Obama calls bailout a 'blank check'

Sen. Barack Obama (D-Ill.) heaped criticism Sunday on President Bush's mortgage-bailout blueprint, calling it a "blank check" for the administration and Wall Street with insufficient safeguards for taxpayers and homeowners.

"[T]hus far, the administration has only offered a concept with a staggering price tag, not a plan," Obama said in a statement. "This crisis started with homeowners and they bear the brunt of the nearly unprecedented collapse in housing prices. We cannot have a plan for Wall Street banks that does not help homeowners stay in their homes and help distressed communities."


Obama on Friday had embraced the concept of the bailout, and his statement does not change that. Sen. John McCain (R-Ariz.), his rival for the presidency, has been noncommittal.

Treasury Secretary Henry Paulson said on Sunday shows that the administration would resist additions to the skeleton of the $700 billion plan sent to Capitol Hill on Saturday. Specifically, Paulson said he was opposed to limits on executive compensation for financial institutions — an idea embraced by the Obama response.

Like some congressional leaders, Obama said the administration's three-page outline does not permit sufficient oversight.

"If we grant the Treasury broad authority to address the immediate crisis, we must insist on independent accountability and oversight," Obama said. "Given the breach of trust we have seen and the magnitude of the taxpayer money involved, there can be no blank check."

Here is the text of Obama's statement:

“The era of greed and irresponsibility on Wall Street and in Washington has led to a financial crisis as profound as any we have faced since the Great Depression.

“But regardless of how we got here, the circumstances we face require decisive action because the jobs, savings and economic security of millions of Americans are now at risk.

“We must work quickly in a bipartisan fashion to resolve this crisis and restore our financial sector so capital is flowing again and we can avert an even broader economic catastrophe. We also should recognize that economic recovery requires that we act, not just to address the crisis on Wall Street, but also the crisis on Main Street and around kitchen tables across America.

“But thus far, the administration has only offered a concept with a staggering price tag, not a plan.

“Even if the Treasury recovers some or most of its investment over time, this initial outlay of up to $700 billion is sobering. And in return for their support, the American people must be assured that the deal reflects some basic principles.

• No blank check. If we grant the Treasury broad authority to address the immediate crisis, we must insist on independent accountability and oversight. Given the breach of trust we have seen and the magnitude of the taxpayer money involved, there can be no blank check.

• Rescue requires mutual responsibility. As taxpayers are asked to take extraordinary steps to protect our financial system, it is only appropriate to expect those institutions that benefit to help protect American homeowners and the American economy. We cannot underwrite continued irresponsibility, where CEOs cash in and our regulators look the other way. We cannot abet and reward the unconscionable practices that triggered this crisis. We have to end them.

• Taxpayers should be protected. This should not be a handout to Wall Street. It should be structured in a way that maximizes the ability of taxpayers to recoup their investment. Going forward, we need to make sure that the institutions that benefit from financial insurance also bear the cost of that insurance.

• Help homeowners stay in their homes. This crisis started with homeowners and they bear the brunt of the nearly unprecedented collapse in housing prices. We cannot have a plan for Wall Street banks that does not help homeowners stay in their homes and help distressed communities.

• A global response. As I said on Friday, this is a global financial crisis and it requires a global solution. The United States must lead, but we must also insist that other nations, who have a huge stake in the outcome, join us in helping to secure the financial markets.

• Main Street, not just Wall Street. The American people need to know that we feel as great a sense of urgency about the emergency on Main Street as we do the emergency on Wall Street. That is why I call on Sen. McCain, President Bush, Republicans and Democrats to join me in supporting an emergency economic plan for working families — a plan that would help folks cope with rising gas and food prices, save one million jobs through rebuilding our schools and roads, help states and cities avoid painful budget cuts and tax increases, help homeowners stay in their homes and provide retooling assistance to help ensure that the fuel-efficient cars of the future are built in America.

• Build a regulatory structure for the 21st century. While there is not time in a week to remake our regulatory structure to prevent abuses in the future, we should commit ourselves to the kind of reforms I have been advocating for several years. We need new rules of the road for the 21st century economy, together with the means and willingness to enforce them.

“The bottom line is that we must change the economic policies that led us down this dangerous path in the first place. For the last eight years, we’ve had an 'on your own-anything goes' philosophy in Washington and on Wall Street that lavished tax cuts on the wealthy and big corporations; that viewed even common-sense regulation and oversight as unwise and unnecessary; and that shredded consumer protections and loosened the rules of the road. Ordinary Americans are now paying the price. The events of this week have rendered a final verdict on that failed philosophy, and it is a philosophy I will end as president of the United States.”