White House Defends Billions To Banks

Bipartisan Congressional Criticism Aimed At Possible Use Of Funds To Reward Executives

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

Ed Lazear, chairman of the Council of Economic Advisers, said the government is keeping close tabs on the way banks use bailout dollars to "make sure that there are not abuses." But he said that normal activities of banks, such as paying performance-related salaries or distributing dividends or even purchasing other banks are allowed under the law Congress passed creating the bailout program.

Members of the Democratic-controlled Congress, including some Republicans, have questioned the program in the wake of reports that banks receiving funds through the newly enacted rescue plan are going ahead with plans for dividends, bonuses or acquisitions. Lawmakers are asking why banks with the money to do those things need taxpayer-funded help.

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 Treasury Department has now decided to use the bulk of that money to make direct stock investments in financial institutions, believing that could work better - or quicker - to get normal lending practices going again.

The rescue legislation included some limits on executive compensation. And it does not allow institutions receiving the money to increase dividends. Lazear said that Treasury officials will make sure those requirements are met.

But he also suggested that the government would go no further in placing conditions on banks in the program. Lazear said that to do so may hamper their voluntary participation, and may also dampen the kind of free-market flexibility the administration believes will work best to get credit moving again.

Instead, he said that incentives in the program as well as free-market realities will result in the program's success. For instance, the law requires that banks pay "quite significant dividends" to the government, meaning they have every reason to start lending again to make the kind of money necessary to both make a profit and to pay back Washington. The law requires a quarterly 5 percent dividend to the government that increases to 9 percent after three years.

"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. She noted that "not only rich people get dividend payments," which can form a significant portion of income for retirees and mutual funds.

"I want to make sure people understand that a lot of people could suffer if they don't have dividend payments," Perino said.

On executive pay, she said that participating banks are complying with the law's requirements. Under the law, an executive who receives a bonus based on false financial statements must repay it. The law also says that "golden parachutes" are not available for the top five executives of a company.

"I'm not here to defend Wall Street," Perino said. "I'm not here to defend their pay practices. But this is the law as it was set out, that was passed by Congress."

[ricklf1]

If you or I want to blame someone for the ROOT CAUSE of this problem....look in the mirror! Our laid-back attitude over the past 4 decades in this country allows "OUR" Government to be dictated to and "PAID FOR" by Bankers and Wall street Fat Cats. If you and I don''''''''t stand up and say "NO MORE", than your children and grandchildren will suffer in their adult lives as "ECONOMIC SLAVES" YOU MUST GO OUT AND VOTE!!!

[sport2069]

Yes , when we pay the very persons which are making millions and billion in salary already which are responsible for this corruption and like Enron and the rest of Bush''s administration will never be prosecuted..
JUST EXPLAIN HOW they deserve for Americans to pull their salary on a credit card for the Americans citizens to owe countries like China.....
Bush has empty our treasury before he leaves office..
Exxon make a nice profit , why are they not paying their share..''
I am sick and tried of the elitist telling how they are paying their share , when Americans don''t have jobs or wages tp pay for their own living expenses..

[riddelup]

Bush was not by himself in this massive wealth transfer called a bailout.

[sigotratando]

This "bailout" is a stunning example of the ''trickle down'' philosophy. And that money was supposed to have been given out in order that these institutions begin loaning asap. So, I don''t mind if it goes to the executives & such AS LONG AS these people get to loaning it to the people it is meant to help, and interest goes to paying it back to the government. This just sound so weird: robbing Paul to loan to Paul.

[liberalme]

Merry Christmas from George W Bush to all his loyal wealthy Wall St supporters, the final BIG bonus!!

[nler1]

Let the banks pay that money back before Christmas, the whole crisis was just another dirty trick of the Bush-maffia

Lock them up en execute that scum

[messiahx4eve]

All you "Joe the plumbers" out there better get your hipwadders on and prepare for some deep waters, IF insane mccain/failin''palin make it to office, you will be eating the raw sewage of the republican party for FOUR MORE YEARS. Hmmmm, how come ole dubya is not out there patting mcstupid on the back and telling America how great he is? Surely people cannot be this stupid as to forget the past EIGHT YEARS of failed policies and WHO the biggest terrorist REALLY is, can they?

[airboatboy1]

Let''s just make sure we all pay our taxes. Our fine government might need some more money in the future.

[eus109937]

Republicans have turned us into the largest Socialist nation in the world. Taxpayer money to banks, insurance companies, Savings & Loans, and Wall St. Investment firms.
Stop the madness of Republicans; vote the bums out!
Give the money to us the taxpaying consumers, it is our money to begin with.

