Whitfield Statement on 2nd Taxpayer Funded Bailout Bill
U.S. Representative Ed Whitfield (KY-01) released the following statement today after voting against H.R. 1424, the Emergency Economic Stabilization Act of 2008. On Monday Whitfield opposed the first "bailout" package, citing numerous concerns over the legislation's effectiveness and cost to taxpayers.
"There is no doubt that our economy is at a critical point. Kentuckians are having a harder time making their home and car payments, sending their children to college and filling up their gas tanks. In order to get our economy back on its feet, we need to instill stability, credibility and confidence in our financial markets. We need to provide citizens with incentives to save more and invest in the American economy through tax breaks that don't increase the federal deficit.
"Unfortunately, the legislation passed today fails to accomplish this goal. Instead it gives a whopping $700 billion of taxpayer money to bail out the irresponsible decisions of a handful of individuals on Wall Street. I don't think government should bail out bad decisions, whether made by individuals or large companies - that isn't fair to those who have more carefully managed their own resources. Furthermore, this package sets unprecedented regulations on our financial institutions and markets that many leading economists believe might do more to hinder our economy than help it.
"Over the course of the past two weeks I have heard from thousands of constituents in the First Congressional District, the majority of whom have voiced their opposition to this bailout. I've heard from small business owners who reminded me that they alone are responsible for the decisions they make with their businesses everyday. I've talked with bankers who tell me they are not convinced this bailout is needed or that it would work. I've heard from parents, teachers, seniors and hardworking Kentuckians who are doing their best to make ends meet and who simply cannot afford to give a handout to big business.
"We need to reform our financial markets, not put a $700 billion band-aid paid for by taxpayers on the problem. On Monday I voted against a similar version of this bailout package. While a few of my concerns have been addressed in this new bill, my reasons for opposing this bailout package remain the same.
- The Federal Deposit Insurance Corporation (FDIC) says most of our banks are not in trouble - in fact, in its most recent quarterly report indicates that there were 8,451 banks in America and 98.4% are well capitalized. In other words, only 1.6% of our nation's banks have a financial problem.
- The legislation grants unprecedented authority to the Secretary of the Treasury. For example, he may buy securities at prices he deems appropriate. Having financial institutions sell the loans to the government at inflated prices so the government can turn around and sell the loans to well heeled investors at lower prices strikes me as good for everyone but U.S. taxpayers.
- The new bureaucracy created to oversee this buyout will be overly complex and still will not provide a mechanism to clarify the real values of the mortgage based securities that have caused the problem.
- The cost of the program, $700 billion, would be the most expensive bailout in the history of our country. The federal debt in August was $9.6 trillion, 65% of GDP, and the government has committed to spend $54 trillion more than it would take to keep the budget deficit at the 2007 levels over the next 25 years. This bailout would weaken our government's financial status.
"There is more than one way to get our economy back on track and I am disappointed that the administration and congressional leaders failed to bring more than one option to the table. After lengthy discussions with my colleagues, economists, regulators and banking leaders in Kentucky and around the country, I have concluded that the Treasury, Federal Reserve, FDIC and Securities and Exchange Commission could take a number of immediate administrative and less costly steps to solve our current financial crisis
"Finally, some provisions of the new Senate passed version of the bill make matters worse, at least in terms of trying to stabilize financial markets. One provision designed to protect homeowners is understandable - after all, you can't hope to bail out shareholders to the tune of $700 billion dollars without also bailing out mortgage holders on the other end - but it makes the bank stabilization problem much worse by lowering the market value of mortgages that we're trying to raise. Mortgages are worth a lot less if people don?t have to pay them back.
"As the people of the First Congressional District continue to face tough economic times, I remain committed to doing everything I can to get our economy back on track and promote job growth in our area. However, I fear the bailout package passed today is nothing more than a wrong response to a complicated problem, paid for by American taxpayers."