Bill gives Paulson unprecedented power

In all of American history, it is likely that no government official besides a wartime president has ever been given as much power over taxpayer money as Treasury Secretary Henry M. Paulson Jr. would receive under the $700 billion financial rescue plan.

If the House passes the bill Friday, the Treasury secretary will acquire broad authority to buy and then dispose of hundreds of billions of dollars in mortgages and mortgage-backed securities at his sole discretion.

“They’re appointing a financial dictator,” said Ryan Ellis, tax policy director at Americans for Tax Reform. “Congress is giving a member of the executive branch virtually unlimited power for the entire economy.”

Historical precedent for a Treasury secretary this powerful is hard to find: Alexander Hamilton enforced taxes by leading an army to suppress the whiskey rebellion; William G. McAdoo shut down the New York Stock Exchange during World War I; Salmon P. Chase issued currency during the Civil War that he later ruled unconstitutional as a Supreme Court justice; and Robert Morris personally guaranteed promissory notes during the days after the Revolutionary War, when the nation had virtually no credit.

Mr. Paulson’s authority in the bill, as written Thursday, is likely to surpass all of those.

“Since this country started, since the Constitution in 1787 … this country has never done anything like this, given this much power to one person,” said Rep. Louie Gohmert of Texas. “It’s just wrong to our principles of American democracy to give one person this kind of power.”

Mr. Gohmert was one of several House Republicans on Thursday to offer an amendment to the rescue plan that would lower the amount the Treasury Department could initially spendfrom $350 billion to $250 billion.

Fifteen lawmakers, including Mr. Gohmert, voted against the bill Monday but said they will support it Friday if the amendment is included, ensuring the bill’s passage if the Senate sweeteners don’t turn other lawmakers against the bill.

Mr. Paulson’s initial proposal to Congress included control over $700 billion with almost no oversight, and it landed him last week on the cover of Newsweek magazine, under the title, “King Henry.”

But such platitudes won him no favor with conservative members of Congress, who decried the plan as giving the government too much power over the economy, with the outcomes ranging from cronyism to socialism. A chorus of voices immediately began calling on Mr. Paulson to resign.

“A plan that relies on the former chairman of Goldman Sachs presiding over disbursing hundreds of billions of dollars to Wall Street is a terrible concept and inevitably will lead to crony capitalism and the appearance of - if not the actual existence of - corruption,” said former House Speaker Newt Gingrich, Georgia Republican.

The White House said layers of oversight have been added in the past two weeks of negotiations to ensure transparency and integrity in the process.

“The government has nuclear programs that don’t have as much oversight, reporting and surveillance as this program will,” White House spokesman Tony Fratto said.

Mr. Paulson will be given $250 billion to spend upfront, with another $100 billion available as long as the president notifies Congress. The president then must request the remaining $350 billion from Congress. The House Republicans’ amendment would authorize only the initial $250 billion; anything more than that would require Congressional approval.

Mr. Fratto said that although the bill will give the Treasury secretary “a lot of decision-making authority,” there will be an “unprecedented amount of oversight and supervision.”

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