CNN ignores GOP contradiction in criticizing Geithner's proposal as "power grab"

››› ››› LILY YAN

In reports on the budget blueprint offered by House Republicans, CNN did not note that the plan includes a proposal to give the federal government authority to take over failing nonbank financial institutions -- a proposal similar to one presented by Tim Geithner, for which he was sharply criticized by those same House Republicans.

During several reports in recent days on Treasury Secretary Timothy Geithner's proposal for Congress to pass legislation allowing the federal government to take over failing nonbank financial institutions, CNN has cited House Republicans' characterization of the proposal as a power grab, including House Minority Leader John Boehner's (R-OH) charge that the proposal constitutes "an unprecedented grab of power." However, in its reports on the budget blueprint that House Republicans, led by Boehner, released on March 26, CNN did not note that Republicans also proposed giving the federal government authority to take over financial institutions.

On the March 24 edition of CNN Newsroom, congressional correspondent Brianna Keilar stated, "[S]ome Republicans [are] raising concerns with the Treasury secretary -- if that isn't then ripe for some abuse of power, turning over too much control to the Treasury." Later that day on The Situation Room, host Wolf Blitzer stated, "The Obama administration wants powers never before seen. The Treasury secretary and the Federal Reserve chief argue it's absolutely necessary right now to contain economic damage should a financial company collapse. Republicans, though, say it's an outright power grab." Both CNN Newsroom and The Situation Room aired Boehner's remarks on Geithner's proposal: "This is an unprecedented grab of power. And before that occurs, there ought to be a real debate about whether we should give that authority to the Treasury secretary."

Additionally, on the March 26 edition of The Situation Room, senior correspondent Allan Chernoff stated of Geithner's plan, "Some congressmen fear the Treasury secretary wants to become Big Brother," before airing a clip of Rep. Don Manzullo (R-IL) asking Geithner at the House Financial Services Committee hearing, "Do you realize how radical your proposal is? ... Oh, it's absolutely -- you're talking about seizing private businesses, and you don't consider that to be radical?" That night on Lou Dobbs Tonight, Keilar reported that "[A]ll of this talk about so much government involvement in the private sector had many Republicans very squeamish today. Fearful that the government would overreach, stifle these corporations, these big banks and financial firms and that ultimately it could have the adverse effect of hurting the economy instead."

However, during those same (March 26) editions of The Situation Room and Lou Dobbs Tonight, reports by senior congressional correspondent Dana Bash and host Lou Dobbs on House Republicans' budget blueprint did not note, as Media Matters for America has documented, that the House Republican budget blueprint -- signed by Boehner -- states that "our plan supports a process to address insolvent institutions that stops throwing good money after bad into failing institutions and places insolvent ones into temporary receivership":

Republicans believe the best antidote for market turmoil is certainty and economic growth. We oppose the trend toward national ownership and control of financial institutions. The government's interventions to date have generated market uncertainty and an aversion to private lending and investment. The government's strategy needs to minimize government interference in the management of companies and provide a clear exit strategy.

The Republican budget ends this failed bailout strategy by refusing to assume additional spending for bailouts. In addition, our plan supports a process to address insolvent institutions that stops throwing good money after bad into failing institutions and places insolvent ones into temporary receivership. Our plan would first perform a thorough stress test to determine whether a financial institution is healthy, troubled, or insolvent. For troubled firms, some portion of the firm's toxic assets would be insured, but such insurance would be self-financed by the industry itself in the form of premiums. For insolvent firms, either the FDIC or a Resolution Trust Corporation-type entity would restructure these firms in receivership by selling off their assets and liabilities, reappointing private management, while protecting depositors -- a process that builds off of Washington Mutual's arranged sale last year.

In prepared remarks for his March 24 testimony to the House Financial Services Committee, Geithner stated: "The Administration proposes legislation to give the U.S. government the same basic set of tools for addressing financial distress at non-banks as it has in the bank context," including the ability for the government to act "as a conservator or receiver":

As we have seen with AIG, distress at large, interconnected, non-depository financial institutions can pose systemic risks just as distress at banks can. The Administration proposes legislation to give the U.S. government the same basic set of tools for addressing financial distress at non-banks as it has in the bank context.

