Local legislators, experts opposed bailout bill

LIMA - It may have been the biggest financial bailout in U.S. history, but it wasn't big enough to make everyone happy.

After more than a week of back-and-forth on exactly what action is needed to bandage a bleeding Wall Street, congressional leaders and the administration finally came to an agreement on a package. However, the House voted down the plan Monday with a 228-205 vote.

U.S. Rep. Jim Jordan, R-Urbana, cast one of those ‘no' votes. The 4th District Republican admitted he liked the latest plan better than previous incarnations, but still couldn't bring himself to vote for it.

"I feel better about the plan, but it's still way too much government," Jordan said. "There are ways to address it through the free market versus putting $700 billion, close to three-quarters of a trillion dollars, of taxpayer money at risk."

Jordan, along with 5th District U.S. Rep. Robert Latta, R-Bowling Green, and other House conservatives, spent much of the past week pushing for changes they believe would help the market sort itself out without the massive influx of government cash. Those included changes to accounting rules and a reduction in capital gains taxes.

"I, and many members of the House, feel we should address it in a free market, free enterprise sort of way," Jordan said.

Like Jordan, Latta voted against what he said was a "tremendously improved" bill Monday. He said he is hoping with more time they can come up with something better.

"This bill took an unnecessary, expedited track through the legislative process. Because of this legislative fast track, there are still many unanswered questions and provisions within the bill that I cannot support," Latta said.

The 110-page plan before the House on Monday was a change from the three-page document Treasury Secretary Henry Paulson presented a week ago. The biggest changes include the addition of congressional oversight, restrictions on compensation for the executives of those companies who take the federal money, and a plan to assure that taxpayers are eventually reimbursed by the companies for any losses.

Those last two points make the legislation more palatable, according to Jonathan Andrea, an assistant professor of Economics at Bluffton University.

"The original Paulson plan, I think, was a very bad plan. It was basically a pure giveaway to Wall Street there was no upside for taxpayers. A lot of the money would have just gone to shareholders and the people that got us into the mess in the first place," Andrea said. "The new plan that Congress has been developing is better. It does two things that are important in reducing the moral hazard involved."

The primary positive in the congressional plan is that it gives taxpayers an equity stake in the companies receiving the cash. That means, if or when the day comes that they make money, we're first in line to get it back.

"It also means that some of the punishment goes to the shareholders and the owners, and it gives the taxpayers some of the upside to the deal," Andrea said.

While Monday's plan was better than Paulson's first shot, it wasn't good enough to pass. Jordan said he would prefer to see a deal that keeps government's role to a minimum. Andrea would go the other way.

"I'd rather see them follow the model of what Sweden did in '92, a full-out socialization. They saw their markets failing and government moved in and put companies back on their feet. It's the same thing we did in the Great Depression," Andrea said.

Andrea admits it is unlikely a Sweden-style plan would make it through Paulson or the House.

"Paulson is a man of Wall Street and in four months he's going to be back there. I'm not sure they could pass a bill that would be less beneficial for Wall Street," Andrea said. "I don't know that there's a better deal that's politically workable."