Wall Street Journal
October 15, 2008
WASHINGTON — Democratic leaders on Capitol Hill are drawing up plans to toughen oversight of the financial industry and considering introducing another economic-stimulus package in the wake of the government’s decision to buy stakes in major U.S. banks.
House Speaker Nancy Pelosi is mulling recommendations from several economists that Congress act on an economic-recovery package that would cost taxpayers $300 billion, according to congressional aides, equivalent to about 2% of the country’s gross domestic product.
The California Democrat envisions a bill that would include new spending on highways and bridges, extended benefits to unemployed workers, aid to cash-strapped states and a tax cut, congressional aides said. She has asked several House committees to examine details of a possible plan. And as part of the effort, Federal Reserve Chairman Ben Bernanke is expected to testify next week before the House Budget Committee on the state of the economy. Ms. Pelosi is expected to call lawmakers back to Washington in late November to take up the issue.
With the Nov. 4 election less than three weeks away, lawmakers are eager to respond to voter concerns about the economy. The chances of a new stimulus package being enacted are likely to depend on what happens in the election and what happens to the economy. The White House and its Republican allies in Congress so far have resisted a spending-focused stimulus package.
House Minority Leader John Boehner (R., Ohio) described the latest Democratic package as a “big government boondoggle.”
Democratic lawmakers are also seeking to rewrite the rules on how housing purchases are financed, and to redefine the roles of mortgage giants Fannie Mae and Freddie Mac.
The lawmakers are also looking to tighten regulation of financial services, with hedge funds, private-equity funds and exotic financial instruments such as credit-default swaps likely to come under greater federal scrutiny.