Republican Leaders Split on Geithner Plan

Posted by Ryan Grim, Huffington Post at 5:23 AM on March 24, 2009.

Republican leaders in Congress offered a range of reactions on Monday to Treasury Secretary Tim Geithner's plan to partner with private investors to buy toxic assets from troubled banks and set a price for them that both banks and investors could be happy with.

The divided sentiments -- with some GOP leaders speaking positively about the proposal, others negatively, and others avoiding judgment altogether -- suggest that party leaders are still trying to determine the political dynamics of Geithner's proposal.

Senate Republican leader Mitch McConnell McConnell, for instance, said he was willing to "give the Secretary of the Treasury credit for finally turning to the real issue here." But he wouldn't offer an opinion on the substance of the plan. "I'm not prepared to react to that yet," he said.

The Senate Budget Committee's senior Republican, Judd Gregg (N.H.), reacted more warmly. "[I]t's a genuine and sincere effort to try to free up the credit markets and especially to get balance into the real estate markets, which is at the core of the financial problems," said Gregg, a leading voice within his party on economic issues. "I don't know if it's going to work. Clearly the markets today reacted in a positive way to it. Whether it will work will depend on how much buy-in there is from the private sector."

Gregg suggested that the plan, if it worked right, could actually return money to the treasury.

"Remember, what the taxpayers are putting up here are dollars, which will come back to us as investments. They'll come back both with interest and they'll come back with return on the underlying investments," he said. "So the taxpayers here are going to make some money, too, if it works correctly."

At the most negative end of the spectrum was Rep. Eric Cantor, the no. 2 Republican in the House, who claimed in a statement that he is "increasingly concerned that it is fundamentally flawed."

"As described, the plan seems to offer little incentive for private investors to participate unless the subsidy is made so rich that it comes at the expense of the taxpayer," the statement read. "In its current form, Secretary Geithner's plan is a shell game that hides the true cost of the program from the taxpayers that will be asked to pay for it. Six months after Congress debated the first TARP, it is inexcusable that taxpayers still have not been told their true exposure."

That said, Cantor voted in favor of a House plan to punitively tax executives at bailed-out banks that made more than $250,000. The White House are cool to that legislation, and both McConnell and Gregg called for the Senate to move slowly on the bill, with Gregg offering that it could harm Geithner's plan.

"I think the biggest threat to it is the House bill on bonuses which was a penal, targeted attack on a group of citizens who obviously acted inappropriately. But you don't use the tax laws to basically target them," he said. "I would think a lot of the private sector folks who might invest with the government are going to have second thoughts, unfortunately, because of the House action."

Rep. Spencer Bachus of Alabama, the highest ranking Republican on the Financial Services Committee, told the Huffington Post that he was hopeful the plan would work, but wanted to hear more from Geithner when he appears before the committee Tuesday. "The $100 billion is a pleasant surprise, that it's not larger. I'm interested in whether it's going to work," he said. "There are prices out there, just lots lower than we would like."

Tagged as: mitch mcconnell, timothy geithner, judd gregg, public-private investment