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Tag: bailouts

  • Trump’s planned farm bailout should require congressional approval

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    By hiking tariffs on nearly all imports to the United States earlier this year, President Donald Trump effectively imposed one of the largest tax hikes in American history—and did so without congressional approval.

    Now, the Trump administration is reportedly preparing to spend some of the revenue from those tax increases—also without congressional approval.

    The White House is preparing a bailout for farmers harmed by the trade war. The exact contours of the package remain unclear for now, but Politico and The Wall Street Journal both report that the administration is eying at least $10 billion in aid. We’ll know more early next week, as Treasury Secretary Scott Bessent says an announcement of “substantial support” is expected on Tuesday.

    This much seems clear: tariffs paid by American importers will be used to fund some of the bailout.

    That’s likely to happen, in part, because the slush fund that Trump tapped to bail out farmers during his first term is running dry. That fund—the Commodity Credit Corporation, a New Deal-era program within the Department of Agriculture—has just $4 billion in it, according to Politico. Meanwhile, the government has collected about $150 billion in tariff revenue during the first eight months of the year.

    It also seems likely because that’s what Trump keeps saying he wants to do. “We’re going to take some of that tariff money that we made, we’re going to give it to our farmers,” he said last month.

    Regardless of how it is funded, a farm bailout would be a wasteful and counterproductive bit of policy—and one that could inspire other tariff-hurt industries to start looking for their own handouts. If the bailout is funded with the tariff revenue (without congressional approval), then it would also be another attack on the separation of powers that are fundamental to our constitutional system of government.

    It is Congress that has the sole authority to lay and collect taxes, per Article I of the Constitution. It is also Congress that has the sole authority to determine how tax dollars are spent. If the Trump administration wants to use some of that $150 billion to bail out farmers, it must ask Congress to approve that spending—ideally as part of a budget bill, but even a one-off emergency or supplemental bill would be better than having the executive branch make this decision on its own.

    There is one other complication that should stop the administration from unilaterally spending the tariff revenue, even if the White House decides to ignore the constitutional argument.

    If the Supreme Court rules that Trump’s tariffs are unlawful—as lower courts already have—then it is possible that the federal government would have to refund all that money to the people and businesses that paid the tariffs in the first place.

    If that money has been given away to farmers, then taxpayers will be on the hook to refund the tariff payments—the same American taxpayers who are already paying higher prices because of the tariffs. That’s literally adding insult to injury.

    There is, of course, an easy way out of this mess. If the Trump administration wants to spare farmers the consequences of the trade war, it doesn’t need a messy, possibly unconstitutional bailout. It just needs to end the tariffs.

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    Eric Boehm

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  • Treasury secretary rules out bailout for Silicon Valley Bank | CNN Politics

    Treasury secretary rules out bailout for Silicon Valley Bank | CNN Politics

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    Washington
    CNN
     — 

    Treasury Secretary Janet Yellen on Sunday ruled out a federal bailout for Silicon Valley Bank following its spectacular collapse last week.

    “Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out, and we’re certainly not looking,” Yellen told CBS News when asked if there will be a bailout. “And the reforms that have been put in place means that we’re not going to do that again.”

    Also Sunday, Shalanda Young, the director of the White House Office of Management and Budget, stressed in an interview with CNN’s Kaitlan Collins on “State of the Union” that the US banking system at large was “more resilient” now.

    “It has a better foundation than before the [2008] financial crisis. That’s largely due to the reforms put in place,” Young said on “State of the Union.”

    Yellen said she’s been hearing from depositors all weekend, many of whom are “small businesses” and employ thousands of people. “I’ve been working all weekend with our banking regulators to design appropriate policies to address this situation,” the Treasury secretary said, declining to provide further details.

    SVB collapsed Friday morning after a stunning 48 hours in which a bank run and a capital crisis led to the second-largest failure of a financial institution in US history.

    California regulators closed down the tech lender and put it under the control of the US Federal Deposit Insurance Corporation. The FDIC is acting as a receiver, which typically means it will liquidate the bank’s assets to pay back its customers, including depositors and creditors.

    Despite initial panic on Wall Street over the run on SVB, which caused its shares to crater, analysts said the bank’s collapse is unlikely to set off the kind of domino effect that gripped the banking industry during the financial crisis.

    But the collapse has prompted a bailout debate in Washington as lawmakers assess the fallout.

    Republican Rep. Nancy Mace of South Carolina told Collins in a separate interview on “State of the Union” that she doesn’t support a bailout “at this time” but cautioned, “It’s still very early.”

    “We cannot keep bailing out private companies because there’s no consequences to their actions. People, when they make mistakes or break the law, have to be held accountable in this country,” she said.

    While relatively unknown outside Silicon Valley, SVB was among the top 20 American commercial banks, with $209 billion in total assets at the end of last year, according to the FDIC. It’s the largest lender to fail since Washington Mutual collapsed in 2008.

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  • Former Ohio House speaker convicted in $60 million bribery scheme | CNN Politics

    Former Ohio House speaker convicted in $60 million bribery scheme | CNN Politics

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    CNN
     — 

    A former Republican speaker of Ohio’s House of Representatives was convicted by a federal jury Thursday on racketeering conspiracy charges in connection with a $60 million bribery scheme.

