Gingrich Calls on Obama to End Bailouts

/PRNewswire-USNewswire/ -- Former Speaker of the House Newt Gingrich today called on the Obama administration to abandon the strategy of bailing out failing companies, and instead insist that companies choose bankruptcy or receivership as the only way to restore a sense of order and fairness to the economic system.

This includes AIG, who recent reports suggest is going to need another bailout even while rewarding its executives $165 million in bonuses.

In his weekly newsletter for HumanEvents.com, The Newt Gingrich Letter, Gingrich writes about the outrage over the bonuses being paid to AIG executives:

"The cure for our outrage is not merely, as President Obama is demanding, that AIG be prevented from paying its executives... Nor is it acceptable to ask Americans to keep throwing their tax dollars at failed companies and their leaders.

The answer is an old fashioned one: AIG should choose between receivership or bankruptcy. It should not be allowed to choose more bailouts from the taxpayer."

Gingrich continues:

"Thanks to the Bush-Obama-Geithner policy of bailing out failing companies, we now have the worst of all possible scenarios: A taxpayer subsidized, government supervised private company; an unsustainable public/private hybrid that is too public to make its own decisions and too private to be responsible to the taxpayers that are keeping it alive.

"Outrages like the fat cat bonuses currently dominating the headlines will only continue as long as the rule of politicians supplants the rule of law on Wall Street.

"Bankruptcy would replace the rule of politicians over U.S. financial institutions with the rule of law."

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House Republicans Press Treasury Secretary Geithner for TARP “Exit Strategy”

House Republican leaders today wrote to Treasury Secretary Timothy Geithner, inquiring about the Obama Administration’s “exit strategy” from the Troubled Assets Relief Program (TARP). The letter comes as Geithner and other Administration officials are determining how to use the second $350 billion installment of TARP funds President Obama requested last month and whether to request additional taxpayer funds beyond the initial $700 billion authorized last year.

“Because the Administration has committed itself to assisting the auto industry, satisfying commitments made by the previous Administration, and devoting up to $100 billion to mitigate mortgage foreclosures, it has been reported that President Obama might need more than the $700 billion authorized by the Emergency Economic Stabilization Act (‘EESA’) to fund a ‘bad bank’ to absorb hard-to-value toxic assets,” wrote the leaders. “In light of these commitments – which come at a time when the Federal Reserve is flooding the financial system with trillions of dollars and the Congress is finalizing a fiscal stimulus that is expected to cost taxpayers more than $1.1 trillion – it is not surprising that the American people are asking where it all ends, and whether anyone in Washington is looking out for their wallets.”

Specifically, the leaders asked Secretary Geithner to provide answers to six questions before the Administration determines the next steps for the TARP program, including:

1. How does the Administration plan to maximize taxpayer value and guarantee the most effective distribution of the remaining $350 billion of TARP funds?

2. How is the Administration lending, assessing risk, selecting institutions for assistance, and determining expectations for repayment?

3. Will the Administration opt for a complex “bad bank” rescue plan? How can the “bad bank” efficiently price assets and minimize taxpayer risk? Will financial institutions be required to give substantial ownership stakes to the Federal government to participate in the program?

4. Is a “bad bank” plan an intermediate step that leads to nationalizing America’s banks?

5. Can you elaborate on your plans for the use of an insurance program for toxic assets? Specifically, will you seek to price insurance programs to ensure that taxpayer interests are protected? If so, how will you do so?

6. What is the exit strategy for the government’s sweeping involvement in the financial markets?

“Indeed, a bipartisan majority of the House – 171 Republicans and 99 Democrats – recently expressed the same concerns, voting to disapprove releasing the final $350 billion from the TARP,” the leaders concluded. “As we noted in our December 2, 2008 letter to then-Secretary Paulson and Chairman Bernanke, we realize that changing conditions require agility in developing responses. However, the seemingly ad hoc implementation of TARP has led many to wonder if uncertainty is being added to markets at precisely the time when they are desperately seeking a sense of direction.”

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