging economy, said Ed Lazear, chairman of the Council of Economic Advisers. He said the administration would not impose any conditions on banks beyond those required when Congress created the bailout program, which authorized the government to buy stock in financial institutions.

On a day of gloomy economic reports, Lazear predicted "a few tough months" ahead but also said "it is realistic" to think the next president will be presiding over solid growth early in his term after taking office Jan. 20. That would be a welcome change after the economy shrank at a 0.3 percent annual rate in the July-September quarter, the strongest signal yet the nation has fallen into recession.

Despite the gloomy outlook, the White House offered its clearest rejection to date of a second stimulus package to boost the economy. Lazear said that "the appropriate stimulus right now" is only what has already been passed by Congress: the $700 billion financial industry rescue package. But there is growing support on Capitol Hill for billions in federal spending for such initiatives as public works projects, aid for cash-strapped states and new jobless benefits.

Lazear was put before the cameras in the White House briefing room amid a rising chorus of complaints from lawmakers about the latitude that banks will have when they receive bailout money from Washington.

That bailout was originally sold by the administration as a plan for the government to purchase toxic mortgage-based assets from financial institutions, to get them off their books and inspire the resumption of normal lending. After passage, though, the administration decided the better course would be to devote $250 billion into buying ownership stakes in banks.

With taxpayers' money flowing into their vaults, banks are going ahead with paying dividends to shareholders, giving bonuses to top executives and acquiring competitors. Lawmakers are asking why banks with the money to do those things need taxpayer-funded help.

Lazear said the government is keeping close tabs on the way banks use bailout dollars to "make sure that there are not abuses" and to ensure the law's requirements are met.

The rescue legislation included some limits on executive compensation, considered weak by many. And while it does not allow institutions receiving the money to increase dividends, it does not prevent them from paying those dividends. Critics note that European banks that accept public investments have been required to suspend dividend payments.

Lazear said the bailout law does require banks to pay "quite significant dividends" to the government - 5 percent quarterly, going up to 9 percent after three years. Bush officials contend this is powerful incentive for banks to start lending again, so they can earn the kind of money necessary to make a profit on top of those payments.

"That's almost like a gun at their heads, so that they know that they have to start making money to be able to do that," White House press secretary Dana Perino said.

The White House also painted the dividend issue in populist terms. "Not only rich people get dividend payments," Perino said. "A lot of people could suffer if they don't have dividend payments." Pension funds and mutual funds, for example, invest in banks.

Perino also tried to dispel talk that the administration is close to announcing a new plan to avert foreclosure for possibly millions of struggling homeowners. She suggested that supporters of that approach were using the media to float their idea but that several options remain on the table with no decision or announcement imminent.


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End of Associated Press Release



Oct 29, 6:26 PM EDT


Bipartisan heat builds over use of bailout funds

By JOHN DUNBAR
Associated Press Writer



WASHINGTON (AP) -- Congressional leaders made clear Wednesday they do not want money from the financial industry bailout used to boost executives' pay.

New York's attorney general asked banks that are getting bailout dollars to turn over information about how they are spending money on executive bonuses.

The top House Republican and the Democratic leaders of the House and Senate sent letters to Treasury Secretary Henry Paulson after reports about how the $700 billion plan might be used.

"Funds made available under the economic rescue package should not be used to pay for bank acquisitions, raises and executive bonuses," wrote House Republican leader John Boehner of Ohio.

House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., wrote "to express concern about the level of compensation" for top executives at banks set to receive bailout dollars.

A day earlier, Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee, sought salary information from nine banks selected to receive $125 billion.

The Troubled Assets Relief Program was created as part of the bailout to buy devalued mortgage-backed securities from tottering banks to unclog frozen credit markets. But the legislation also gave the Treasury the power to make direct stock investments in financial institutions.

While the bailout legislation includes limits on compensation, Pelosi and Reid cited concerns about the direct investment program.

Treasury guidelines say participants must follow compensation restrictions contained in the law. Critics say the restrictions are weak. The law says executives should not have incentives to make risky investments. It also says an executive who receives a bonus based on false financial statements must repay it. Lastly, it says "golden parachutes" are not available for the top five executives of a company.

Several news organizations, including The Associated Press, have published stories saying that banks receiving funds from the bailout are using them to make acquisitions. They have also reported companies are going ahead with plans to pay dividends to shareholders and bonuses to executives.

Treasury spokeswoman Brookly McLaughlin said Wednesday that using the funds for acquisitions was within its broad goal of spurring more lending.

"It's in no one's interest to have unhealthy banks that are unable to play the role of lenders in the economy, who threaten the financial system," she said. "So it's possible and even appropriate if capital is used to create strong, healthy financial institutions."

In New York, Attorney General Andrew Cuomo said Wednesday that the bailout essentially has made taxpayers shareholders in the nine banks and they have a duty to be upfront with the public about huge bonuses.


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End of 2nd Associated Press Release

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