The proposed resolution authority would allow the government to provide financial assistance to make loans to an institution, purchase its obligations or assets, assume or guarantee its liabilities, and purchase an equity interest.

The U.S. government as a conservator or receiver would have additional powers to sell or transfer the assets or liabilities of the institution in question, renegotiate or repudiate the institution's contracts (including with its employees), and prevent certain financial contracts with the institution from being terminated on account of the conservatorship or receivership.

This proposed legislation would fill a significant void in the current financial services regulatory structure with respect to non- bank financial institutions. Implementation would be modeled on the resolution authority that the FDIC has under current law with respect to banks.

Before taking any emergency action, the Treasury Secretary would need to determine that resolution authority is necessary upon the positive recommendations of the Federal Reserve Board and the appropriate federal regulatory agency.

Media Matters also previously noted that a nearly 1,000-word CNN.com article on the Republican proposal quoted Boehner's criticism of the president's budget as "completely irresponsible" but did not mention that the proposal Boehner is pushing includes a plan for federal authority that he previously denounced.

From the noon ET hour of the March 24 edition of CNN Newsroom:

KEILAR: But the real headline today, [anchor] Betty [Nguyen], is that Treasury Secretary Tim Geithner, here in this hearing, asking Congress to give the Treasury Department, to give the federal government, unprecedented power when it comes to dealing with companies like AIG, when it comes to selling off assets, when it comes to winding down a company. And this is something -- this request of Congress -- it's already getting some pushback from Republicans, including the top Republican in the House, John Boehner.

Here's what he said even before these men came before this committee to testify.

BOEHNER [video clip]: This is an unprecedented grab of power. And before that occurs, there ought to be a real debate about whether we should give that authority to the Treasury secretary. We need to look at insurance operations as an example that are regulated by states. What interest would the Treasury secretary have here, and why would he want this power?

KEILAR: And some Republicans raising concerns with the Treasury secretary -- if that isn't then ripe for some abuse of power, turning over too much control to the Treasury. Tim Geithner saying that's not a concern, what we're trying to do here is make sure that what happened with AIG doesn't happen again.

That if there is a company like AIG, we will have more control when it comes to executive compensation and other things, so that we don't look back and say, "Wow, we really should have done something differently" -- Betty.

From the March 24 edition of CNN's Situation Room:

BLITZER: Happening now: The Obama administration wants powers never before seen. The Treasury secretary and the Federal Reserve chief argue it's absolutely necessary right now to contain economic damage should a financial company collapse. Republicans, though, say it's an outright power grab.

[...]

BLITZER: The Obama administration says a financial crisis like no other requires special powers never given to the government. So, it's asking Congress essentially to turn the existing model of financial regulation on its head. The Treasury secretary, Timothy Geithner, and the Federal Reserve chairman, Ben Bernanke, put the request to Congress today. Republicans, though, quickly blasting it.

BOEHNER [video clip]: This is an unprecedented grab of power. And before that occurs, there ought to be a real debate about whether we should give that authority to the Treasury secretary.

[...]

BLITZER: The Obama administration says a financial crisis, like no other, requires special powers never given to the government before. So, it's asking Congress essentially to turn the existing model of financial regulation on its head. The Treasury secretary, Timothy Geithner, and the Federal Reserve chairman, Ben Bernanke, put the request to Congress today. Republicans, though, are blasting it.

BOEHNER [video clip]: This is an unprecedented grab of power. And before that occurs, there ought to be a real debate about whether we should give that authority to the Treasury secretary.

BLITZER: Let's go right to Capitol Hill.

Our senior congressional correspondent, Dana Bash, has all the details for us -- Dana.

BASH: Well, you know, Wolf, every time the Fed chief and the Treasury secretary have come under withering criticism here on the Hill about the way that they handled these bailouts, the response has been, look, we did what we could with the tools that we have.

So, today, they came armed with a new controversial proposal for new tools.

[begin video clip]

BASH: The Treasury secretary is trying to channel AIG anger into a new solution: Give him unprecedented power.

