(CNSNews.com) – Former House Speaker Newt Gingrich blasted President George Bush and Treasury Secretary Henry Paulson Tuesday over the proposed financial bailout, saying the president “is being absolutely irresponsible” in his handling of the problem.
“There are steps that the administration could take today that would dramatically improve where we are immediately, without legislation” Gingrich said.
“If the president believes anything he is saying in his speeches about how big this crisis is, he should pick up the phone this morning and call SEC (Securities and Exchange Commission) Chairman Chris Cox and tell him to suspend the ‘mark-to-market’ accounting rules, which are the fundamental problem today and can be suspended.”
The mark-to-market system of accounting requires all assets, mortgages, and holdings to be valued at their current market value, regardless of whether that reflects their true worth.
It is an accounting practice that “literally hundreds of the most revered economists” blame for 70 percent of the current problem in the financial markets, Gingrich said.
“If you calculate 70 percent of $700 billion, that is $490 billion” he said.
Gingrich suggested suspending the mark-to-market system for a trial period of two to three weeks, along with suspending the capital gains tax and moving to a three-year rolling average – something that “could be implemented today without congressional involvement,” he said.
The criticism apparently hit its mark – at least in part. Late Tuesday, the SEC announced it intended to ease mark-to-market rules, which were part of the Sarbanes-Oxley Act that Congress passed in 1992 in response to the accounting scandal involving Enron and WorldCom.
The former House speaker, meanwhile, blamed both Paulson and liberal Democrats in Congress for the proposed bailout, which he termed “grotesque.”
Paulson, who Gingrich said represents a very narrow Wall Street view, wrongly created a “bailout” rather than a “work-out” – a principle that is more in line with American tradition, he said.
Paulson “has almost no concept of what the job of secretary of the treasury is in the United States Constitution,” Gingrich said.
Worse, he added, was the fact that the first draft of Paulson’s plan called for latitude for the secretary to spend $700 billion without judicial review or legislative oversight.
“(This) was such a fundamental violation of the American constitutional process and rule of law,” Gingrich said.
The bailout proposal is a further sign that the administration is “catering to liberal Democrats,” he added.
“This administration has given them (liberal Democrats) a greater chance to move towards a socialist economy than anything in modern times,” Gingrich told CNSNews.com.
“They can’t imagine how good George Bush has been [to them] in giving Congress what it wants,” he said. “They got $152 billion in a stimulus package this spring that didn’t work. They got a $300 billion housing bailout this summer that didn’t work. … If you’re a liberal Democrat, it doesn’t get much better than this.”
Liberal Democrats “had the gall,” Gingrich said, to try to attach a provision that would give $20 billion to “a left-wing organization” called ACORN (the Association of Community Organizations Right Now), in a power play that was just breathtaking.”
In the end, “two scandals that will come out of this” said Gingrich, “are political donations, and power on Capitol Hill, such as Chris Dodd being the largest recipient [of monies] from Fannie Mae and Freddie Mac.”
“It was ironic to watch Sen. Dodd, who was the largest recipient of Fannie Mae and Freddie Mac money, and who himself had received favorable mortgage treatment on his homes, act as a key negotiator,” Gingrich said. “It made it (discussions) more difficult.”
The former speaker said that he would have “reluctantly and angrily” voted for the bill himself, explaining that Sen. John McCain (R-Ariz.) had empowered House Republicans, led by Rep. John Boehner (R-Ohio) to “substantially improve the bill.”
Gingrich said that the vast improvements made on the bill by House Republicans were a “huge step in the right direction.”
He was also clear to emphasize that the bill’s defeat was a product of bipartisan rejection, citing the 95 Democrats who also voted against the bill along with the majority of House Republicans.
Gingrich was critical of House Speaker Nancy Pelosi (D-Calif.), who had blamed House Republicans for stopping the bill.
“Nancy Pelosi is the speaker of the House.” Gingrich said. “There’s a majority of Democrats in the House. It seems to me that if the Speaker of the House cannot pass the bill, it’s a little bit clever to decide that it’s the Republicans’ fault when she cannot pass a bill in the House for which she is speaking. I think, in that sense, her speech was sadly inappropriate, very partisan, and deeply embittered a number of people.”
Gingrich went on to explain that Pelosi’s speech was different from the original text she had drafted and, in her effort to appeal to the left wing of her party, announced before House Members that passing the bill would result in a, “victory for Barack Obama.”
When it comes to accountability for the current financial problem, Gingrich said it is “politically incorrect” to note that today’s financial problems started in the 1970s during the Carter administration, and were “celebrated” by the Clinton administration.
Those problems, he said, were compounded by liberal involvement with ACORN, “which the Democrats wanted to give $20 billion to (now) and who they did give ($500 million) a year to in a housing bill over the summer.”
“There has been a perennial pressure for over 20 years now to get every last American into a home even if they couldn’t afford it,” said Gingrich, adding that this is a strategy that leads to bankruptcy – for individuals and lending institutions.
Gingrich also criticized the lack of attention paid to what he calls “predatory politicians,” those who demanded Fannie Mae and Freddie Mac buy mortgages that were unsound and unable to be repaid. These were financially unsound decisions made to “make themselves [politicians] feel good,” said Gingrich.