Conservatives Offer Bailout Alternative

Posted September 25, 2008 at 4:07pm

Demonstrating fractures within their party on how to proceed with a $700 billion bailout bill, conservative House Republicans on Thursday laid out their proposals that would have Wall Street fund its own rescue package.

Chief Deputy Whip Eric Cantor (R-Va.), Republican Study Committee Chairman Jeb Hensarling (R-Texas) and Budget ranking member Paul Ryan (R-Wis.) outlined “economic rescue principles” that lean on a mortgage insurance approach, rather than taxpayer dollars, to solve the financial sector meltdown.

The three are members of the RSC, a 110-Member strong group of House conservatives.

Their proposal would have the Treasury Department design a system to charge premiums to holders of mortgage-backed securities to finance an insurance system for the outstanding securities.

Stating that “too much private capital is sitting on the sidelines during this crisis,” the GOP conservatives call for drawing private capital into the market by removing regulatory and tax barriers.

They also call for mandating that government-sponsored enterprises no longer securitize unsound mortgages, capping CEO compensation and creating a panel with representatives of the Treasury, the Securities and Exchange Commission and the Federal Reserve to make recommendations to Congress for financial sector reforms by Jan. 1.

Their push to address these principles in the bailout bill coincides with legislation introduced Thursday by Hensarling that would, over time, return Fannie Mae and Freddie Mac to the marketplace.