GEITHNER: We came into this crisis without the authority and the tools necessary to contain the damage to the American economy.

BASH: Timothy Geithner wants Congress to grant him that same power over nonbanking financial institutions like AIG that the FDIC has over banks -- the ability to take control of a failing company and do what it takes to reduce risks.

Fed Chairman Ben Bernanke backed the idea, saying he would have had better tools to handle AIG's crisis and its controversial bonuses.

BERNANKE: This bonus issue would not have arisen because all the contracts could have been adjusted.

BASH: In fact, Bernanke said when he learned of AIG's bonuses, he wanted to sue, but was stopped by Fed lawyers.

Bernanke and Geithner's new proposal was clearly intended to deflect outrage, but it didn't always work, like when this Democrat demanded a full list of companies taking taxpayer dollars that paid bonuses.

[begin video clip]

REP. BRAD SHERMAN (D-CA): Are you going to give us the chart or are you going to hide the ball?

GEITHNER: I'm not -- I'm not going to hide the ball.

SHERMAN: Are you going to give us the chart?

GEITHNER: I will reflect on the suggestion you made and see if that is a reasonable --

SHERMAN: In other words, you won't commit to telling the American people how many folks at Goldman Sachs or AIG are going to make $1 million this year?

GEITHNER: Congressman, I will think carefully about your proposal.

[end video clip]

BASH: That exchange: evidence that Geithner's shaky bailout history will make lawmakers think twice before expanding his power.

[end video clip]

BLITZER: Before any of that power, Dana, is expanded, Congress has to pass legislation giving the executive branch this kind of new authority. Will Congress do that?

BASH: Well, you know, Democratic leaders in both the House and the Senate, they came out in support of this idea today.

But, you know, rank-and-file lawmakers, they are a bit more cautious, and the reason is because they feel like they've been burned by jumping in behind proposals with regard to these complex issues coming out of Treasury before. But, you know, we're going to have a chance to look at more dissection of this in the next couple of days because there's another hearing on this the day after tomorrow -- Wolf.

From the March 26 edition of The Situation Room:

BASH: Well, what's going on, I think, and the answer to that question is, for the most part, Republicans aren't saying no despite -- to spite the president. It's because on most issues, they philosophically disagree with his prescriptions. But the reality is, at least in the House, Democrats have a 77-seat majority, so they don't have to, and they don't, reach out and compromise with Republicans. Still, Wolf, Republicans are getting a rap as the party of "no," and they're trying to shake it.

[begin video clip]

BASH: From the president's stimulus plan ...

BOEHNER: This is a joke, and we ought to treat it as such. Vote no.

BASH: To the spending bill ...

BOEHNER: We should vote no.

BASH: Republicans know they're getting a reputation for saying ...

BOEHNER: Put me in the "no" column.

BASH: President Obama has been working hard to make the "party of no" label stick.

OBAMA: "Just say no" is the right advice to give your teenagers about drugs. It is not an acceptable response.

BASH: Taunting GOP critics of his budget in prime time.

OBAMA: We haven't seen an alternative budget out of them.

BASH: So, today, House Republicans released one.

BOEHNER: Here it is, Mr. President.

BASH: A glossy blue pamphlet, but it was light on specifics and had few answers to basic budget questions like, what's the Republican goal on the deficit?

BOEHNER: To do better.

BASH: He promised more details next week. But the rush to respond now is part of a new effort by Republicans to not just oppose Democratic plans, but publicize their own.

What's the danger of being labeled and perceived as the party of "no"?

CANTOR: Well, you know, if you're just the party of "no," I don't know how anyone could say that you are ready to lead again.

BASH: The number-two House Republican, Eric Cantor, leads an economic team in charge of devising GOP alternatives.

REP. JUDY BIGGERT (R-IL): It's the bad actors that really, we have to address.

BASH: He invited CNN in as they completed a GOP housing plan. And at a press conference announcing the proposal ...

CANTOR: We're here today to say yes, we do.

UNIDENTIFIED MALE: Yes to better solutions. Yes to alternatives.

BASH: They were candid about their goal -- go from ...

