Schumer ‘troubled’ by aspects of bank plan

Sen. Charles Schumer (D-N.Y.) said Wednesday that he supports the Bush administration’s bank investment plan but wants more assurances that the $250 billion proposal will reach everyday consumers.

Schumer met for an hour with Treasury official Neel Kashkari, who is in charge of overseeing the plan, and told him he is "troubled" by the lack of legal safeguards in the plan and proposed four specific guidelines aimed at ensuring the infusion of capital benefits consumers as directly as possible.

{mosads}Schumer prefers freeing up some money to offer consumer loans, using the capital to help homeowners who want to refinance mortgages and limiting executive compensation at firms that participate.

“On the other hand, if [the plan benefits] executives, shareholders or the bank balance sheet, and [doesn’t] get money churning out into the economy, the program will be regarded as a failure.”

Schumer said Kashkari told him that federal regulators would strive to ensure that, but that there were no specific legal requirements on the banks.

“That is troubling to me,” Schumer said. “So I have asked for guidelines to be put out to banks that will be part of the program and are part of the program.”

There remains no firm guarantee that federal regulators will ensure those principles are carried out, Schumer said, given regulators’ past record.

“We’ll have to wait and see,” he said. “The regulators in many of these areas have not been tough enough, but the feeling in that room there — and most of those people are relatively new — is that they’ve learned their lesson.”

Schumer said he was told that the $250 billion figure will cover all banks that are expected to participate in the plan, but that the administration will likely use another $100 million in a matter of weeks, as allowed under the terms of the financial plan Congress approved two weeks ago.

The possibility of putting a government representative on the board of directors of banks that participate in the plan was also proposed by Schumer, but the senator said Kashkari told him Treasury was opposed to the idea for fear that the provision would cause banks not to participate in the plan.

Schumer is the second Senate Democratic leader to have a sit-down briefing with the Treasury Department on Bush’s plan. Banking Committee Chairman Chris Dodd (D-Conn.) on Tuesday met with Treasury Secretary Henry Paulson at the Treasury Department just hours after the president announced the plan.

On other fronts Wednesday, Dodd announced his committee will hold a hearing on Thursday titled “Turmoil in the U.S. Credit Markets: The Genesis of the Current Economic Crisis.” A Banking Committee press release says the hearing “will focus on what led to our country’s economic crisis, as well as solutions to restore stability and soundness to our financial markets and the American economy,” and will feature former Securities and Exchange Commission Chairman Arthur Levitt Jr. and former federal Comptroller Eugene Ludwig.