Former Speaker of the House Newt Gingrich has called on the government to return to capitalism’s basics by allowing failed companies to go into bankruptcy instead of pumping taxpayers’ money in to keep them afloat.
Gingrich’s call to abandon the strategy includes AIG which has paid its executives $165 million in bonuses while teetering on the brink of collapse for months.
"Thanks to the Bush-Obama-Geithner policy of bailing out failing companies, we now have the worst of all possible scenarios – a taxpayer subsidized, government supervised private company," he wrote in his weekly The Newt Gingrich Letter.
"[It has created] an unsustainable public – private hybrid that is too public to make its own decisions and too private to be responsible to the taxpayers that are keeping it alive," he added.
Despite the call, Treasury Secretary Geithner returned before Congress today to ask for greater regulatory powers over financial markets, including big hedge funds and derivatives trading.
On Monday, the administration unveiled a plan to buy back toxic assets weighing down banks’ balance sheets that may cost more than $1 trillion in order to stave off their collapse and restart the flow of credit.
The move follows several earlier rounds of bailouts which, as of mid-March, have seen $152.6 billion invested in nearly 500 institutions, not including giants like AIG, Citigroup and Bank of America.