In March 25 articles, both The Washington Post and the Los Angeles Times reported House Minority Leader John Boehner's (R-OH) criticism of Treasury Secretary Timothy Geithner's proposal for Congress to pass legislation allowing the federal government to take over failing non-bank financial institutions, which Boehner described as “an unprecedented grab of power.” However, neither the Post nor the Times subsequently reported* that in their budget blueprint released March 26, House Republicans, including Boehner, themselves proposed giving the federal government authority to take over financial institutions.

While the Times did not report on the House Republican budget blueprint, the Post published a March 27 article on the proposal. The Post reported that the Republicans' budget “proposes to cut overall government spending except for defense, ban additional spending for bailouts of financial companies, and cut the maximum income tax rate to 25 percent from the current rate of 36 percent.” Additionally, both the print and online editions of the article included a photo of Boehner holding the budget proposal, with the caption: “House Minority Leader John A. Boehner (R-Ohio) unveils the House Republicans' 18-page outline for a budget solution.” However, while both quoting Boehner in the article and featuring his picture, the Post ignored the contradiction between Boehner's criticism of the administration's plan -- criticism that it reported only two days before -- and the budget outline he “unveil[ed].”

As Media Matters for America has documented, the Associated Press reported on Republican opposition to the administration's proposal in a March 27 article but did not note that House Republicans have released a similar proposal.

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.

Likewise, the House Republican budget blueprint -- signed by Boehner and several other members of the House Republican leadership -- 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.

From the Los Angeles Times' March 25 article “Obama administration uses AIG to make case for more regulatory power”:

A congressional hearing intended to put the nation's top economic policymakers on the hot seat over bonuses paid to employees of American International Group Inc. turned instead into a preview of the Obama administration's effort to revamp the powers of federal regulators.

Treasury Secretary Timothy F. Geithner and Federal Reserve Chairman Ben S. Bernanke told Congress on Tuesday that the government needed broad new powers to seize and dismantle large financial institutions that could seriously damage the entire economy should they collapse.

“AIG highlights broad failures of our financial system,” Geithner said. “Our regulatory system was not equipped to prevent the buildup of dangerous levels of risk.”

The call for greater authority, which President Obama raised last week, would be a major expansion of government power in the economy, echoing the wide authority granted to Washington during the Great Depression.

Geithner said such power would be part of a new financial regulatory framework that he would outline Thursday and that also could include tougher limits on executive compensation.

[...]

Obama said he hoped it wouldn't take too long to convince Congress of the need for the new powers to deal with large companies on the brink of failure.

“Keep in mind that it is precisely because of the lack of this authority that the AIG situation has gotten worse,” Obama said during Tuesday's nationally televised news conference. “If it were a bank and it had effectively collapsed, then the FDIC could step in . . . and in a structured way renegotiate contracts, get rid of bad assets, strengthen capital requirements, resell it on the private marketplace.”

The House committee's chairman, Rep. Barney Frank (D-Mass.), endorsed the idea.

“When nonbank, major financial institutions need to be put out of their misery, we need to give somebody the authority to do what the FDIC can do with banks,” he said, promising to work with the administration to craft legislation. House Speaker Nancy Pelosi (D-San Francisco) and Senate Majority Leader Harry Reid (D-Nev.) signaled their support as well.

In recent weeks, other lawmakers, such as Sen. Bob Corker (R-Tenn.), have expressed surprise and concern that federal officials have no authority to seize struggling large companies, such as AIG or General Motors Corp., that pose a major risk to the economy, so they can be restructured or dismantled in an orderly fashion.

But some Republicans weren't ready Tuesday to grant the new authority. House Minority Leader John A. Boehner (R-Ohio) called it “an unprecedented grab of power.”

From The Washington Post's March 25 article “The Pitch for Expanded Powers”:

Treasury Secretary Timothy F. Geithner and Federal Reserve Chairman Ben S. Bernanke pressed Congress yesterday to give the federal government unprecedented new power to seize financial firms beyond banks whose collapse could jeopardize the world financial system.

