A Bill Is Not A Handshake

Jeff Merkley visited Daily Kos and explained why he voted to allow Obama to have the 2nd half of the TARP money.

From the moment we were notified of the pending vote, I worked night and day to convince the Obama team to dedicate a large chunk of the funds directly to working families for mortgage relief. Millions of working families have already lost their homes and millions more are behind on their payments. It is time that Congress and the President immerse themselves in assisting these families.

Direct mortgage relief does three things. First, it restores the financial foundation for a family by replacing a scam mortgage with a fixed-interest 30-year loan at a fair rate. Second, if a family is on solid ground and can keep their home, it strengthens the neighborhood; empty foreclosed homes have a terrible effect on communities. Third, when a family is in a better position to make payments, or a loan is paid off, it strengthens the financial institution or pension fund that owns that loan [...]

The Obama team heard us. Mostly. You saw an evolution from the FDIC $25 billion plan to the possibility of doing $40-50 billion to the final commitment in writing to a minimum of $50 billion and up to $100 billion.

In addition, the Obama team committed to support bankruptcy reform, which is extremely important. Currently a judge can adjust the mortgage features for second homes (and yachts and planes and commercial investments) for the rich, but are barred from adjusting the mortgage interest rates or terms for mortgage loans held by working families. That’s outrageously unfair.

Here is Obama’s commitment:

"The Obama Administration will commit substantial resources of $50-$100 billion to a sweeping effort to address the foreclosure crisis. We will implement smart, aggressive policies to reduce the number of preventable foreclosures by helping to reduce mortgage payments for economically stressed but responsible homeowners, while also reforming our bankruptcy laws and strengthening existing housing initiatives like Hope for Homeowners."

That's all great. As I said initially, TARP as stimulus, saving people from foreclosure and removing $250,000 per home from hitting the greater economy, makes a lot of sense. But we shouldn't make policy on the honor system. We could have gotten it in writing. Congress could have fulfilled their obligation as holders of the purse strings to put restrictions on the funds. They shouldn't take anybody's word for it. It's a really bad precedent.

I just received confirmation from a congressional aide that Senate Banking Chair Chris Dodd will not introduce legislation in the Senate to mirror House Finance Chair Barney Frank's bill, HR 384, to provide increased conditions, transparency and oversight on the second $350 billion of the Wall Street bailout money (otherwise known as TARP).

All that was necessary to secure a seamless transition from the Bush bailout to the Obama bailout were two letters sent from Larry Summers to members of Congress. This is the same Larry Summers who, just last week, drafted a massive business tax cut for the stimulus package, which even moderate Democratic Senators found abhorrent. That tax cut was removed from the stimulus because, unlike anything that happens with TARP, one chamber of Congress can shoot it down with a simple majority vote. By comparison, for TARP to be stopped, a two-thirds majority was required from both branches of Congress.

Dodd's willingness to just trust the administration is, as Elena Schor noted earlier in the week, similar to the trust many Senate Democrats placed in the Bush administration when granting them authority to use military force in Iraq. Keep in mind that Dodd was one of the Democratic Senators who gave that authority to the Bush administration. While it can be safely said that there are good reasons to trust the Obama administration more than the Bush administration, HOPE and trust were abandoned as systems of government a long time ago.

I really would have liked to see a bill, not a handshake. That said, I'm happy that Merkley decided to engage instead of hide. His TV ads during the campaign railed against the bailout, and then he voted to release the money, and instead of ignoring the disconnect he explained it. That's more than we get from most lawmakers. It's not sufficient, but it's something.

David Sirota has more.