EMERGENCY ECONOMIC STABILIZATION ACT OF 2008 -- (House of Representatives - October 03, 2008)
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Mr. WOLF. Madam Speaker, when the House responded to the economic crisis facing our country and considered a financial rescue plan this past Monday, September 29, the vote failed 205-228. Because of my deep belief that Congress must take action to restore the confidence and stability in the Nation's financial system and keep credit flowing to the people of Virginia and to households across the country, I voted for that legislative package and enclose for the RECORD my statement that day explaining my vote.
I have never been more concerned about the financial future of our country. Following the results of the House vote, there was a record 1-day point drop in the stock market that wiped out $1.2 trillion in wealth that average folks have tied up in retirement accounts, pension funds, and college savings. While there was a short-lived rebound on Tuesday, the market has continued on a downward spiral.
The latest unemployment figures announced today showed that the economy shed 159,000 jobs in September, the steepest drop in 5 years and the ninth straight monthly decline. Also that day, world stocks fell to a new 3-year low. This news, combined with reports this week that U.S. auto sales fell in September by 27 percent from a year ago, points to a worrisome sign that credit is tightening and the economy is hurtling toward a deep recession.
If we don't deal with this financial crisis now, foreign governments like China and Saudi Arabia, who already hold a significant portion of our debt, are waiting in the wings to buy up even more of America. We cannot allow China--a country that persecutes its own people because of their faith--or Saudi Arabia--which breeds the kind of radical ideology that led to the terrorist attacks on our country--to own what generations of Americans have worked so hard to build for their children and grandchildren.
After the House's failed vote, the Senate worked to revise the bipartisan package. The new bill includes the base of the economic rescue plan voted on in the House plus additional taxpayer protection and tax relief provisions and was passed by the Senate 74-25 on Wednesday. Because I continue to believe that this Congress must act to restore confidence in our economy, I will vote today for this amended measure.
The revised bill has significant new safeguards for taxpayers and important tax relief provisions that will increase the amount of bank deposits insured by the FDIC from $100,000 to $250,000 through 2009, to help stop a run on banks; protect 21 million working, middle-class families from getting hit with an average tax hike of $2,500 from the Alternative Minimum Tax, AMT, for tax year 2008; extend critical energy tax credits and incentives to encourage conservation and the development of renewable energy technologies such as wind and solar power; extend tax deductions on State and local sales taxes and out-of-pocket expenses for teachers; expand the income threshold used to calculate the refundable portion of the child tax credit; extend a property tax deduction to homeowners who don't itemize, and provide tax relief for those in areas hit by recent natural disasters including hurricanes and floods.
As in the original legislation, the revised measure authorizes up to $700 billion for a troubled assets relief program for the Treasury secretary to buy mortgages and other assets that are clogging the balance sheets of financial institutions and making it difficult for working families, small businesses, and other companies to access credit. While the legislation gives the Treasury secretary an immediate $250 billion for the program, it requires the president to certify that additional funds are needed, $100 billion, then $350 billion subject to congressional disapproval. The assets acquired by the Treasury will eventually be sold. Many economists believe that if they are purchased at appropriate discounts, it is fair to say that the Treasury will recoup the taxpayers' investment or could even turn a profit over the long-run.
The measure also provides strong watchdog authority over the Treasury through an oversight board and a special inspector general to protect against waste, fraud and abuse. The bill also ensures that irresponsible corporate executives at institutions participating in the Treasury program will not be rewarded with multi-million dollar ``golden parachutes'' or severance pay. The FBI continues to pursue corporate fraud investigations related to lenders, brokers, and appraisers involved in the mortgage and sub-prime loan crisis.
I understand the concerns raised about the response to the financial crisis our country is facing. This package, including some provisions added by the Senate, is certainly not perfect. But I can't pick and choose from the parts. As I said in my statement after the House's initial vote, credit is the lifeline of our economy. Overall I believe this plan is vital to protect the long-term economic future of our country and to ensure that people in my congressional district as well as folks across America are able to keep their jobs, get a home loan or car loan or a student loan to send their kids to college, and protect their savings and the value in their retirement accounts.
I have always worked for the best interest of the taxpayers and residents of the 10th District which I represent. I am voting for this package because in good conscience I cannot stand by and watch the financial futures of the people across America tumble toward ruin not seen since the Great Depression. I believe this vote is the right thing to do at this time for our country.
The American people are understandably angry that our Nation's financial condition has reached this point and I understand the worry that has brought. I'm angry and worried, too, and share the concerns of the scores of people from the 10th District who contacted me in recent days. I understand when folks say they don't want to ``bail out'' Wall Street when they see the greed and irresponsibility we've witnessed from some in the financial system gambling with other people's money and losing. Experts say that the root of the current financial crisis can be traced to the collapse of the sub-prime mortgage industry and the impact of high-risk loans on the Nation's housing industry.
I agree and also share the concern about reports that some CEOs on Wall Street and top executives at Fannie Mae and Freddie Mac--which are now in Federal conservatorship--have gotten sweetheart deals and bonuses in the millions of dollars. That kind of action must not be rewarded and that's why I applauded the news that the FBI as well as the Justice Department and the Securities and Exchange Commission have launched investigations into potential criminal cases against firms accused of contributing to the market collapse.
But I'm more worried about the people of Virginia and across America if we don't respond to the collapse in the credit markets in our country. We face a financial crisis and threat to the U.S. economy the proportions of which many say we haven't seen since the economic collapse of the Great Depression. For the past few weeks, the news has been filled with reports of some of the most prominent financial institutions in our country in free fall. Just this Monday, Wachovia, one of the largest banks in Virginia and perhaps a bank you or your family or neighbors use, was sold, and more banks are expected to fail.
