The head of the powerful Service Employees International Union said on Thursday that he trusts Barack Obama will use the bailout money transparently and for the betterment of homeowners, even without legislation requiring him to do so.
In a lunch interview with a small group of reporters, Andy Stern urged Congress to grant Obama the second $350 billion tranche of TARP money. And while, under normal circumstances, Stern said he would prefer that the money come with restrictions -- specifically that it go towards helping homeowners and require institutional reforms among the recipients -- he was willing to grant Obama the benefit of the doubt.
"We are convinced that the Obama administration is going to both use the next 350 billion dollars significantly to help consumers on mortgages. And that it is very aware of the need for more transparency and accountability," said Stern. "Once you have this money in the banks it is not as if you lose your leverage permanently. But we are at this moment of not letting the ship sink for the sake of small, smaller issues. We just have a lot more trust in the Obama administration that they are going to give this money differently."
Prior to Obama's request for the second $350 in TARP funds, Democrats in the House of Representatives were considering legislation that would have made any use of the money contingent on a variety of reforms. Rep. Barney Frank, the architect of that proposed plan, wanted to structure the new expenditures on the bailout packaged approved for the automobile industry: CEOs would have to give up private jets, report to Congress on a quarterly basis, agree to certain benchmarks, and not use the money for mergers or lobbying. Once Obama asked for the funds, however, Frank stepped back, saying he trusted the incoming administration to use the money appropriately.
Asked about the move, Stern said it was dictated by political realities. "The way Congress works, the House [would have gotten] something done but I think the Senate would have been [more difficult]."
"In an ideal world," he added, "we think there are a series of conditions that need to be included. I just think that we are now in the middle of a storm and we want to keep the ship floating. We have a new captain coming on and we believe he is going to steer us in a different direction. And we have a Senate that is appropriately deliberative."
Obama and his aides have already demonstrated that they are serious in their insistence for a more accountable, transparent and restrictive asset relief program. In a letter to members of Congress, incoming director of the National Economic Council Larry Summers said any TARP expenditure would contain four stipulations: that there be transparent explanations for the investments, a monitoring system for the lending, clear conditions on firms that received government support, and a focus on increasing the flow of credit.
"We completely agree that this program must promote the stability of the financial system and increase lending, preserve home ownership, promote jobs and economic recovery, safeguard taxpayer interests, and have the maximum degree of accountability and transparency possible," wrote Summers.
Asked whether too much trust was being placed in the hands of the Obama administration, officials at SEIU said that the president-elect merited the faith. As Stern sees it, the current economic paradigm makes it impossible for Obama to spend the TARP money in any other way.
"The Obama administration and this Congress can not be setting policy on one hand legislatively and then have their policy undermined the people who are receiving money from them," he argued. "It is a bad business model for them to try and save people's homes over here, and then have Bank of America get money and not redo their mortgages over there. It would be an unwise decision if they made that."
In addition to entrusting the Obama administration to spend the bailout funds wisely, Stern and the SEIU are also undertaking efforts of their own to ensure that recipients don't fritter away the money on items that don't help workers. The union announced on Thursday that it was launching a campaign against the Bank of America for using the funds it had already received on corporate jets, lobbying efforts and executive salaries. The bank, which Stern said did nothing to help ease the mortgage crisis over which it has much sway, could be in line to receive an addition $100 to $200 billion from the government to help with its risky debt.
"This is not just about Bank of America being good or bad," said Stern. "There is a business model in this country that has led us to this place. The census bureau reports that the American worker has not gotten a raise in six years -- the longest period of economic stagnation in history. This is not a sustainable economy, where people still fly around in corporate jets and 30,000 people lose their jobs."