The administration of President Barack Obama is crafting new financial bail-out initiatives in a way it believes will allow firms receiving funds to avoid restrictions imposed by Congress, The Washington Post reported on Saturday.
The administration believes it can sidestep the rules because it has in many cases decided not to provide federal aid directly to the financial institutions, the Post reported, instead setting up special entities that act as middlemen to channel the funds. The administration has concluded this approach is essential to persuade firms to participate in programs funded by the $700 billion-plus financial rescue package, the newspaper reported.
Experts are questioning the legality of the strategy, the Post reported, which would require recipients of government money to turn over ownership stakes to the government and limit sometimes lavish executive pay. While the strategy has so far attracted little scrutiny from lawmakers, the Post cited one lawmaker as saying conditions imposed by Congress should apply to all firms receiving bailout funds.
Rep. Edolphus Towns, chairman of the House Oversight and Government Reform Committee, said he planned to review the administration's actions and might seek to undo them. "We have to make certain that if they are using government money in any sort of way, there should be restrictions," Towns told the Post.
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