Kucinich leads Hearing that grills Neel Kashkari about Treasury Dept’s use of bailout funds Category: News and Politics

Treasury Bailout Revamp Subject Of Contentious Hearing

(RTTNews) - The Treasury Department's use of the $700 billion financial rescue package was the subject of a contentious hearing on Capitol Hill Friday.

Led by Chairman Dennis Kucinich (D-Ohio), members of the House Oversight Committee's subcommittee on domestic policy grilled the Treasury Department's Interim Assistant Secretary for Financial Stability Neel Kashkari on the restructuring of the bailout plan.

Kashkari attempted to deflect criticism, telling the committee, "Our system is stronger and more stable than just a few weeks ago."

However, a panel of angry representatives accused him of playing "ring around the rosie" with their questions.

Ranking member Darrell Issa (R-CA) was particularly harsh, telling Kashkari, "You're here because Congress feels you played a bait-and-switch game," adding that representatives would remain skeptical to the Treasury's motives.

The Treasury Department came under scrutiny earlier this week following the revelation that it no longer plans to buy troubled mortgage-related assets from banks with the $700 billion financial relief package created last month.

The move explicitly abandons the original intention of the rescue bill, with Treasury Secretary Henry Paulson changing the focus of the relief program to other areas.

In a press conference, Paulson revealed that the government would now focus on building capital in financial institutions, finding ways to support consumer access to credit and looking at ways to ease mortgage foreclosures.

The program might also be expanded to include lightly regulated non-bank financial institutions, the Treasury secretary said, though he noted that this would bring up challenges in protecting taxpayer money.

In his opening remarks, Kucinich berated the decision to completely alter the focus of the bailout.

"Secretary Paulson's policy reversal breaks with Congressional intent, contradicts public assurances previously made by Treasury, and leaves the federal government without an adequate mechanism to stem a tide of home foreclosures," he said.

"Thus, the only significant use by Treasury of the funds Congress authorized to address the mortgage crisis underlying the financial crisis includes, among other things, propping up a Beverly Hills banker to the stars; subsidizing the evisceration of National City Bank and the laying-off of thousands of Clevelanders who worked there; and indirectly funding the payment of bonuses, compensation, and dividends by financial firms that could not have afforded to make them without the TARP capital infusion," Kucinich continued.

He added that Congress would have not passed the Emergency Economic Stabilization Act if it had known that the Treasury would so drastically restructure the package. Both Kucinich and Issa voted against the first and second versions of the EESA.