Sali Demands Answers Regarding Financial Crisis, Role Played by Regulators

Press Release

At today's hearing of the House Oversight and Government Reform Committee, U.S. Rep. Bill Sali (R-ID), asked for further explanation from former Chairman Alan Greenspan, Chairman Chris Cox and former Secretary of the Treasury John Snow on the financial crisis and the role of federal regulators in it.

"I attended today's hearing hoping to ask the panel three essential questions: Who knew what and when, and what action did they take? Today, Idaho's mom and pop investors are losing their hard-earned savings in their retirement funds, while some corporate CEO's have received golden parachutes. Idahoans want to know if anyone is going to go to jail for causing this crisis," said Sali. "SEC Chairman Chris Cox indicated that is likely given the large number of prosecutions he has begun. I hope he is correct."

"During the recent debate on the proposed ‘bailout' package, the input from my fellow Idahoans was loud, clear and resounding. Many Idahoans told me that while action was likely needed to address problems in our financial sector, it should not be in the form of an enormous bailout for Wall Street and people who made poor investment decisions at the expense of hardworking taxpayers, who have to go it alone with the benefits - or hardships -- of their own financial decisions," said Sali.

Sali voted against both bailout packages citing unfairness to taxpayers and its apparent lack of a mechanism to quickly deal with unlocking frozen credit in banks. Sali also expressed concern with the timing of recent Congressional hearings. "I find it revealing that the only hearings on our financial crisis came after Congress passed the bailout and adjourned," he noted.

"Of course, there is plenty of blame to spread around on this issue. Partisan blame-games, whether from the Democrat side of the aisle or my own won't fix anything. But it is troubling that at a time when millions of Americans are wrestling with how to pay their most important bills, we hold court, as it were, up here on Capitol Hill pointing fingers. We owe our fellow Americans better than that," said the Congressman.

Sali also cited on the role the recent failure of Fannie Mae and Freddie Mac and the role that low, prolonged interest rates played in today's economic issues. "Today this Committee should be addressing the massive failures, ethical and financial, of Fannie Mae and Freddie Mac," he said. "Our failure to do so is a disgrace, not only because of the profound hardships Fannie's and Freddie's collapse has had on millions of innocent Americans but also because together, Fannie and Freddie spent roughly $175 million on congressional lobbying efforts. Government-sponsored entities lobbying the government? Give me a break," said Sali.

Sali also submitted a statement regarding yesterday's Oversight and Government Reform hearing addressing a number of matters relevant to the development of credit rating policy and the way such ratings have affected America's financial system, particularly in how all of this filters-down to Idahoans. "In Idaho towns like Middleton, Orofino, McCall and Sandpoint, as throughout America, people of modest means have been struck hard by the mortgage crisis. My constituents are understandably outraged because they are paying the costs of regulators who didn't do their job and are demanding answers," said Sali.

"As Chairman Greenspan pointed out during today's hearing, the unrealistic credit ratings given to many mortgaged backed securities were not warranted. The credit rating agencies fueled a market that was unrealistic. When the markets recognized that, they collapsed.

"Going forward, the answer is not more regulation, it is having smart regulation. Credit market swaps, GSE reform, transparency; these are all important areas where the panel indicated that new regulation may well be needed. But, as Chairman Greenspan contended and in his testimony, at least 40 percent of the time, the best models and projections of the brightest regulators will be wrong. As lawmakers asked questions regarding regulating the financial sector, Dr. Greenspan cautioned against merely combining disparate regulators, noting that he does not believe that when you ‘combine levels of ignorance you somehow enhance insight.'

"Just as there are no guarantees to avoid loss in totally free markets, we see today that heavily regulated entities such as commercial banks and the stock markets have no guarantee against losses to investors either. Nonetheless, a lot of Idahoans can easily see that through no fault of their own, they have been wronged. They deserved to see the perpetrators punished," concluded Sali.

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