“The problem is not that we threw money at the economic crisis but instead that we threw money to financial institutes and looked like we have walked away afterwards,” Rep. John Mica (R-Fl) said during The House Committee on Oversight and Government Reform hearing on “The Causes and Effects of the AIG Bailout.” Chairman Henry Waxman (D-Calif) said that because of employees receiving bonus’s larger then that of the CEO’s yearly income.

Two former CEO’s of AIG, Martin Sullivan and Robert Willumstad, testified on behalf of AIG, placing blame on accountants and marked to market rules for the reason why AIG went bankrupt. “AIG never suffered one dollar of realized lost, it was the accountants that did not let the bonds mature to their potential value,” Sullivan said while trying to explain why AIG had problems.

Waxman criticized AIG on the way bonuses were given out to their employees. One employee, Joe Cassano, was terminated after his division had imploded but was still allowed to keep up to $34 million in unvested bonuses and AIG had put him on a $one million a month retainer. “ It boggles my mind that Cassano not only received over $280 million in his eight years of employment but that he is still receiving money after he was terminated.” Waxman said about Cassano.

The committee also criticized AIG’s week-long retreat for company executives at a exclusive resort a week after the federal bailout occurred. AIG reported to have paid the resort over $440,000, including nearly $200,000 for rooms, over $150,000 for meals, and $23,000 in spa charges. “I can’t understand how executives thought it would be a good idea to take all their employees, even those that were at fault for this whole mess, to a swanky resort to relax while the American taxpayers payed the bill,” Rep. Elijah Cummings (D-MD) said criticizing Sullivan for agreeing with AIG executives for the retreat.

The House Committee on Oversight and Government Reform are planning more hearings in the following weeks. The next hearings will be with shareholders, hedge funds and Fannie Mae and Freddie Mac. The committee is hoping that the following hearings will help them find out “where to place the much needed blame.”

Bureau Chief Ellen Ratner and Legal Affairs Correspondent Jay Tamboli will be reporting on the Presidential Debate in Nashville, Tenn.

White House Correspondent Lovisa Frost will be covering the President’s remarks on the Emergency Economic Stabilization Act in Chantilly, Va.

Pentagon Correspondent S. Dawn Casey will be reporting from the Pentagon.

The Washington Bureau will be covering the House Oversight and Government Reform Committee on the AIG bailout, remarks by Energy Secretary Samuel Bodman and Agriculture Secretary Ed Schafer on the release of National Biofuels Action Plan, a discussion on the function of the Electoral College at the National Archives, and the National Research Council’s briefing on protecting individual privacy in the struggle against terrorists.

The Washington Bureau will also be covering a National Press Club luncheon with artists Christo and Jeanne-Claude on the art project “The Mastaba” for the United Arab Emirates and the Energy Deparment’s 2008-2009 Winter Fuels Outlook Conference.

Following the president’s statement in the Rose Garden, White House spokeswoman Dana Perino and Director of the National Economic Council briefed the press on the government’s increasing role in attempting to restore investor confidence to the struggling financial markets.

Hennessey outlined the steps that have been taken and those that the government would like to happen, “So we’ve got the conservatorship for Fannie and Freddie. Treasury and Fed worked over the last weekend, they were up in New York working with firms in the industry,” he said. “We had the Fed taking steps just a couple days ago to prevent what they would call the disorderly liquidation of AIG, the insurance company. And then the Fed has been increasing significant amounts of liquidity into the financial system to keep things moving.”

Hennessey reiterated statements made by President Bush about urging the Congress to pass legislation that would allow the federal government to buy illiquid assets from struggling financial institutions to further increase liquidity.

“The most obvious example of an illiquid asset is a mortgage asset, a mortgage-backed security that’s probably lost value as the values of the homes that are underlying those mortgages have declined,” he said. “And what’s happening is, as those assets have lost value, people don’t want to buy them, they become illiquid, it’s hard for people to buy and sell them, and so they’re stuck on the balance sheets of financial institutions.”

Hennessey said that the White House would be in negotiation with congressional leaders over the weekend. Congress and the administration will need to hammer out the details of this authorizing legislation. Hennessey said that they would have to make “significant, substantive progress on the details” over the weekend.