Inside a hearing room crowded with snapping cameras, petulant politicians and pink-clad protesters, the two men pointed to the troubled insurer American International Group as a cautionary tale, offering an ominous account of the global fallout that could have come if the company had collapsed in the fall.

“At best, the consequences of AIG's failure would have been a significant intensification of an already severe financial crisis and a further worsening of global economic conditions,” Bernanke told the House Financial Services Committee. “Conceivably, its failure could have resulted in a 1930s-style global financial and economic meltdown, with catastrophic implications for production, income and jobs.”

Despite those grave risks, the officials said, the government did not have the power to seize the insurance giant the way that the Federal Deposit Insurance Corp. can take over banks.

“No legal means existed under U.S. law to resolve AIG using the kind of powers available to the FDIC to resolve a bank,” Geithner said of the federal bailout of AIG in September. “Because of the absence of authority, your government was faced with no good options.”

Unless there is new legislation expanding the government's control over non-bank entities, Geithner said, the current laws would “continue to constrain our capacity to address future crises.”

While Geithner and Bernanke were unified in calling for new authority to wind down non-bank financial firms, the men have yet to agree on who should get this new power. Geithner has urged that the Treasury secretary be given this authority, although traditionally such resolution power has rested with bank regulatory agencies. Bernanke, however, suggested that “the FDIC or some other body could be in charge of resolution and deals with those specific issues.” Both men, however, agreed that the president should be involved in deciding whether and when to seize large, systemically important institutions.

Steven Adamske, a spokesman for Rep. Barney Frank (D-Mass.), chairman of the committee, acknowledged the differences between the Fed and the Treasury's proposals, but noted that the plan is “still in its infancy.”

“No decisions have been made, yet,” he said “We are a long way away from saying one proposal is better than the other.”

[...]

The push for broader government authority was met yesterday with support and skepticism from legislators and firms that might soon be subject to more federal control, such as hedge funds, investment companies and large insurers.

Sen. Charles E. Schumer (D-N.Y.) backed the new authority. “Early, strong action is much better than letting these institutions bleed to death,” he said.

On the other hand, House Minority Leader John A. Boehner (R-Ohio) expressed apprehension. “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,” Boehner said.

From The Washington Post's March 27 article “House Republicans Present Outline of Alternative Budget”:

House Republicans yesterday laid out the federal budget that they would propose if they controlled Congress, but they were mocked by Democrats for putting out a document with almost no details or precise figures.

Looking to rebut criticism from President Obama that the GOP is attacking him but not offering proposals of its own, Republican lawmakers released an 18-page outline of an alternative budget that proposes to cut overall government spending except for defense, ban additional spending for bailouts of financial companies, and cut the maximum income tax rate to 25 percent from the current rate of 36 percent.

“Two nights ago, the president said we haven't seen a budget yet out of the Republicans,” said House Minority Leader John A. Boehner (R-Ohio), waving a document titled “The Republican Road to Recovery.” “Well, it's not true, because here it is, Mr. President.”

Republicans said they will release actual numbers as an amendment to the budget next week when it comes to the House floor. But Democrats criticized their effort. White House press secretary Robert Gibbs joked that “it took me several minutes to read it.”

“I think the administration is glad that the Republicans heard the president's call to submit an alternative,” Gibbs said. “We just hope that next time it will contain actual numbers so somebody can evaluate what it means.”

With Democrats in control of Congress, the House GOP budget has no chance of becoming law, and Senate Republicans rejected the idea of even offering an alternative budget but will instead offer amendments on the floor. House rules allow Democrats to limit the amendments offered, so Republicans in that chamber will offer only their complete budget alternative.

“Our economic plan amounts to less government, lower taxes and economic prosperity,” the GOP document says.

House Minority Leader John A. Boehner (R-Ohio) unveils the House Republicans' 18-page outline for a budget solution.

* Media Matters searched the Nexis database for “Republican or GOP and budget” after March 25, 2009, for U.S. Newspapers and Wires.