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Oct. 5, 2008, editorial: The principles of Congress

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THE ISSUE: The bailout(s) OUR VIEW:

By The Staff

The past week has been a scary one.

It began with the financial brain trust of the Bush Administration and congressional leaders huddling to develop a $700 billion plan to save the financial institutions on Wall Street from the consequences of the risky loan decisions they've been making.

The same people who had been asleep at the switch while the financial system was running off the track were in a panic to put the economic engine back on the rails.

For nothing, because the House rejected the gambit by a vote of 228-205.

Then the Senate added about $150 billion in sweeteners to the plan, without any hearings or consideration of less costly or less intrusive alternatives, approved it overwhelmingly and dared the House to reconsider.

Some important safeguards were added to assure oversight and accountability and to allow the federal government to recoup some of its billions.

What happened next was the scariest of all. The House voted 263 to 171 on its second try to accept the now $850 billion financial lifeline. It was nauseating to see 32 Democrats and 26 Republicans who a few days earlier appeared to stand bravely on principle,  so easily abandon those principles when an even more costly plan was greased with $150 billion in pork.

But the version of the bailout signed into law by President Bush included tax breaks for auto race tracks, the maker of 30-cent wooden arrows for children, and the excise tax on rum produced in Puerto Rico and the Virgin Islands, and billions in long-sought subsidies for rural counties mostly in the West hurt by federal logging cutbacks.

So much for all the campaign talk about curtailing unnecessary congressional spending, what they call earmarks.

The bailout included an increase in federal deposit insurance from $100,000 to $250,000, originally enacted to prevent Depression Era-like runs on banks by depositors, a veritable admission that the plan might not work.

The latest $850 billion bailout has to be considered in context, coming on the heels of an $85 billion bailout of the insurance giant American International Group, an anticipated cost of $25 billion for the bailout of Fannie Mae and Freddie Mac, $29 billion for the Bear Stearns and JPMorgan Chase merger. And it comes with an extension of the federal debt ceiling to more than $11 trillion.

 — This editorial represents a consensus of The News-Enterprise editorial board: R. Chris Ordway, Warren Wheat, Sarah Reddoch, Jeff D'Alessio, Holly Tabor, Michelle McGuffin and Kendra Stewart.