(CNSNews.com) – Sen. Charles Schumer (D-N.Y), chairman of the Joint Economic Committee, told CNSNews.com on Wednesday that once the economy is healthy, the U.S. Treasury should sell back the $250 billion in bank stocks it is now purchasing as part of the $700 billion financial bailout.
The stock purchase in major and minor banks nationwide by the Treasury is intended to infuse capital into banks so they keep credit flowing and also to reportedly stabilize the market.
Schumer said that the bailout bill – the Troubled Asset Relief Program (TARP) – was never intended to allow the government to keep the bank stocks it purchased, but Schumer also conceded that under the TARP law there is no requirement or timeline that says Treasury must sell back the stocks.
“I don’t think there should be permanent government stock-holding in these banks,” Schumer told CNSNews.com at a press conference on Wednesday. “I think that the intention is that once these institutions become healthy and the economy gets better, is for the government to get rid of these stocks – and I would support that.”
Treasury Secretary Henry Paulson announced on Oct. 10 that the Treasury Department planned to use half of the first $250 billion installment from the bailout money to purchase “non-voting shares” in nine of the nation’s major banks. The other half, $125 billion, would go towards purchasing stock in smaller banks across the country.
As CNSNews.com reported this week, however, not all congressmen who voted in favor of the bailout understood that it gave the Treasury secretary authority to purchase the stocks, defined as “troubled assets” in the law.
One senior Republican aide told CNSNews.com: “From the very beginning, we didn’t know exactly what these ‘assets’ were. We knew that the bailout would allow the Treasury to buy mortgages from banks, but there was some debate about what else they could buy.”
The TARP law also does not stipulate that Treasury must sell the stocks back to the banks or to another private entity – nor is there a timeline for selling the stocks back.
When CNSNews.com recently asked the White House whether President Bush thought there should be a timeline or incentive for a future administration to sell the shares back to the private sector, White House Press Secretary Dana Perino said that Bush trusted the Treasury to do the right thing.
“The president is trusting his team at Treasury who designed the program, and he believes they are doing it the right way,” Perino told CNSNews.com. “I don’t have details. We’ll just trust our treasury secretary to implement the program.”