UNIDENTIFIED MALE: The party of no --

BASH: To ...

UNIDENTIFIED MALE: Yes, yes, yes, yes, yes.

[end video clip]

BASH: Now, Republicans will tell you that saying no is, actually, for the most part, what their supporters want them to do. But they also say they realize that to come out of the political wilderness, which is where they are right now, they've got to be for some things and not just against them.

But they also say that one of the big challenges is actually breaking through and getting attention for what they're saying and doing because, obviously, this is a Democratic-dominated town and a Democratic -- Democrats are getting most of the attention.

BLITZER: It used to be a Republican-dominated town, now a Democratic-dominated town. That's what happens in these kind of political times.

BASH: It sure does.

BLITZER: All right. Thanks very much, Dana, for that.

[...]

BLITZER: The Obama economic team wants to go to dramatic new lengths to protect the financial system, the Treasury secretary today laying out proposals before Congress that would give the administration controversial power over private businesses. Our senior correspondent, Allan Chernoff, is here with more on this story. Allan, what's the goal here?

CHERNOFF: Wolf, what the secretary is trying to do is prevent a collapse of the financial system. Our markets that raise and lend money to keep the economy going came very close to a complete shutdown last year. Some, in fact -- some of those markets actually did fail. The Treasury wants to make sure this does not happen again.

[begin vldeo clip]

CHERNOFF: The failure of investment firms Bear Stearns and Lehman Brothers and the near-collapse of insurance giant AIG threatened the financial system. Government regulators concede they were poorly equipped to head off the trouble and to deal with it once it erupted. Treasury Secretary Geithner says it can't happen again. New regulation is needed.

GEITHNER: To address this will require comprehensive reform -- not modest repairs at the margin, but new rules of the game.

CHERNOFF: The new rules Geithner has in mind would have a government regulator watching out for the system as a whole, making sure that no one company can knock down the nation's financial dominoes. That means tougher regulation requiring the biggest banks, insurance companies and investment firms to be more conservative by keeping more cash on hand and limiting their risk-taking.

If a major firm were in danger of going bust, the new regulator would have the power to either bail the firm out or shut it down.

GEITHNER: We're still in the midst of a very challenging period. And so I think it would be in the interest of the country for Congress to do everything they can to make sure we've got broader tools so that we can manage this effectively.

CHERNOFF: Some congressmen fear the treasury secretary wants to become Big Brother.

MANZULLO: Do you realize how radical your proposal is?

GEITHNER: It's not a radical proposal.

MANZULLO: Oh, it's absolutely -- you're talking about seizing private businesses, and you don't consider that to be radical?

GEITHNER: No. This is a prudent, carefully designed proposal to protect -- protect our financial system from the --

MANZULLO: If it's prudent and carefully designed, Mr. Secretary, then you would have the answers to some of my questions.

CHERNOFF: Hedge funds, the private investment pools that are not regulated now, would have to register with the Securities and Exchange Commission. And they are concerned.

DAVID FRIEDLAND (president, Hedge Fund Association): The last thing we want now is overly burdensome regulation that pushes these managers over the edge and decide that it is no longer worth their efforts to remain in business.

[end video clip]

CHERNOFF: Geithner also wants more oversight of money market mutual funds to make sure that they're being as conservative as they are supposed to be and to ensure there's no danger of a run on those funds, as regulators feared last year -- Wolf.

BLITZER: Lots of changes happening. All right, thanks, Allan.

[...]

BLITZER: President Obama's $3.6 trillion budget scores a big win -- Democrats pushing it through a key Senate committee. The Senate and the House will both vote on different budgets next week. Republicans in the House say they have come up with a plan B to the president's budget. Are Republicans saying no to spite the support, or do they really have better plans? Our senior congressional correspondent, Dana Bash, is up on Capitol Hill with more on this story. Good questions. Do we have answers, Dana?

BASH: Well, for the most part, the Republicans aren't saying no to the president to spite him. They do philosophically disagree with most of his prescriptions, but I can tell you Republicans are getting a rap as the party of no, and they're trying to shake it.

[begin video clip]

BASH (voice-over): From the president's stimulus plan ...

