Bailout Nation? Senator asks, “Where do you stop?”
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The federal government’s unprecedented run of huge bailouts may be just beginning -- the auto industry is lobbying for up to $50 billion in federal loans, and talk swirled in Washington Tuesday of yet another massive bailout, this one to create a new federal agency to unburden banks of hundreds of billions of dollars’ worth of toxic mortgage securities.
The New York Times reports the new agency -- loosely modeled after the Resolution Trust Corp. formed after the Savings & Loan crisis -- would put taxpayers at risk for ‘hundreds of billions of dollars’ in bad assets: ‘The issue is whether Congress, after the election, should create a more formal and accountable mechanism, such as a federal agency, that would provide a relief valve for the troubled assets now causing havoc on Wall Street.’
And there may be more. The Los Angeles Times reports tonight that the next president ‘is likely to face further demands for assistance from mortgage lenders, home builders, automakers and other struggling industries.’ Writing in the Wall Street Journal in opposition to the loan program for Detroit, Paul Ingrassia wrote, ‘If we bail out Detroit, where do we stop? The newspaper industry is in financial trouble because more readers and advertisers are turning to the Internet.’
Bailout backlash, a staple of housing blogs for over a year -- even before the bailouts actually began -- appears to be spreading. One of the first in Washington to leak word of the coming AIG bailout Tuesday was Sen. Richard Shelby of Alabama, who made clear that he opposed the move. ‘Where do you stop?’ Shelby asked. ‘Where do you draw the line?’’
The McCain and Obama presidential campaigns both argued against a bailout for AIG Tuesday morning, even before the Bush administration reversed course and came to the company’s rescue. ‘No, I do not believe that the American taxpayer should be on the hook for AIG, and I’m glad that Secretary Paulson is apparently taking the same line,’ Sen. John McCain said. ‘We cannot have the taxpayers bail out AIG or anybody else.’
Still, both McCain and Sen. Barack Obama have supported the Detroit automaker’s campaign for $25 billion in low-interest federal loans.
--Peter Viles
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