This vote was on an amendment by Jim DeMint, R-S.C., that would prohibit the Treasury Department from using housing bailout funds (known as TARP) to acquire common stock in financial institutions that are receiving federal assistance. The amendment was offered to a bill that would ease application and eligibility requirements for a $300 billion foreclosure prevention program enacted to help blunt the impact of the economic downturn.
DeMint said that though the TARP program was originally supposed to be used to purchase toxic mortgage assets, particularly those in serious delinquency or bankruptcy, the money was also used to give enormous loans to banks and the automobile industry. But now, DeMint said, the banks and companies are complaining that the loans make their books look bad, and so the government is readying to turn those loans into assets – in this case, stock – making the government owners of significant portions of those industries.
“It is an amendment that would force this Government to do at least part or keep it from going further than it already has into the private sector. It would prohibit the Government from converting these loans, which are sometimes referred to as preferred stock now. It is not voting. It would prohibit them from converting this to common stock, to ownership, to equity in these banks,” DeMint said.
Chris Dodd, D-Conn., said converting the loans into common stock isn’t about the government taking over these companies, it’s about helping those companies feel comfortable loosening banks’ lending requirements.
“It seems to me if we accept the DeMint amendment we are going to make the answer even more difficult because what our lending institutions need is obviously capital—whether private capital or otherwise, they need capital,” Dodd said. “This is not about the Government taking over these entities. I don’t know of anyone who supports that idea. We are taking positions in these companies far larger than most of us would like, and I hope and I believe it to be the case that as soon as the moment is appropriate we are going to be selling this off and getting out of it as fast as we can.”
By a vote of 36-59, the amendment was rejected. All but four Republicans present voted for the amendment. Every Democrat present voted against the amendment. The end result is that the measure went forward without language that would have prohibited the Treasury Department from using TARP funding to acquire common stock in financial institutions that received federal financial assistance.