“This is a very bold set of actions, we are calling on Congress to do something that is very big and that we believe needs to be done quickly,” he said.

Speaking to reporters in the Rose Garden President George W. Bush, joined by the Chairmen of the Federal Reserve Board and the Securities and Exchange Commission Ben Bernanke and Chris Cox and the Secretary of Treasury Henry Paulson, speaks about government action in financial markets. Bush explains the current economic crisis and steps that the U.S. government is taking or plans to take to restore balance, liquidity, and investor confidence to the market. (9:04)

 

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Rep. Steny Hoyer (D-Md.) explains about upcoming congressional hearings into the recent government bailouts of large financial companies. (0:39)

 

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“He has no credibility in his promises,” said Senior Policy Advisor of the McCain-Palin 2008 campaign, Doug Holtz-Eakin during a conference call today, discussing Barack Obama’s economic leadership. According to Holtz, Obama voted 94 times for higher taxes in the Senate but suddenly changing his opinion saying that he will only raise tax barriers for people with higher income. Holtz said that McCain on the other hand have studied the current economic crisis closely.

According to Rep. Eric Cantor (R-V.Wa.), Obama has not made a clear stand point on the insurance company American International Group (AIG) latest financial difficulties. Cantor said that McCain believes this is a extreme situation and does not want to put American taxpayers money into privately owned industries that are faltering, but believes this will protect taxpayers dollars in the end.

“This is a loan to AIG, not a bailout,” said Cantor.

“This is an election that will be decided based upon leadership,” said Sen. Richard Burr (R-N.C.) According to Burr, Obama is taking no position on what needs to be done to address issues similar to the government assistance of AIG. Burr said that Obama needs to take a stance because of the financial sector’s major impact on Americans as employees and customers.

Rep. Michelle Bachmann (R-Minn.) says that government bailouts to financial companies were rationalized as those companies being “too big to fail.” (0:42)

 

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Rep. Tom Fenney (R-Fl.) says that recent government bailouts in the financial sector are socializing market risk while profits stay on Wall Street. (0:30)

 

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The Hill is still reeling from Department of Treasury and Federal Reserve market interventions in the hard hit financial section.

“Enough is enough…We’ve got to bailout the taxpayer from bailout mania,” said Rep. Jeb Hensarling (R-Texas). Hensarling and other House Republicans spoke out against government intervention in the market, including the recent government assistance of Bear Sterns, AIG and the takeover of government sponsored enterprises Freddie Mac and Fannie Mae. Hensarling, along with Marsha Blackburn (R-Tenn.), Michelle Bachman (R-Minn.), Tom Price (R-Ga.), Scott Garrett (R-NJ), and Tom Feeney (R-Fl.)

“The government is the lender of last resort,” said Price. He said that risk is an inherent part of the free market system. Price and Feeney emphasized their view that the government is socializing risk as profits are kept private. The recent moves to facilitate sales and give loans to struggling financial giants by the Treasury Department are expected to add to the long term debt to be absorbed by the tax payer. “Again we believe that any short term gain by bailing out one another financial institution is not worth the long term pain of the moral hazard of taking us…to a lost decade of economic growth,” said Hensarling.

Following a press conference to highlight recipients of certain government assistance programs like the Children’s Health Insurance Program and the Low Income Energy Assistance Program, Senator Harry Reid (D-Nev.) and House Majority Leader Steny Hoyer (D- Md.) addressed the bailout of American International Group.

Reid, the Senate majority leader, decried “secret meetings” between Congress and the administration to lay out government assistance measures. “I think it’s time that there’s more than one branch of government. The American people deserve some transparency.” Reid said that he believed that the Senate could do something to stabilize the economy by passing a bill to fund infrastructure before the current session comes to an end.

Hoyer said that there would be hearings in both the Financial Services and Oversight committees. He said that Financial Services Chairman Barney Frank (D-Mass.) would look into the future of regulations and that Oversight Chairman Henry Waxman (D-Calif.) would investigate what happened to lead up to these government bailouts. Hoyer said that committee would answer the questions “What went wrong? Why did we not regulate? Why did we not have the referee on the field?”