GOP group blasts AIG, Bear Stearns rescues

Both Democrats and Republicans complained they weren’t consulted before the Federal Reserve and the administration moved to help AIG.

MCCLATCHY NEWSPAPERS

WASHINGTON — Conservative lawmakers led by Dallas Rep. Jeb Hensarling strongly denounced the multibillion-dollar rescues of AIG and Bear Stearns on Thursday, exposing a deep schism among Republicans on how to cope with the potential Wall Street meltdown.

“Enough is enough. It is time to bail out the American taxpayer from bailout mania,” said Hensarling, who leads the 100-strong bloc of lawmakers called the Republican Study Committee.

The group sent Federal Reserve Chairman Ben Bernanke and U.S. Treasury Secretary Henry Paulson a stern letter urging them to refrain from any further bailouts, arguing that the ultimate cost to taxpayers will be staggering.

“Americans are struggling,” Hensarling said. “Whatever short-term gain is to be realized through bailing out large financial institutions, it is not worth the long-term pain.”

The latest move by the Fed and Treasury involved an $85 billion emergency loan to American International Group Inc. in exchange for an 80 percent stake in the insurance giant, which plays a key role in financial markets. That came after a $30 billion bailout of Bear Stearns and $25 billion for Fannie Mae and Freddie Mac, which provide funds for home mortgages.

U.S. automakers were on Capitol Hill this week seeking help, too — as much as $25 billion in loan guarantees.

“Who is next?” Hensarling said, warning that by propping up failing companies instead of letting them fail, the U.S. is following the path Japan took before its “lost decade” of economic stagnation.

Members of both parties complained that they weren’t consulted before Bernanke and the administration invoked a Depression-era authority — never before used— allowing them to tap government cash reserves to shore up AIG. President Bush defended the “extraordinary measures” taken to stabilize the economy — measures that have set off complaints in Congress.

At his Capitol Hill news conference, Hensarling was among a half-dozen House conservatives who denounced the moves. Some decried the “nationalization” of key financial players.

But conservatives are not unanimous in their dismay.

Rep. Eric Cantor, R-Va., a member of the House leadership and an adviser to GOP presidential nominee John McCain, praised the steps taken so far to address an “economic crisis.”

“I don’t think any of us like to put taxpayer dollars into a private entity, but the way that this has been done, it has been done to protect the taxpayer dollars,” he told reporters on a McCain campaign conference call. “This is a loan to AIG, not a bailout.”