[scallywag8]

This is flat out theft of America. They are literally robbing us. The President is a Criminal!!! and needs to have his sorry A** exiled from this country. Traitor Traitor Traitor!!!!

[dburfears]

Here we go again. The Republicans have turned the rescue plan into a GIVEAWAY for their FRIENDS.

When will the American People get it? The Republicans are all about their CORPORATE and RICH FRIENDS. They don''t give a d*MN about you. McCain is just another face telling you to "TRUST US ONE MORE TIME" while they giveaway the country to these criminals.

[tincup356]

Are you people ready to start a middle class party so we can outnumber the two evil parties we have now?

[tincup356]

Nothing would please me more than to watch a whole lot of congressmen standing in the unemployment line like they have caused many Americans to do.

[tincup356]

to vote and think that Obama will fix things ia a bad idea, to fix things , we need to get rid of all the one in congress that have A, voted for the SELLOUT, B.anyone who has received lobby dollars from anyone getting SELLOUT money C. stop the war and come home, it was a lie to go into the mess and we all know it, why continue? D.let wall st. and the banks fail, they were the ones who tried to manipulate the system with unethical practices approved by CONGRESS. we should ship them to gitmo and get the trial started so they can be found guilty and start paying restitution.

[jsutaguy]

Dana Perino is not really what I would call the sharpest tool in the tool kit particularly on economic policy. She is a parrot for an incompetent administration. Republican deregulation policies are responsible for this Wall Street bailout and subprime mortgage meltdown. Look at the disastrous deregulation allowing credit default swaps. The banks pushed for this deregulation and now that it went bust all the rest of us get the bill. Certain players made billions of dollars out of this mess.

So what if the Fed lowered the prime rate to 1.0%. Mortgage rates are still going up for borrowers approaching 6.5% to nearly 7.0%. Credit card interest is at 12% to 18% even higher when hidden fees and surcharges are added in. When is the average mortgage holder or credit card holder going to get a break from unchecked corporate greed? The bankruptcy laws have been rigged to favor the creditor especially Big Banks. Explain how anyone working a $10 or $15 per hour job is supposed to stay out of debt? Rent is outrageous, health insurance, food, college tuition, car expenses all have increased at nearly double digit rates. I am real sick and tired of these Republican SOB''''s supporting Wall Street. Middle class people are being financially pillaged by the policies of the Bush Administration. I hate and despise this Republican rip-off economics. Vote Obama-Biden, God help all of us if McCain and that idiot Palin come to power.

[jsutaguy]

This is *ANOTHER* outrage....well run banks received no money from the Fed because they didn''t need it, but now, because of the fraud committed by Goldman Sachs, Bear Sterns, Morgan Stanley, Merrill Lynch, etc.....smaller banks have had their stocks destroyed....driven to new lows...many because THEY BOUGHT THE FANNIE MAE AND FREDDIE MAC PREFERRED STOCK, and NOW THEY WILL BE TAKEN OVER BY THE SAME CORRUPT BANKS THAT CAUSED THE FANNIE/FREDDIE COLLAPSE!!

I can G-U-A-R-A-N-T-E-E you I will pull every nickel I have out of any bank that is bought by one of these Treasury paid off crony banks.

This is just so fu cking WRONG!

[incog-nito]

Let''s see: This administration opposes proposals to help homeowners in distress, but defends bonuses for bank executives responsible for this mess in the first place.

Now we know what their priorities are, loud and clear.

[tincup356]

One reason the bailout passed on the second try was that the White house threatened the use of martial law if they voted it down the second time.Its time to march on Washington and jail all of them that voted for the SELLOUT.

[tincup356]

Blame congress , they knew up front , that no stipulations could be made after giving the money, also no recourse by any court could come back on those who got the money.Stupid congressmen jumping right on time to bushes call just like they did when they voted to go to war.When are the people of this country going to make the connection....We are not represented in congress , however, Corporate America Is represented ...they paid for it up front in the form of lobby dollars.Now they are getting at least 700 billion,I suspect that number will double after the election, when its too late to do anything.Thank you to all the party line voters who have brought us this wonderful two party system of crooks and crooks.

[jerr11]

First the GOP spread American taxpayers wealth to Iraq, so far, $1 trillion flushed down that ******** (mostly into the Halliburton cesspool).

Now, they''re spreading American taxpayers money to their rich fat cat friends om Wall Street.

How much have the GOP looted from the US treasury in the past 8 years?

No wonder Bush has made plans to hide away in Paraguay with his 99,000 acre ranch.

That''s where German Nazis went to hide.

That''s where US neocons are planning to hide.

No extradition treaty there.