Bailout Bill for Wall Street

Press Release

Dear Friends:

On September 29, 2008, H.R. 3997, the "Emergency Economic Stabilization Act of 2008" failed to pass the House of Representatives by a vote of 205 Yeas to 228 Nays. I joined a majority of my Republican colleagues in voting against this bill.

As you may know, our economy is struggling amid record levels of home mortgage foreclosures, increased market volatility, and skyrocketing oil prices. I certainly share your concern about the state of our economy and for its future. I also have concern that over-involvement of the Federal government in free market enterprise can often-times yield negative, unintended consequences.

Over the past few years, there have been significant fluctuations in the housing market. While the market was up, interest rates remained low and most Americans had relatively easy access to credit. Unfortunately, these conditions led to risky decisions among lenders and borrowers, and when the economy started to slow, mortgage-holders began to default on their loans. This downturn in the housing market has affected other sectors of our economy as well. Many home loans packaged together into mortgage-backed securities were sold to investment banks. When mortgage-backed securities began to sour, investment banks such as Bear Stearns were unable to sell these assets. As a result of widespread defaults, banks began restricting lending.

In an attempt to alleviate the credit freeze, U.S. Treasury Secretary Paulson and Federal Reserve Chairman Bernanke came to Congress with an economic rescue proposal. The specific details of the rescue package have changed substantially since the original plan. After negotiation that continued throughout the weekend, the House of Representatives considered a compromise proposal which contains protections lessening the risk to taxpayer dollars.

H.R. 3997 "the Emergency Economic Stabilization Act of 2008" (EESA) provides up to $700 billion for the Secretary of the Treasury to be able to buy mortgages and other assets which have made it difficult for businesses to access credit. However, rather than giving the Treasury all the funds at once, the legislation gives the Secretary of the Treasury access to $250 billion immediately, then requires the President to certify that additional funds are needed ($100 billion, then $350 billion subject to Congressional disapproval). The Secretary of the Treasury must report on the use of the funds and the progress in addressing the crisis. EESA also establishes an insurance guarantee program that in lieu of purchasing assets with taxpayer funds is available to insure assets, thus lessening the cost to the taxpayer. Furthermore, EESA creates an Oversight Board so that the Treasury cannot act in an arbitrary manner and a special inspector general to protect against waste, fraud and abuse.

From the beginning, I have had great concern over allowing $700 billion of taxpayer dollars to be put on the line for this rescue proposal. I was encouraged to see improvements to the proposal that House Republicans were able to achieve during negotiations such as the insurance guarantee program. However, many provisions of the plan remain cause for concern in my view; we are still authorizing $700 billion of taxpayer money to be put on the line. No matter how many positive provisions have been added, there is no certainty the plan will actually achieve the goal of stabilizing the economy. I believe that it is a dangerous trend to have the U.S. Government taking over shares of companies. I also have concerns that foreign banks and companies are eligible for the bailout so long as they have "significant operations in the United States."

Under normal circumstances, I do not believe the Federal government should regulate private companies' ability to compensate their executives. However, given the fact these companies are seeking an economic bailout from the Federal government, I believe it is appropriate that any package should have strict requirements whereby executives of failed companies should not be rewarded with excessive severance packages. I remain skeptical the final version of this package effectively does so. Under the proposal, power to limit executive compensation is given to the Secretary of the Treasury. Thus, there is not a stated cap. The only other provisions in the legislation are a 20% excise tax on golden parachute payments triggered by events other than retirement and tax deduction limits for compensation limits above $500,000. Furthermore, if a company elects to choose the insurance provision, there are no restrictions on executive compensation.

Additionally, I am troubled that this rescue plan does not take steps to reform some of the failures of government institutions such as, Fannie Mae and Freddie Mac. This could include reforms such as limiting the Federal backing for high risk loans and transitioning Fannie and Freddie over a reasonable time period to truly private companies without special government privileges. Opening them up to real market competition would establish commonsense limits for their capital requirements and portfolio holdings.

I continue to believe that further consideration should have been given to other options such as market stimulating tax cuts, changes to mark-to-market valuation rules and taking real steps to solve the ongoing energy crisis our nation faces by increasing our domestic energy capacity. Even if this rescue package is successful, we will continue to face this energy crisis and continue to operate under an energy policy which does not allow us to employ an all-of-the-above approach to meet our energy needs. Doing so would have tremendous positive impacts on our economy. I have always had reservations about government involvement in the private sector. While I recognize the seriousness of the economic situation we find ourselves in, I remain unconvinced there are not better ways to deal with this crisis.

Because of these concerns discussed above, I could not support the "Emergency Economic Stabilization Act". At the time of this letter being written, it is uncertain how Congress will proceed. It is my hope that Speaker Pelosi will now allow consideration of a bill which addresses the concerns of a majority of the American people.

Thank you for sharing your views with me on this issue. I take very seriously my responsibility to reflect the voice of my constituents, and it was abundantly clear that a majority of the people of the Ninth District of Georgia felt the same way as I did.

Respectfully

Source