This Op Ed was posted in The Washington Examiner and can be viewed online here.
If taxpayers knew that the U.S. Treasury was sitting on $80 billion dollars that could be used to pay down the gigantic federal debt, they would not be pleased.
If they knew that Treasury Secretary Timothy Geithner is bound by law to pay down that debt but has not done so, they would be furious.
The $80 billion is the amount that has been repaid by banks that were the recipients of the giant $700 billion federal bailout of the financial industry last October. One bright spot in our troubled economy of late has been the performance of the stock market since its March lows.
Usually seen as a leading economic indicator, the Dow Jones Industrial Average is up over 40 percent from its early March low. Leading the way have been the major banks, many of which received shovelfuls of taxpayer money in the form of the Troubled Assets Relief Program (TARP).
I was one of those who strongly opposed the TARP at the time of the financial meltdown in October of last year when then-Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke insisted that bailing out the financial industry was necessary to save the nation from economic catastrophe.
My opposition was based, in part, on the enormous price tag—$700 billion—and in part because of my concern that the proposed plan to remove toxic assets from bank balance sheets simply would not work.
As it happened, Treasury quickly abandoned the idea of removing toxic assets and simply gave money directly to the banks in exchange for shares of preferred stock. In addition, Treasury used the funds for a variety of other bailouts never envisioned at the time of TARP’s passage.
One thing that was anticipated in the financial bailout legislation was the necessity of using any of the TARP funds paid back by the banks to pay down the exploding federal debt. That’s why a provision in the legislation required Treasury to do just that.
This was one of the ways that Congress and the administration sought to allay concerns that the taxpayer would be left on the hook for hundreds of billions in bailout money used to save institutions that had taken enormous and risky gambles—and lost.
To date, this promise to make the taxpayer whole has not been fulfilled. Geithner has given no indication when—or whether—the money will be used to pay down the debt, as is mandated by law. Instead, it appears that Treasury is trying to maintain a slush fund that can be used for future bailouts and other “necessary” interventions in the economy.
There’s only one way to insure that this money goes to repay taxpayers, and not only the $700 billion they are owed, but any profits as well. That is to pass a law that forces Treasury to use the proceeds to pay off a portion of the nation’s debt every time it receives a payback of TARP money from the recipients. After all, this was the original intent of the TARP legislation; the only thing that was not specified was when the money would be used to pay down the debt.
This is why I have introduced a bill that would require Treasury to pay down the federal debt and follow through on the requirements of the original financial bailout legislation. The Save American Free Enterprise Act (SAFE Act) would do this by reducing the statutory debt limit immediately by $80 billion.
Then, at the end of each month, SAFE requires Treasury to reduce the debt limit by the amount of any repayments, dividends and interest, warrant sales or other proceeds from the sale of assets received during that month.
The American people are demanding that we in Washington tackle the enormous problem of skyrocketing government spending and our soaring federal debt burden. Doing any less than requiring Treasury to pay taxpayers back for bailing out Wall Street would not only be irresponsible, it would invite yet more unauthorized, counter-productive economic intervention.