US business warns Congress of economic collapse

23 September 2008 23:12  [Source: ICIS news]

WASHINGTON (ICIS news)--US business leaders warned on Tuesday that the entire economy could collapse unless Congress quickly approves a $700bn (€476bn) banking bailout, but the urgent rescue plan continued to draw fire from legislators.

 

The US Chamber of Commerce warned that congressional delay in working out final terms for the bailout could trigger the worst US economic catastrophe since the 1930s.

 

“Make no mistake - if Congress does not act quickly, decisively and responsibly to prevent a total freeze up of our financial system, the entire economy could collapse with devastating consequences,” said Bruce Josten, the chamber’s vice president for government affairs.

 

“Without a doubt, it would be the greatest financial calamity since the Great Depression, impacting consumers and small and large businesses alike,” Josten added.

 

However, despite urgent appeals from top US federal financial officials and business interests, the Treasury Department’s hurriedly drawn $700bn rescue proposal came under heavy criticism from both Democrats and Republicans on Capitol Hill.

 

Senator Chris Dodd (Democrat-Connecticut), chairman of the Senate Banking Committee, said that the plan put together by Treasury Secretary Henry Paulson “is stunning and unprecedented in its scope and lack of detail”.

 

Dodd said the Paulson plan would give the Treasury secretary unprecedented powers without meaningful oversight. 

 

Speaking to Paulson at a Banking Committee hearing on the proposal, Dodd said, “After reading this proposal, I can only conclude that it is not just our economy that is at risk, Mr Secretary, but our Constitution as well.”

 

Earlier, Paulson and Federal Reserve Board Chairman Ben Bernanke urged quick approval of the plan, warning that congressional efforts to amend it or add other provisions would create delays that could put the economy at dire risk.

 

Despite that appeal for congressional approval of the Treasury proposal, Dodd said a rescue plan must include more congressional oversight and audit provisions, limits on banking executives’ incomes and measures to forestall further bank foreclosures on homeowners unable to make mortgage payments.

 

The chamber’s Josten warned that extensive legislative manoeuvring to effect the kind of changes that Dodd wants puts the whole plan at risk.

 

“All of those issues can, should and must be addressed - but not now,” Josten said.

 

“The current legislation must not become a vehicle to advance pet interests, completely overhaul the financial regulatory system or exact revenge against those believed to have gotten us into this mess,” Josten added. “Now we must put partisan differences aside to save our economy. There can be no further delay.”

 

Congressional deliberation on the Treasury bailout plan is expected to continue on Wednesday. Paulson and Bernanke are to testify before the House Committee on Financial Services.

 

Dodd did indicate, however, that he recognises the urgency of the financial crisis and the need for prompt action.

 

Despite his sharp reservations about the Paulson plan, Dodd said, “Nevertheless, in our efforts to restore financial security to American families and stability to our markets, this committee has a responsibility to examine this proposal carefully and in a timely manner.”

 

($1 = €.68)

 

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