Dennis Kucinich Investigates Treasury’s Blank Check

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


It looks like the Bush administration can create its own reality after all. Just this week Treasury Secretary Henry Paulson turned the $700 billion bailout from a program to purchase toxic assets from troubled financial institutions to one that will invest in banks. Understandably, this abrupt change of course angered members of Congress, who were now left to wonder if they’d been led astray in supporting the stimulus package. At a hearing on Friday, convened to examine the Treasury Department’s use of the bailout funds, lawmakers on both sides of the aisle vented their outrage. The question if whether their displeasure will make a dime’s worth of difference.

Displaying the range of congressional discontent, both Rep. Dennis Kucinich (D-Ohio), the chair of domestic policy oversight subcommittee, and Rep. Darrell Issa (R-Calif.), its ranking member, accused the Treasury of a “bait-and-switch” and questioned Neel Kashkari, the 35-year-old former Goldman Sachs banker selected by Paulson to supervise the bailout, about the sudden reversal.

In response, Kashkari explained that Treasury had “worked very hard with Congress” to negotiate the bailout bill, but as the financial crisis worsened in the weeks following the bailout’s passage, Paulson felt he “had to take very aggressive action.” And Kashkari assured the committee that his boss had only decided “late last week, earlier this week,” that the plan had to change. Issa, who voted against the bailout, suggested that the agency had planned all along to ignore the specific provisions of the bailout and instead wield the broad authority Paulson had originally demanded. “Congress is feeling you played a bait and switch game,” Issa said.

Fuming that Treasury had ignored congressional provisions in the bailout bill to buy troubled mortgage assets and help homeowners in jeopardy of foreclosure, Kucinich charged, “The Secretary just took some scissors and cut it out.” He also accused the administration of still relying on trickle-down economics to fix the financial crisis. “You have to get money into the grass roots. In your model you just have some trickle down and it never trickles down, everyone knows that.”

Kashkari, the interim assistant secretary for financial stability, remained remarkably calm and painstakingly polite in the face of tough questioning, often using phrases like “with deep respect” and “I understand your concern.” His demeanor won him some points—Rep. Brian Bilbray (R-Calif.) called him “probably the best spokesman the administration has.” Kashkari repeatedly stressed that if Treasury had spent the entire $700 billion buying home loans, they would have been able to buy about 3 million of them—a small fraction of America’s 55 million outstanding. By injecting money into the banks instead, the Treasury “influenced almost every loan in America,” Kashkari claimed. But the fundamental conflict remained. Congress had mandated one bailout, and Paulson and the Treasury Department are executing a different one.

“The legislation we asked for was to prevent a complete financial collapse,” Kashkari said. “We are every day trying to figure out how to stabilize the system so we can help everyone. My phone is ringing off the hook. But if we went out and helped everyone who needs it directly the $700 billion wouldn’t go far enough.” Kashkari said that’s why Treasury has to work from the top-down, helping banks first. Kucinich, who voted against the bailout, said he was confident Congress would never have approved it if lawmakers had known Paulson would change the plan. But the fact remains: the bailout is law. Perhaps Paulson got his blank check after all.

(The House Committee on Oversight and Government Reform, which contains Kucinich’s subcommittee, has been holding a series of hearings investigating the financial crisis. Mother Jones covered the hearings on Lehman Brothers, AIG, credit rating agencies, federal regulators, and hedge funds.)

WE'LL BE BLUNT

It is astonishingly hard keeping a newsroom afloat these days, and we need to raise $253,000 in online donations quickly, by October 7.

The short of it: Last year, we had to cut $1 million from our budget so we could have any chance of breaking even by the time our fiscal year ended in June. And despite a huge rally from so many of you leading up to the deadline, we still came up a bit short on the whole. We canā€™t let that happen again. We have no wiggle room to begin with, and now we have a hole to dig out of.

Readers also told us to just give it to you straight when we need to ask for your support, and seeing how matter-of-factly explaining our inner workings, our challenges and finances, can bring more of you in has been a real silver lining. So our online membership lead, Brian, lays it all out for you in his personal, insider account (that literally puts his skin in the game!) of how urgent things are right now.

The upshot: Being able to rally $253,000 in donations over these next few weeks is vitally important simply because it is the number that keeps us right on track, helping make sure we don't end up with a bigger gap than can be filled again, helping us avoid any significant (and knowable) cash-flow crunches for now. We used to be more nonchalant about coming up short this time of year, thinking we can make it by the time June rolls around. Not anymore.

Because the in-depth journalism on underreported beats and unique perspectives on the daily news you turn to Mother Jones for is only possible because readers fund us. Corporations and powerful people with deep pockets will never sustain the type of journalism we exist to do. The only investors who wonā€™t let independent, investigative journalism down are the people who actually care about its futureā€”you.

And we need readers to show up for us big timeā€”again.

Getting just 10 percent of the people who care enough about our work to be reading this blurb to part with a few bucks would be utterly transformative for us, and that's very much what we need to keep charging hard in this financially uncertain, high-stakes year.

If you can right now, please support the journalism you get from Mother Jones with a donation at whatever amount works for you. And please do it now, before you move on to whatever you're about to do next and think maybe you'll get to it later, because every gift matters and we really need to see a strong response if we're going to raise the $253,000 we need in less than three weeks.

payment methods

WE'LL BE BLUNT

It is astonishingly hard keeping a newsroom afloat these days, and we need to raise $253,000 in online donations quickly, by October 7.

The short of it: Last year, we had to cut $1 million from our budget so we could have any chance of breaking even by the time our fiscal year ended in June. And despite a huge rally from so many of you leading up to the deadline, we still came up a bit short on the whole. We canā€™t let that happen again. We have no wiggle room to begin with, and now we have a hole to dig out of.

Readers also told us to just give it to you straight when we need to ask for your support, and seeing how matter-of-factly explaining our inner workings, our challenges and finances, can bring more of you in has been a real silver lining. So our online membership lead, Brian, lays it all out for you in his personal, insider account (that literally puts his skin in the game!) of how urgent things are right now.

The upshot: Being able to rally $253,000 in donations over these next few weeks is vitally important simply because it is the number that keeps us right on track, helping make sure we don't end up with a bigger gap than can be filled again, helping us avoid any significant (and knowable) cash-flow crunches for now. We used to be more nonchalant about coming up short this time of year, thinking we can make it by the time June rolls around. Not anymore.

Because the in-depth journalism on underreported beats and unique perspectives on the daily news you turn to Mother Jones for is only possible because readers fund us. Corporations and powerful people with deep pockets will never sustain the type of journalism we exist to do. The only investors who wonā€™t let independent, investigative journalism down are the people who actually care about its futureā€”you.

And we need readers to show up for us big timeā€”again.

Getting just 10 percent of the people who care enough about our work to be reading this blurb to part with a few bucks would be utterly transformative for us, and that's very much what we need to keep charging hard in this financially uncertain, high-stakes year.

If you can right now, please support the journalism you get from Mother Jones with a donation at whatever amount works for you. And please do it now, before you move on to whatever you're about to do next and think maybe you'll get to it later, because every gift matters and we really need to see a strong response if we're going to raise the $253,000 we need in less than three weeks.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate