Gramm Says He Can Block Bailout

Sen. Phil Gramm (R-Tex.) squared off with House Democrats on Friday over how to finance a taxpayer bailout of the beleaguered savings and loan industry that could cost from $166 billion to $300 billion.

Gramm said that the bailout could send the American economy into a depression.

He said he has enough votes to block the thrift industry financing plan that the House insisted on Senate conferees accepting in approving the landmark rescue bill.

The House demanded that the financing plan be carried on the books of the federal government, which means it will have to be counted as part of the budget deficit. They said this will reduce by $4.5 billion, to $40 billion, the cost of issuing bonds to finance the bailout. Because the Treasury would issue the bonds, they would carry a lower interest rate.

“What the House Democrats propose is to substitute the taxpayer for the private industry, put the taxpayer at risk and drive up the federal budget deficit by $50 billion,” Gramm told reporters.

“They knew this was coming, they knew this was an issue that would produce a crisis legislatively,” Gramm said. “Quite frankly, we are engaged here in a game of chicken. It is not a game I sought.”

Gramm said: “They basically believe that we don’t have the votes to protect the budget process. Clearly a benefit to some political interest in Washington, D.C., is sought, and that interest is the interest of killing fiscal responsibility and unleashing massive new spending.”