Missed in the wake of the titanic battle over the president’s budget has been the reaction to Treasury Secretary Tim Geithner’s plan for a public-private partnership to clean up the toxic assets still sitting on the books of many of the nation’s largest banks.
The Financial Times reports:
The liberal backlash against President Barack Obama has begun with many prominent left-leaning economists in the US attacking the administration’s plans to bail out the banks. Paul Krugman describes the toxic asset purchase plan as “cash for trash.” Jeffrey Sachs calls it “a thinly veiled attempt to transfer hundreds of billions of US taxpayer funds to the commercial banks.” Robert Reich depicts Tim Geithner, Treasury secretary, as a prisoner of Wall Street while Joe Stiglitz says the plan “amounts to robbery of the American people.”
Liberals’ criticisms are three-fold. First, the public-private partnership which Geithner has devised is a huge taxpayer subsidy and get-rich scheme for hedge funds and financial institutions, which reap almost all the rewards and bear virtually none of the risk. Second, they observe that the scheme is unduly complicated and nontransparent — the same faults which contributed to the financial meltdown.
And finally, the critics claim that it is an end-run around the Congress and the Constitutional requirement for the legislature to appropriate funds. (All of this is to be financed through and by the Fed and without Congressional approval.) As the Financial Times notes:
Most of Mr. Obama’s liberal critics argue he should have gone to Congress already and asked for a lot of money for bank recapitalisation. His defenders say that would be political suicide until the populist mood on Capitol Hill has died down.
Yes, constitutional government can be frightfully inconvenient.
So the question remains: why aren’t Republicans crying bloody murder? After all, they like to be the party of strict Constitutional interpretation. And they are supposedly opposed to the bailout culture. It would seem to be an issue tailor-made for them, yet they have remained rather quiet.