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Sanders on Bailout: “Let Paulson and His Friends Pay For It.”

The Senate will vote this evening on some version of Treasury Secretary Hank Paulson's proposal to bail out bad bankers with a massive infusion of taxpayer dollars into the nation's troubled financial system.

As with the House vote Monday, the Senate vote will be a mess, with members voting on a proposal that is in constant flux.

A few senators are asking the right questions.

John Nichols

October 1, 2008

The Senate will vote this evening on some version of Treasury Secretary Hank Paulson’s proposal to bail out bad bankers with a massive infusion of taxpayer dollars into the nation’s troubled financial system.

As with the House vote Monday, the Senate vote will be a mess, with members voting on a proposal that is in constant flux.

A few senators are asking the right questions.

Like Ohio Congresswoman Marcy Kaptur in the House, Vermont Senator Bernie Sanders has taken the lead in challenging the spin from the White House and party leaders.

Here is the latest take on the struggle from the office of the independent senator:

Senate leaders pressed ahead with plans for a Wednesday vote on a $700 billion Wall Street bailout bill that was rejected Monday by the House of Representatives in a close, dramatic vote. “We’re all committed to keeping the progress on this rescue package moving forward,” Senate Majority Leader Harry Reid told other senators. “Given the very serious problems we have in the economy,” Senator Bernie Sanders said, “what is most important is we get it right, so that two weeks from now or two years from now we are not in the same position we are in today.”

Sanders has said that if the Congress concludes that it is necessary to pass the greatest government intervention in history, the cost of a bailout should not be shouldered by the middle class “given the fact that the middle class is declining while the wealthiest people in this country have made out like bandits during the years President Bush has been in office.”

Among the wealthiest Americans are the tycoons that ran many of what’s left of the Wall Street financial institutions lining up for bailouts.

One of them is now the Treasury secretary, Henry Paulson. He was chief executive of the Wall Street financial behemoth Goldman Sachs. In 2005, Paulson received a $38 million bonus. At the time, it was the largest bonus ever given to a Wall Street CEO.

Sanders has argued — to Paulson and others — that those who caused the problem and stand to benefit the most from a government rescue should be the ones to pay for any bailout. The senator has suggested a five-year, 10 percent surtax on individuals making more than $500,000 a year and couples with incomes of more than $1 million. The surtax would yield $300 billion to cover losses the government could incur when it resells troubled mortgages it acquires from banks.

If a bailout is urgently needed, Sanders said, “Let Mr. Paulson and his friends pay for it, not people in Vermont making $30,000 a year.”

Sanders also called for a major economic recovery package to put Americans to work at decent wages, a return to stronger regulation of businesses, and the breakup of giant corporations like those that got the country and Wall Street into the crisis. “If a company is too big to fail, it is too big to exist,” Sanders said.

In addition, Wisconsin Senator Russ Feingold is refusing to join in the official wringing of hands in Washington and on Wall Street about Monday’s surprise decision of the House to reject the proposed $700 billion bailout plan.

Of course, the maverick Democrat is concerned about the turbulence in the banking and insurance industries.

But he believes that the House vote created an opening to develop a better plan. And the Wisconsin Democrat is proposing some priorities for doing so.

“(Monday’s) vote on the bailout proposal in the House of Representatives gives Congress an opportunity to address the major flaws in the proposal,” the senator said on Tuesday. “We can do so and still act in an expedited manner.”

The third-term senator, who often has been at odds with the Capitol consensus with regard to financial issues, is offering a list of specific ideas about how to improve the proposal.

“First, the negotiators should offset the cost of the proposed bailout so that taxpayers don’t get saddled with it. There are plenty of proposals out there that can be considered, including asking Wall Street to bear at least some of the cost,” says Feingold.

“Second, negotiators should add meaningful provisions to help families facing foreclosure. This is more than just a matter of fairness – the housing crisis is the root cause of the credit market collapse, and unless we address it, any rescue package is far less likely to work,” Feingold continues. “Finally, negotiators must address the deeply flawed regulatory structure that paved the way for this crisis. The administration and others have said such reforms must wait for another day, but once a rescue package is enacted, we lose the leverage needed to enact tough reforms to get the financial sector to clean up its act, and we risk having to deal with this same mess all over again.”

John NicholsTwitterJohn Nichols is a national affairs correspondent for The Nation. He has written, cowritten, or edited over a dozen books on topics ranging from histories of American socialism and the Democratic Party to analyses of US and global media systems. His latest, cowritten with Senator Bernie Sanders, is the New York Times bestseller It's OK to Be Angry About Capitalism.


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