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Democrats disappointed over use of TARP funds

BY TOM BRUNE

December 23, 2008

The way Treasury Secretary Henry Paulson has handled the first $350 billion of the $700 billion of the financial bailout funds has frustrated and angered many Democrats in Congress - including members of the Long Island delegation.

"It is an enormous disappointment," said Rep. Tim Bishop (D-Southampton). "I think one can argue that the secretary has complied with the letter of the legislation, but clearly has not complied with congressional intent. I sort of feel we have spent $335 billion and have very little to show for it."

When he voted for the legislation authorizing the $700 billion bailout this fall, Bishop said, he expected Paulson to use the money the way he said he would - to buy troubled assets, primarily mortgages and mortgage-back securities.

But instead, Paulson switched course and directly invested in financial institutions, with few results so far. At the time, Paulson said he had no regrets for the revised plan. "I will never apologize for changing a strategy or an approach if the facts change," he said then.

Bishop said he would like a better accounting of how the money is being used. "Frankly we're tying to keep our anger in check," Bishop said of many members of Congress. "None of us enjoyed voting for this legislation in the first place."

If Paulson comes back to Congress for the second $350 billion installment in the bailout, Bishop said he would vote against granting him that authority, explaining he would rather wait for the Obama administration to take office.

Rep. Carolyn McCarthy (D-Mineola) said she is "very disappointed" in Paulson.

"We gave him the tools to certainly have the transparency there," she said. "Why didn't he use the tools the way they were intended to be used? He is the one who is supposed to have the pulse on all of this."

McCarthy said she is still hearing from angry constituents - including local bankers and consumers - about how the economic slowdown and tight credit are hurting them despite the bailout.

If Paulson comes back to Congress for the rest of the bailout funds, she would like to turn him down, she said. But she added, "I don't know if we can."

Republican Rep. Peter King of Seaford issued a statement saying there should be more oversight of the Troubled Asset Relief Program. "After all, these are taxpayer dollars. As Congress considers releasing the remaining TARP funds it must include tighter restrictions and an increased transparency of the program."

Rep. Gary Ackerman (D-Jamaica Estates) complained that Congress gave Paulson "$350 billion for a specific flight plan, so he flew somewhere else."

Asked if the bailout was working, Ackerman said, "No, it hasn't worked yet. Is it working? Hard to tell. But what we can tell, the banks aren't telling. If the banks aren't telling, we can't judge."

Ackerman said he favors waiting for the new administration for the next installment.

"We are going to make sure there are controls," he said. "We are going to write it into law that banks can't use it for bonuses."