U.S. Rep. Tom Allen
1st Congressional District of Maine
Last week, members of Congress cast difficult votes on the Emergency Economic Stabilization Act. I voted yes because I believe that while imperfect, the plan will help stabilize the credit and stock markets and protect the middle class. The measure, however, will not bring immediate relief, and must be seen as just the first step in a comprehensive attack on the problems that got us here.
America is on the brink of the worst financial crisis since the 1930s. Concerns about the potential fallout from mortgage market problems and the weakening economy have already led financial institutions to hoard capital and stop lending to each other and to consumers. At a local level, we've seen banks reluctant to lend to small businesses, farmers, and local governments. Scores of lenders have abandoned or severely cut back student loan programs. Maine has been unable to raise $50 million in the bond markets for necessary highway repairs.
Credit is the lifeblood of our nation's economy. It is only a matter of time before every American would be hurt by a credit freeze. The jobs, homes, prospects for higher education, and retirement savings of millions of Americans are at risk. Without action, we could see massive unemployment, failed businesses, and widespread home foreclosures.
Thousands of you called or wrote me to express your strong feelings about the bill. Many Mainers worried that the funds could be misdirected or unfairly enrich those who had brought the economy to its knees. Others feared that the so-called "bailout" would not work or that Congress was moving too quickly. Still others felt that their livelihoods or savings were in jeopardy if Congress remained gridlocked. These are all valid concerns, and I share Mainers' outrage at the need for this legislation. It's not your fault that greedy Wall Street executives took reckless risks, or that this Administration and its congressional allies let them do it.
When I voted yes, however, I believe I was acting in the best interests of Maine and American taxpayers. Doing nothing or waiting to craft the perfect plan would have brought further and enduring financial suffering to the middle class. Hardworking Americans are already bearing the brunt of the perilous economic policies of the last eight years. Additional losses could tighten the squeeze on the wallets of the Maine mill worker, single mother, small business owner, and other middle class people.
Fortunately, Congress refused to rubberstamp the blank check President Bush presented on September 20th. His proposal gave the Secretary of the Treasury unparalleled, unchecked powers; his plan provided no oversight, no protections for homeowners facing foreclosure, and no method for recouping taxpayer losses. The rich and powerful would benefit while the gas station owner in Gorham, the young couple who just bought their first home in Camden, and countless other hardworking Americans would be ignored. I opposed the President's plan because it is time to put the middle class first for a change. In the two weeks Congress spent hammering out a new bill, these glaring deficiencies were remedied. The final Emergency Economic Stabilization Act:
Phases in funding for the Treasury to buy toxic assets from struggling financial firms with additional funds subject to Congressional approval. The bill requires Congressional review after the first $350 billion is disbursed.
Protects taxpayers by requiring companies to reimburse taxpayers if the companies benefit from future growth after selling bad assets to the government.
Protects homeowners by requiring the Treasury to modify troubled loans so that people at risk of foreclosure can stay in their homes.
Limits compensation and bars "golden parachutes" for executives who created this mess.
Ensures strong Treasury oversight to protect the taxpayers' interests.
Raises the FDIC insurance cap to $250,000 from $100,000.
The plan's cost will likely be substantially less than the projected $700 billion, since the Treasury will be reselling the assets purchased with the funding. Taxpayers may even recoup all the costs. The measure also gives taxpayers a share of the profits of participating companies, or if a company fails, taxpayers are first in line to recover assets.
Unfortunately, the Senate attached provisions that should have been considered separately. While I had supported several of these measures, including alternative minimum tax relief for 25 million middle class families and expanded incentives for renewable energy production, I opposed adding these provisions and other tax breaks to this bill.
The Emergency Economic Stabilization Act is only the first step towards protecting and strengthening our economy. Congress must modernize our financial regulations to match our 21st century economy. We must scrutinize the causes of this crisis and change the way that our financial markets work to ensure that it never happens again. Those at fault must be held accountable. The House is already moving forward on these tasks.
I am proud to have worked with members of Congress from both parties to build consensus and pass this imperfect but critically important legislation.