Paulson Defends ‘Flexibility’ of $700B Bailout Plan Set for House Vote Today

Legislation & Lobbying

Paulson Defends ‘Flexibility’ of $700B Bailout Plan Set for House Vote Today

Posted Sep 29, 2008, 08:05 am CST
By Debra Cassens Weiss

The Treasury Department will get sweeping authority under a bailout plan for the financial industry set for a House vote today.

Under the plan, Treasury Secretary Henry Paulson “would stand largely unfettered by traditional rules, largely unrestricted in his ability to spend $700 billion of federal money,” the Washington Post reports.

The department would be able to decide which assets to buy and how much to pay, and could hire firms to manage them without complying with contractor hiring rules, the story says. It would also have the authority to buy any kind of financial instrument, not just mortgages and mortgage-backed securities, the New York Times reports.

“Rarely if ever has one man had such broad authority to spend government money as he sees fit, with no rules requiring him to seek out the lowest possible price for assets being purchased,” the Times reports.

Paulson defended the plan in an interview with the Post. "We need confidence, and this is about confidence," he said. “We need flexibility, we need a variety of tools, we need to figure out how to get out there in weeks."

Two oversight panels would be created under changes to the original plan made after lawmakers voiced concerns. Another change requires financial institutions selling securities to the program to give the government an equity stake, although Paulson would have discretion to decide how large the stake should be.

The vote will come on the heels of an announcement this morning that another bank is being sold. Most of the assets and liabilities of Wachovia are being acquired by Citigroup for $2.2 billion.

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