Obama Falsely Claims 'Every Penny' of Bailout Proceeds Will Go to Americans
In a speech in support of the financial bailout before the U.S. Senate Wednesday night, the Democratic presidential candidate claimed that American taxpayers would get their money back, raising the possibility they might even profit from the bailout.
“If this is managed correctly, and that is an important ‘if,’ we will hopefully get most of our money back, and possibly even turn a profit on the government's investment -- every penny of which will go directly back to the American people,” Obama said.
The claim is false. According to the bill that passed, the government will get all of its money back – but none will be returned directly to taxpayers.
Under Section 106(d) of the bill, entitled “Transfer to the Treasury,” “(all) revenues of, and proceeds from the sale of troubled assets purchased under this Act . . . shall be paid into the general fund of the Treasury for reduction of the public debt.”
This means that any money generated by the bailout would go directly into the federal treasury, regardless of whether the federal government turns a profit or not.
The section directly prohibits the refund Obama talked about – returning the money to the taxpayer – by specifying that all proceeds be used to pay off the national debt, prohibiting it from being used for new government spending.
Obama was not alone in touting the possibility of recouping most or all of the $700 billion authorized in Wednesday’s rescue package.
Sen. Judd Gregg (R-N.H.) made a similar claim, telling CNSNews.com after the vote: “We’ll get most of it back, as we sell the assets. It [the bailout] isn’t going to cost anything, compared with doing nothing.”
But Obama’s claim that those revenues would go directly back to taxpayers stood out because it is false.
As Sen. John Cornyn (R-Texas) told CNSNews.com, the bill’s provisions “make sure the money goes to pay down the debt.”
According to the Congressional Research Service, a majority – for FY 2007, 53.1 percent – of the federal debt is held by foreign investors.
Among that debt, 69.7 percent is held by foreign governments, including Japan (24.7 percent); China (20.3 percent); the United Kingdom (6.7 percent) and “all oil exporters” – including Saudi Arabia – at 5.9 percent.
Only 46 percent of the national debt is held domestically, and is either owned by state governments that bought Treasury bonds, or by private investors.
The $700 billion is expected to come from Treasury bonds to buy what the law calls “troubled assets,” i.e., any “residential or commercial mortgages, any securities, obligations . . . or any other financial instrument that the Secretary determines the purchase of which is necessary to promote financial market stability.”