Access to credit is the lifeline of our economy. I'm worried that if we don't take the necessary action to shore up the Nation's credit system it will be the mom and dad in Herndon who won't be able to get a student loan to send their kids to college or buy a new house, or the young college graduate in Leesburg who won't be able to get a loan to buy a first car, or the older couple in Winchester nearing retirement whose nest egg in a 401(k) account is losing value, or the mom and pop store around the corner in Front Royal that can't get the loan to make payroll, or the family in Manassas who need to sell their house but watch as home values drop and the prospective buyer can't get a home loan.
I believe this crisis calls for extraordinary action. Some say without action millions of jobs could be lost. I believe the legislative package before Congress was mis-named as a ``bailout.'' It is important to understand that it was a depression prevention plan to help restore confidence in and stabilize our country's credit system and ultimately the American economy. No legislation is ever perfect and there will be people of good will who disagree. But in tough times, it is the responsibility of lawmakers to act and make tough choices.
I voted for this legislation today because I believe it was the right thing to do to begin the process of resolving this crisis and setting the country's financial institutions on sound footing. This legislation was a bipartisan compromise dramatically changed and improved from the original proposal and forged after tough negotiations between both political parties and the call that the measure must first and foremost protect taxpayers' investment and have transparency, accountability and oversight.
The package fulfilled those goals by:
Providing the Treasury secretary with authority to buy troubled assets currently held by financial institutions, but cut in half Secretary Paulson's original proposal of $700 billion in up-front, immediate authority. The plan would allow $250 billion in immediate authority, with another $100 billion available after the Secretary reports to Congress, and providing Congress with the authority to withhold the remaining $350 billion, assuring that economic assistance will be financed by Wall Street, not Main Street. Many economists predict that ultimately taxpayers will see all their investment fully recouped.
Providing transparency and oversight through establishment of a bipartisan oversight commission, split evenly between minority and majority; reporting requirements to ensure proper reports to Congress and the public; a special inspector general; a financial stability oversight board; strict conflict of interest and unjust enrichment rules, providing that if after 5 years the Government has a net loss of taxpayer funds as a consequence of the purchase program, the president will be required to submit a legislative proposal to recoup such funds from program beneficiaries.
Protecting taxpayers--not shareholders and not corporate executives--against loss by placing taxpayers first in line to recoup losses from participating financial institutions in the event they fail or lose money.
Prohibiting executive compensation or golden parachutes to ensure bad actors on Wall Street are not rewarded.
Requiring the establishment of an insurance guarantee program that in lieu of purchasing assets with taxpayer funds is available to insure assets at no cost to the taxpayer. Costs would be fully paid for by participating companies, i.e., those receiving the assistance. Assets insured by the program would count against the total funds the Treasury secretary would otherwise have available to make purchases.
In considering this package I had to answer this question: What is the consequence of doing nothing to help stop the hemorrhaging of the Nation's credit system, and even the broader consequence of a potential worldwide depression? I had to decide what is in the best interest of our country and the taxpayers and residents of this congressional district.
When faced with that decision, I cast my vote for the legislative package. I was disappointed that the bill failed passage by a vote of 205-228 and that a majority of my House colleagues both Democrat and Republican did not recognize the need to shore up our financial system and restore the flow of credit to help protect Main Street America.
Just minutes after the final vote, the Dow Jones industrial average dropped over 700 points and closed for the day down 778 points, the largest one-day point drop in history. The broadest measure of the American stock market, the Standard & Poor's 500-stock index, fell 8.77 percent, its biggest drop since October 1987. The failure to approve the legislation resulted in uncertainty and turmoil in the markets, eroding billions of dollars in individual savings and household wealth. In a few hours, an estimated $1.2 trillion in assets lost their value--that is people's retirement accounts, pension funds, and college savings.
With the failure of the legislation, it is uncertain what the next step will be, but the crisis in the financial markets continues, and congressional leaders have pledged to go back to work and negotiate a bipartisan solution to restore confidence in the markets and come back to the House for another vote. No matter what final legislation is enacted to help stem the current crisis, I believe Congress has lots of work to do in the future to reform financial market regulation so that our country is not faced with this kind of crisis in the future.
The crisis in the credit markets, however, may be a symptom of a greater financial crisis on the horizon. We must come to grips with the national debt which is approaching $11 trillion. Then we must focus on the over $53 trillion in unfunded and unsustainable entitlement obligations we face as well as uncontrolled Federal spending. The statistics are staggering and real. Standard and Poor's Investment Service has indicated that the United States could lose its triple-A bond rating as early as 2012 if we do not take action to reverse course. By not dealing with this issue we are enabling foreign governments like China and Saudi Arabia to buy America. That is bad for our country.
That's why I introduced the SAFE Commission Act, H.R. 3654, with Democrat Rep. JIM COOPER of Tennessee to set up a national bipartisan commission to put everything on the table and recommend to Congress a way to put our country on sound financial footing. The legislation requires an up-or-down vote by Congress. The Capitol Hill newspaper Roll Call said in an editorial that the SAFE Commission should be part of the discussion of any response to the financial markets crisis. Other newspapers and organizations across the political spectrum have agreed that the SAFE plan can be the way forward.
P.S. I have based my service in Congress on the principles of honesty and integrity and doing what I believe is best for the people of this congressional district and the country.
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