House Republicans refused to support the Henry Paulson/Chris Dodd compromise bailout plan yesterday afternoon, even after the New York Times reported that Treasury Secretary Henry Paulson got down on one knee to beg Nancy Pelosi to compromise. One of the sticking points, as Senator Lindsey Graham explained later, wasn’t a lack of begging but a poison pill that would push 20% of all profits from the bailout into the Housing Trust Fund — a boondoggle that Democrats in Congress has used to fund political-action groups like ACORN and the National Council of La Raza:
In the Roosevelt Room after the session, the Treasury secretary, Henry M. Paulson Jr., literally bent down on one knee as he pleaded with Nancy Pelosi, the House Speaker, not to “blow it up” by withdrawing her party’s support for the package over what Ms. Pelosi derided as a Republican betrayal.
“I didn’t know you were Catholic,” Ms. Pelosi said, a wry reference to Mr. Paulson’s kneeling, according to someone who observed the exchange. She went on: “It’s not me blowing this up, it’s the Republicans.”
Mr. Paulson sighed. “I know. I know.”
Graham told Greta van Susteren that Democrats had their own priorities, and it wasn’t bailing out the financial sector:
And this deal that’s on the table now is not a very good deal. Twenty percent of the money that should go to retire debt that will be created to solve this problem winds up in a housing organization called ACORN that is an absolute ill-run enterprise, and I can’t believe we would take money away from debt retirement to put it in a housing program that doesn’t work.
Here’s the relevant part of the Dodd proposal:
TRANSFER OF A PERCENTAGE OF PROFITS.
- DEPOSITS.Not less than 20 percent of any profit realized on the sale of each troubled asset purchased under this Act shall be deposited as provided in paragraph (2).
- USE OF DEPOSITS.Of the amount referred to in paragraph (1)
- 65 percent shall be deposited into the Housing Trust Fund established under section 1338 of the Federal Housing Enterprises Regulatory Reform Act of 1992 (12 U.S.C. 4568); and
- 35 percent shall be deposited into the Capital Magnet Fund established under section 1339 of that Act (12 U.S.C. 4569).
REMAINDER DEPOSITED IN THE TREASURY.All amounts remaining after payments under paragraph (1) shall be paid into the General Fund of the Treasury for reduction of the public debt.
Profits? We’ll be lucky not to take a bath on the purchase of these toxic assets. If we get 70 cents on the dollar, that would be a success.
That being said, this section proves that the Democrats in Congress have learned nothing from this financial collapse. They still want to game the market to pick winners and losers by funding programs for unqualified and marginally-qualified borrowers to buy houses they may not be able to afford — and that’s the innocent explanation for this clause.
The real purpose of section D is to send more funds to La Raza and ACORN through housing welfare, via the slush fund of the HTF. They want to float their political efforts on behalf of Democrats with public money, which was always the purpose behind the HTF. They did the same thing in April in the first bailout bill, setting aside $100 million in “counseling” that went in large part to ACORN and La Raza, and at least in the former case, providing taxpayer funding for a group facing criminal charges in more than a dozen states for fraud.
It’s bad enough that taxpayers have to pay the price for Congress’ decade-long distortions of the lending and investment markets. If we realize a profit from the bailout, that money should go to pay down the debt or get returned to taxpayers as dividends from their investment — not to organizations committing voter fraud, and not to restarting the entire cycle of government meddling in lending markets. I’d support a rational bailout package, but anything that funds the HTF needs to get stopped.
Update: Here’s the video with Graham:
Update II: The Wall Street Journal reported on the HTF/ACORN/Democratic connections in July:
The housing bill signed Wednesday by President George W. Bush will provide a stream of billions of dollars for distressed homeowners and communities and the nonprofit groups that serve them.
One of the biggest likely beneficiaries, despite Republican objections: Acorn, a housing advocacy group that also helps lead ambitious voter-registration efforts benefiting Democrats. …
Partly because of the role of Acorn and other housing advocacy groups, the White House and its allies in Congress resisted Democrats’ plans to include money for a new affordable-housing trust fund and $4 billion in grants to restore housing in devastated neighborhoods. In the end, the money stayed in the bill; the White House saw little choice.
What most riles Republicans about the bill is the symbiotic relationship between the Democratic Party and the housing advocacy groups, of which Acorn is among the biggest. Groups such as the National Council of La Raza and the National Urban League also lobby to secure government-funded services for their members and seek to move them to the voting booth. Acorn has been singled out for criticism because of its reach, its endorsements of Democrats, and past flaws in its bookkeeping and voter-registration efforts that its detractors in Congress have seized upon.
Once again, the Democrats want to set up a self-funding mechanism, this time by exploiting a severe financial crisis. Despicable.