In perusing the amendments that have passed and failed thus far in the House Financial Services Committee's systemic risk regulatory proposal, I came across an interesting one. Rep. Erik Paulsen (R-MN) wanted to allow the Treasury's authority to conduct the bank bailout expire on December 31, 2009, as scheduled. His amendment would have eliminated the Treasury's ability to request that its power is extended. The amendment was rejected yesterday, but I think that's meaningful.
The amendment (.pdf) sought to eliminate a sub-section from the "Emergency Economic Stabilization Act of 2008," (.pdf) the legislation that gave birth to the bank bailout. Here's what Paulsen wanted to strike:
(b) EXTENSION UPON CERTIFICATION.--The Secretary, upon submission of a written certification to Congress, may extend the authority provided under this Act to expire not later than 2 years from the date of enactment of this Act. Such certification shall include a justification of why the extension is necessary to assist American families and stabilize financial markets, as well as the expected cost to the taxpayers for such an extension.
If you kill that clause, the Treasury's bailout authority would end this year. Instead, leaving it in implies that Congress is comfortable providing the Treasury with more time to conduct its bailout activities with the $700 billion slush fund. The vote was 30 to 37, largely along party lines with 27 Republican ayes, 3 Democrat ayes, 36 Democrat Nays and 1 Republican Nay.
The rejection of this amendment appears to indicate that Congress will support the bailout program's extension if and when the Treasury Secretary makes the request. I think you'll see the vote to do so along similar party lines. Republicans likely believe that, although the hard economic times drag on, the financial crisis is over; thus, the Treasury doesn't need bailout authority any longer. Democrats probably don't see the harm in allowing their Treasury use of these emergency funds until it's clear that the economy is out of the woods.
I see both sides of the argument on this one. While it's easy to say that the Treasury could just request new bailout powers if necessary, politically that might be easier said than done. Bailouts have become politically toxic, and it's easier to extend an already existing authority than grant a new one.
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