As the President’s top spokesman made a final pitch yesterday for passage of the financial rescue package the Administration was trying emphatically not to dub it “bailout” or “buyout”. The President discussed several of fresh amendments in the cleaned-up version of the package defeated in the House Monday: extension of renewable tax credits for wind and solar power; protection for approximately 26 million Americans who would be hit by the Alternative Minimum Tax (AMT); and Federal Deposit Insurance Corporation (FDIC) reform, specifically lifting the cap on insurance benefits from $100,000 to $250,000.
“It will have benefits for banks across the country,” acting Press Secretary Tony Fratto told my colleagues and me at the White House yesterday morning, “It will have benefits for credit unions across the country, which I understand are included in the amendment.
“And so we look forward to that debate. We look forward to the votes tonight.” And then Fratto added a bit of warning to lawmakers hours before their crucial vote: “ I think there is no question that if you look at your papers this morning, look at the news this morning, you see increasing evidence of how the credit squeeze is affecting small businesses and municipalities across the country.”
Fratto (who is filling in for Press Secretary Dana Perino this week)was trying to give the bailout credibility by making it appear that it included both carrots and sticks in dealing with the credit crisis. But one “carrot” he didn’t touch on — near and dear to conservatives, but apparently not discussed — was repeal or at least amending the Community Reinvestment Act of 1977.
Referred to as a kind of financial affirmative action law, CRA requires banks to make loans in the communities from which they draw deposits — ostensibly ensuring that they extend credit to low income areas. Signed by President Carter in 1977 and toughened by the Clinton Administration in the 1990’s, the CRA has been cited by many as a pivotal reason for the people acquiring subprime mortgages who were unable to pay them.
Many conservatives in the House called for watering down or even repealing the CRA as a part of any bailout measure. Rep. Michele Bachmann (R.-Min.), who tracked me down in California to voice her opposition to the bailout, said emphatically that any such package should include “repeal of the CRA.”
I asked Fratto, in negotiations over the “rescue” package, “[w] as there any discussion of repeal or significant amendment of the Community Reinvestment Act, the CRA?”
“I’m not aware of that,” he replied, “I don’t know.”
CRA reform is not in the package and so I asked Fratto: “It never came up?”
“I don’t know if it came up or not,” he said.
As for the Federal Reserve Board’s pumping in more than $600 billion into the market in coordination with other central banks, I asked Fratto if anyone ever said “isn’t that enough on this whole situation” before cobbling together a $700 billion bailout package.
“No, well, they [the Fed and the central banks] would have a sense of whether that’s enough,” Fratto said, “That was to deal with a specific liquidity problem involving global banks and, in particular, problems with European banks, as well. They’ve explained it. I’d rather not go into too much detail into why they do the liquidity injections that they feel are necessary. I’d rather have the Fed comment on that themselves.
I asked him to clarify that liquidity injections are separate from the rescue package.
“Very separate,” he said, “remember, what we’re trying to do here is to deal with this specific problem of these assets that aren’t trading in our financial system, and those liquidity injections don’t have an impact on that particular problem.