In an unusual display of like-mindedness, the top Republican in the House and the Democratic leaders of the House and Senate sent letters to Treasury Secretary Henry Paulson about how the $700 billion in bailout funds will be used.
"Funds made available under the economic rescue package should not be used to pay for bank acquisitions, raises and executive bonuses," wrote House Republican Leader John Boehner.
Speaker of the House Nancy Pelosi and Senate Majority Leader Harry Reid wrote a joint letter "to express concern about the level of compensation" for top executives at financial institutions receiving funds through the bailout.
The letters came a day after Rep. Henry Waxman, D-Calif., chairman of the House Oversight Committee, sent letters seeking salary information from nine banks that have been tapped to receive $125 billion.
The "Troubled Assets Relief Program" was created within the bailout legislation to buy devalued mortgage-backed securities from tottering banks to unclog frozen credit markets. But the legislation also gave Treasury the power to make direct stock investments in financial institutions.
While the legislation includes limits on compensation, Pelosi and Reid note in their letter concerns about the direct investment program.
"News reports have suggested that six major financial institutions participating in the program have plans to pay their executives billions of dollars," they wrote.
Several news organizations, including The Associated Press, have published stories saying that banks are planning to use the funding to buy other banks, pay dividends to shareholders and for executive compensation.
Treasury spokeswoman Brookly McLaughlin said Wednesday that using the funds for acquisitions was within its broad goal of spurring more lending.
"It's in no one's interest to have unhealthy banks that are unable to play the role of lenders in the economy, who threaten the financial system," she said. "So it's possible and even appropriate if capital is used to create strong, healthy financial institutions."
In New York, Attorney General Andrew Cuomo said Wednesday that the bailout essentially has made taxpayers shareholders in the nine banks and they have a duty to be upfront with the public about huge bonuses.
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