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Sen. Sessions Slams 'Investment Banker' Paulson

Politicians and experts who think aggressive government intervention in the U.S. economy is a dangerous path to travel aren’t heard very often in the media. But one of those voices did get a platform on CNBC’s Nov. 11 “Squawk Box.”

 

     Recently reelected Sen. Jeff Sessions, R-Ala., criticized Treasury Secretary Henry Paulson’s handling of the $700 billion financial bailout and warned against passing another multi-billion-dollar bailout of the U.S. auto industry.

 

     “Secretary Paulson thinks he’s an investment banker instead of Secretary of Treasury,” Sessions said on the financial network. “He’s allocating taxpayers’ money right and left without any control. Am I wrong about that?”

 

     Sessions, who voted against the original $700 billion financial bailout – which included an extra $150 billion in “sweeteners” – also attacked his colleagues in Congress for advocating an auto industry bailout estimated to cost taxpayers between $11 billion and $14 billion.

 

     “[Senate Majority Leader Harry] Reid and [House Speaker Nancy] Pelosi don’t run the world,” Sessions said. “I mean, this is not the Senate? The Senate has to vote and this is really – that’s what happened last time. Senate leaders signed on along with the White House and the deal was done on the eve of the election.”

 

     Sessions told CNBC he thought President George W. Bush’s handling of the proposed bailout of General Motors (NYSE:GM) would put his legacy “on the line.”

 

     “I think it is going to have a lot of momentum and if it’s stopped – it’s going to be difficult,” Sessions said. “Really the president is going to have to – if he says, ‘We’ve got to do this,’ he’ll probably get the votes to do it. If the president says, ‘This is not the right way,’ I think it would likely not pass.”

 

     Some in the media are warning of the worst if GM were allowed to fail. CNBC host Jim Cramer said on “Mad Money” on Nov. 10 said there would be a permanent bear market in the U.S. financial markets. “To do otherwise is to root against your own 401(k), and any hope of a full recovery,” Cramer said on his CNBC Web site.

 

     But Sessions is skeptical of that point-of-view. According to the junior Alabama senator, there is a way for struggling companies like GM to survive these times without a massive government bailout.

 

     “We do not know. There is no way I and every senator that is responsible for voting on this can possibly know,” Sessions added. “So, we have a mechanism for companies that are in trouble which is reorganization and Chapter 11 [bankruptcy]. That’s what would normally happen. It’s happened in other big companies. And it could happen here, but they are determined to see if they can’t move forward with another expanded bailout on top of the $25 billion that we have.”

 

     The original purpose of the original financial bailout – the Troubled Asset Relief Program or TARP – was to give the Treasury secretary the authority to buy up to $700 billion in mortgages and other troubled assets owned by financial institutions. However, using it to bailout GM and other struggling private company’s was not its intended purpose. 

 

     “We were promised that we were going to buy toxic mortgages,” Sessions said. “The ink was not dry before Paulson’s buying stock, just what George Soros has been saying we should do all along. He’s not my economic advisor, so this is a scary thing.”