    Former Speaker Larry Householder and former Ohio Republican Party Chair Mathew Borges, who was also convicted Thursday, could face up to 20 years in prison for orchestrating the scheme to accept bribes in exchange for ensuring the passage of a billion-dollar bailout for a nuclear energy company.

    “As presented by the trial team, Larry Householder illegally sold the statehouse, and thus he ultimately betrayed the great people of Ohio he was elected to serve,” said US Attorney Kenneth Parker.

    Steven Bradley, an attorney for Householder, expressed disappointment with the verdict.

    “We will take some time to discuss and evaluate our legal options moving forward and will most certainly pursue an appeal,” he said. “Larry is looking forward to going home and spending time with his family after what has been an exhausting seven week trial.”

    CNN reached out to an attorney for Borges for comment.

    The release did not explicitly identify the nuclear energy company involved in the scheme but noted that utility company FirstEnergy Corp. previously agreed to pay a $230 million penalty for “conspiring to bribe public officials and others” as part of a deferred prosecution settlement.

    Jennifer Young, a manager for external communications at FirstEnergy Corp., told CNN that “while it would be inappropriate to comment on the verdict, FirstEnergy has taken decisive actions over the past several years to strengthen our leadership team and ensure a culture of strong ethics, integrity and accountability across the company.”

    Jeffrey Longstreth, Householder’s longtime campaign and political strategist, and Juan Cespedes, a lobbyist, previously pleaded guilty to their roles in the racketeering conspiracy.

    Beginning in March 2017, FirstEnergy began making quarterly $250,000 payments to Householder’s tax-exempt social welfare account named Generation Now, US attorneys in Ohio’s southern district laid out in their case.

    Householder’s team then used that money to support the passage of House Bill 6, a $1 billion bailout that saved two nuclear power plants operated by FirstEnergy Corp., and stop a ballot effort to overturn the law.

    Millions of those dollars went to Householder’s bid for speaker, to other state House candidates likely to support him and to his team’s own pockets.

    Householder spent over $500,000 of those funds to “pay off his credit card balances, repair his Florida home and settle a business lawsuit,” according to prosecutors.

    Borges used about $366,000 for his own benefit and used another $15,000 to bribe an Ohio Republican operative for information on the number of signatures collected on the ballot referendum opposing HB 6, the news release said.

    Householder and his associates were arrested and charged with racketeering conspiracy in July 2020.

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  • Pakistan to seek $16 billion to rebuild flood-hit country at UN conference | CNN

    Pakistan to seek $16 billion to rebuild flood-hit country at UN conference | CNN

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    Pakistan and the United Nations are holding a major conference in Geneva on Monday aimed at marshaling support to rebuild the country after devastating floods in what is expected to be a major test case for who pays for climate disasters.

    Record monsoon rains and melting glaciers last September displaced some 8 million people and killed at least 1,700 in a catastrophe blamed on climate change.

    Most of the waters have now receded but the reconstruction work, estimated at around $16.3 billion, to rebuild millions of homes and thousands of kilometers of roads and railway is just beginning and millions more people may slide into poverty.

    Islamabad, whose delegation is led by Prime Minister Shehbaz Sharif, will present a recovery “framework” at the conference where United Nations Secretary General Antonio Guterres and French President Emmanuel Macron are also due to speak.

    Guterres, who visited Pakistan in September, has previously described the destruction in the country as “climate carnage.”

    “This is a pivotal moment for the global community to stand with Pakistan and to commit to a resilient and inclusive recovery from these devastating floods,” said Knut Ostby, United Nations’ Development Programme’s Pakistan Representative.

    Additional funding is crucial to Pakistan amid growing concerns about its ability to pay for imports such as energy and food and to meet sovereign debt obligations abroad.

    However, it is far from clear where the reconstruction money will come from, especially given difficulties raising funds for the emergency humanitarian phase of the response which is around half funded, according to UN data.

    At the COP27 meeting in Egypt in November, Pakistan was at the forefront of efforts that led to the establishment of a “loss and damage” fund to cover climate-related destruction for countries that have contributed less to global warming than wealthy ones.

    However, it is not yet known if Pakistan, with a $350 billion economy, will be eligible to tap into that future funding.

    Organizers say around 250 people are expected at the event including high-level government officials, private donors and international financial institutions.

    Pakistan’s ambassador to the UN in Geneva, Khalil Hashmi, said Islamabad was willing to pay for about half of the bill but hoped for support from donors for the rest. “We will be mobilizing international support through various means,” he said. “We look forward to working with our partners.”

    An International Monetary Fund (IMF) delegation will meet Pakistan’s finance minister on the sidelines of the conference, a spokesperson of the lender said on Sunday, as Pakistan struggles to restart its bailout program.

    The IMF is yet to approve the release of $1.1 billion originally due to be disbursed in November last year, leaving Pakistan with only enough foreign exchange reserves to cover one month’s imports.

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