Senator Christopher Dodd opened today's Senate Banking Committee hearing by offering deep concern over the bailout package proposal that's been put forth by U.S. Treasury Secretary Henry Paulson. During his opening remarks, Dodd criticized the underlying thinking behind the proposal, pointing out its lack of attention to taxpayers, its allowance of "golden parachutes" for CEOs, and its dearth of detail. Most importantly, however, Dodd squarely aimed a shot at Section 8 of the proposal, which stipulates that, under the plan, the Secretary's actions would be "non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."
"After reading this proposal," said Dodd, "I can only conclude it is not just our economy that is at risk but our Constitution as well."
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DODD: Barely 72 hours ago, Secretary Paulson presented a proposal that he believes, and others do as well, is urgently needed to protect our economy. This proposal is stunning and unprecedented in scope and lack of detail, I might add. It would allow the Secretary of the Treasury to intervene in our economy by purchasing at least $700 billion of toxic assets. It would allow the Secretary to hold on to those assets for years and to pay millions of dollars to hand-pick firms to manage those assets. It would do nothing in my view, to help a single family save a home, at least not upfront. It would do nothing to stop even a single CEO from dumping billions of dollars of toxic assets on the backs of American taxpayers. While at the same time do nothing to stop the very authors of this calamity to walk away with bonuses and golden parachutes worth millions of dollars. And it would allow the Secretary and his successors to act with absolute impunity without review of any agency or court of law. After reading this proposal, I can only conclude it is not just our economy that is at risk but our Constitution as well.
Nevertheless, in our efforts to restore financial security to American families and stability to our markets this banking committee has a responsibility to examine this proposal carefully and in a timely manner. In my view, any plan to address this crisis must embody three principles. First, American taxpayers must have some assurance that their hard-earned money is being used correctly and responsibly. Second, we must put in place proper oversight so the executors of this plan are accountable and their actions are transparent. Finally, we must address the root cause of this crisis by putting an end to the rising number of foreclosures sweeping our nation. Longer term, it is clear our current economic circumstances demand we rethink, reform, and modernize supervision of the financial services industry. Certain basic principles should form the foundation for reform. We need a leader in the White House that will ensure regulators are strong cops on the beat and do not turn a blind eye to reckless lending practices. We need to remove incentives for regulators to compete against each other for bank and thrift clients by weakening regulation. We need to ensure all institutions that pose a risk to our financial system and taxpayers are carefully and sensibly supervised. We need to accept the premise that consumer protection and economic growth are not in conflict with one another but inextricably linked. If we learn nothing else from this crisis, it is that the failure to protect consumers can cause the collapse of our largest financial institutions, loss of hundreds of thousands of jobs, and the draining of hundreds of billions of dollars of wealth from hard-working Americans.