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Herseth Sandlin fears high-pressure bailout won't shield taxpayers
October 15, 2008 | By Kevin Woster, Rapid City Journal

Scare tactics used the Bush administration and congressional leaders to win approval for a $700 billion bailout package contributed to panic that swamped Wall Street and depressed financial markets around the world, Rep. Stephanie Herseth Sandlin said Monday.

Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke first stirred up the panic during a conference call with members of Congress Sept. 26 by asserting that "everything was going to crash" if the House and Senate did not pass the bailout package within a few days, Herseth Sandlin, D-S.D., said.

"In my opinion, they bred some of the fear and panic that we've been witnessing throughout the past two weeks, including the worst week on Wall Street in a decade last week," she said during a meeting with the Rapid City Journal Editorial Board. "And that certainly bled into what's happening in different markets across the world and the global economy."

Herseth Sandlin voted against the package in the House on Sept. 29, when it failed 205-228. She argued that Congress needed more time to properly consider and design a bailout package that protected taxpayers, prevented other financial problems and denied fat financial packages to corporate executives who were partially responsible for the mortgage-and-investment meltdown.

The Senate followed the House vote by approving a revised bailout package, sweetened with $150 billion in additional federal money thrown into tax breaks and other incentives to win more votes. Republican Sen. John Thune voted for the package and Democratic Sen. Tim Johnson voted against it.

House leaders increased their push for passage of the revised package, even though there were few significant improvements beyond what Herseth Sandlin called "irresponsible" additions to gain member support. And the leaders continued to pitch the bill as vital to protecting against a financial fall, she said.

The bill passed the House 263-171 on Oct. 3 with Herseth Sandlin again voting no.

"Even my own leadership tried to sell this to members of my own caucus as something that had to be done to calm the markets and unfreeze the credit market," she said. "And none of that happened all last week after it was passed and signed by the president."

Herseth Sandlin said her office initially received 90 percent opposition to the bailout from constituents in South Dakota, before she began to hear from more supporters. And while some backers of the package argued that many citizens probably didn't understand the issue, Herseth Sandlin said that view underestimated the acumen of many citizens.

"I was getting calls from some awfully sophisticated investors in the marketplace, who have known for quite some time that it was going to be hard to keep the bubble from bursting, and that this country had developed some very bad habits," she said.

In addition, "hundreds of economists were writing to Congress saying take a deep breath" and take time to consider other approaches, Herseth Sandlin said.

Although the stock market made a promising rebound Monday, Herseth Sandlin said she continues to worry that the package was too hastily conceived to properly protect taxpayer interests, prevent a repeat of problems or assure that lending practices private-sector institutions will open up again for qualified borrowers.

"There's no guarantee that they won't just horde the cash and shore up their own bottom line, versus making credit more available to consumers and small businesses," she said.

She also worried that there may be a request for more money.

"My concern is that they may very well come back to Congress and say they need more than $700 billion," she said.

Contact Kevin Woster at 394-8413 or kevin.woster@rapidcityjournal.com

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