Congressional Democrats are working hard to insert their own provisions into Hank Paulson’s rescue plan. The key additions the Democrats want to append are:
- provisions for greater oversight of the Treasury Department,
- A law that would allow many homeowners to renegotiate the terms of their home loans with lenders, and,
- a “claw-back” provision which would allow regulators to force firms participating in the program to recoup lavish pay packages to senior executives.
Democrats said the plan would need to provide more specific relief for troubled homeowners. They said the program, which the administration proposed to be run by Treasury, would have to be more accountable to Congress. And they said that the plan must restrict the compensation of corporate executives from companies that make use of the program to sell the burdensome securities on their balance sheets to the United States.
“We need to offer some assurance to the American taxpayer that Congress is watching,” Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the banking committee, told reporters on Sunday. “One of the things that got us into this mess was the lack of accountability and the lack of oversight that was occurring, and I don’t think we want to repeat those mistakes with a program of this magnitude.”
Paulson, appearing on the Sunday talk-show circuit, cautioned that bill shouldn’t be so punitive as to discourage participation–and that restrictions on executive pay would do this:
But Mr. Paulson said that he was concerned that imposing limits on the compensation of executives could discourage companies from participating in the program.
“If we design it so it’s punitive and so institutions aren’t going to participate, this won’t work the way we need it to work,” Mr. Paulson said on “Fox News Sunday.” “Let’s talk about executive salaries. There have been excesses there. I agree with the American people. Pay should be for performance, not for failure.”
But he quickly added: “But we need this system to work, and so we — the reforms need to come afterwards.”
Republicans, meanwhile, focussed on measures that would protect taxpayers, and are insisting on a provision that any profits realised under the program would be returned to the treasury.
The composition of the final bill remains uncertai. With Congress approval ratings near historic lows, and an election coming up this November, you can bet that Congress will be eager to appear proactive, which means both houses will likely to be in a far more accommodative mood than usual.
Business Insider Emails & Alerts
Site highlights each day to your inbox.