BOEHNER: This is a joke, and we ought to treat it as such. Vote no.

BASH: To the spending bill ...

BOEHNER: We should vote no.

BASH: Republicans know they're getting a reputation for saying ...

BOEHNER: Put me in the "no" column.

BASH: President Obama has been working hard to make the "party of no" label stick.

OBAMA: "Just say no" is the right advice to give your teenagers about drugs. It is not an acceptable response.

BASH: The latest dig? Taunting GOP critics of his budget in prime time.

OBAMA: We haven't seen an alternative budget out of them.

BASH: So, today, House Republicans released one.

BOEHNER: Here it is, Mr. President.

BASH: A glossy blue pamphlet, but it was light on specifics and had few answers to basic budget questions like, what's the Republican goal on the deficit?

BOEHNER: To do better.

BASH: He promised more details next week. But the rush to respond now is part of a new effort by Republicans to not just oppose Democratic plans, but publicize their own.

What's the danger of being labeled and perceived as the party of "no"?

CANTOR: Well, you know, if you're just the party of "no," I don't know how anyone could say that you are ready to lead again.

BASH: The number two House Republican, Eric Cantor, leads an economic team in charge of devising GOP alternatives. He invited CNN in as they completed a GOP housing plan.

REP. JUDY BIGGERT (R-IL): It's the bad actors that really, we have to address.

BASH: And at a press conference announcing the proposal ...

CANTOR: We're here today to say yes, we do.

UNIDENTIFIED MALE: Yes to better solutions. Yes to alternatives.

BASH: They were candid about their goal -- go from...

UNIDENTIFIED MALE: The party of no --

BASH: To ...

UNIDENTIFIED MALE: Yes, yes, yes, yes, yes.

[end video clip]

BASH: Now, Republicans will tell you that the supporters want them to do exactly what they are doing, Wolf, which is say no to the president's policies. But they also know inside the GOP that they also have to get out of the Republican -- or actually the political wilderness by saying what they're for. But I can tell you just from watching this press conference today and the fact that we didn't get very many details on plan we thought we were going to get, it shows it may be a tough road for them.

From the March 26 edition of CNN's Lou Dobbs Tonight:

KEILAR: Lou, Secretary Geithner asked Congress today to sign off on legislation, or to sign off on a plan that would give the government sweeping new powers to regulate big banks and financial institutions. He wants Congress to create what some have deemed a super regulator that would oversee these corporations that, if they were to fail, could threaten the very health of the U.S. economy.

GEITHNER [video clip]: To address this will require comprehensive reform. Not in modest repairs at the margin, but new rules of the game. And the new rules must be simpler and more effectively enforced. The president has made it clear that we're going to do what's necessary to stabilize the system, to get credit flowing again and restore the conditions for a strong economic recovery.

KEILAR: Now, under Geithner's plan, this super regulator could force these corporations to have enough cash on hand to -- to -- in order to back up the bets they make against derivatives like mortgage-backed securities. Geithner also said the federal government should have some input on how these corporations pay their executives, that it should be geared more towards long-term performance, instead of short-term profits. And as you can imagine, Lou, all of this talk about so much government involvement in the private sector had many Republicans very squeamish today, fearful that the government would overreach, stifle these corporations, these big banks and financial firms, and that ultimately it could have the adverse effect of hurting the economy instead, Lou.

[...]

DOBBS: Tonight, Republicans in Congress have revealed their budget blueprint to counter the president's $3.6 trillion spending plan.

REP. PAUL RYAN (R-WI) [video clip]: We're going to show a leaner budget, a budget with lower taxes, lower spending, and lower borrowing. And it's going to be a budget that says here's how best to get America out of the struggling economy and here's how best to preserve the legacy of the American dream, the legacy of this country, which is to leave the next generation better off.

DOBBS: Republicans offered few details. Congressman Ryan, who you heard there, saying those details will be presented on the House floor next week. This sounds a bit like a Secretary Geithner plan.

Posted In
Economy, Budget
Network/Outlet
CNN
Person
Dana Bash, Lou Dobbs
Show/Publication
Lou Dobbs Tonight, The Situation Room
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