Senator Chuck Grassley made the following statement after a Senate resolution of disapproval of the Troubled Asset Relief Program failed to clear the Senate late this afternoon. Grassley voted to not release the funds to the incoming administration.
Earlier this week, President George Bush, on behalf of President-elect Barack Obama, requested the release of $350 billion under the Troubled Asset Relief Program. Senator David Vitter then introduced the Senate resolution to prevent the Secretary of the Treasury from accessing the second half of the bailout funding. The resolution failed by a vote of 42-52, allowing the president-elect to begin using the funds in a few weeks.
Here is Grassley's statement on his vote to not release the $350 billion.
Prepared Statement of Senator Chuck Grassley
On S.J. Res. 5, the Troubled Asset Relief Program Resolution of Disapproval
Thursday, January 15, 2009
Many Senators, including this one, reluctantly supported the Troubled Asset Relief Program last year because we were told by the so-called experts that our financial markets were on the verge of collapse.
We were told that we had to deal with the toxic mortgages that were clogging up our financial markets by having the government purchase them at an auction and hold them until the markets stabilized. The theory was to get these troubled assets off the banks' balance sheets and provide them with additional funds to lend to credit worthy borrowers.
I had serious doubts about the original plan, but it has never been implemented. Instead, the money has been used to invest directly in select financial institutions. Essentially, it has become a slush fund for the Secretary of Treasury to engage in an erratic industrial policy of picking winner and losers among any company directly, or indirectly, connected to our financial markets.
I am deeply troubled by this outcome. I believe Congress was mislead with respect to the financial crisis as well and the intended use of the funds. Moreover, the Administration's decision to use funds to provide assistance to the U.S. auto industry was contrary to congressional intent.
The ever-changing nature of the TARP program has introduced a new level of uncertainty into our financial markets. Market participants no longer know when or where the federal government will intervene. This unpredictability has a chilling effect on investors and undermines the ability to raise capital and make new loans.
The outgoing Administration has misused these funds and failed to provide adequate accountability. But, the vote today is about the use of the remaining funds by the incoming Administration. Unfortunately, they have expressed a desire to pursue an even more vigorous policy of picking winners and losers, with an extra dose of micro-management thrown in for good measure.
The efficient allocation of credit is vital to the successful operation of our economy. Without saving and investment, there can be no long-term economic growth. Banks and other financial institutions serve a critical role in bringing savers and investors together and allocating credit to its most productive use.
To operate successfully, credit markets need transparency and accountability. Transparency is achieved through the reporting and disclosure of assets and liabilities. Accountability is achieved through the proper alignment of risk and reward. Those who accept risk should profit from their success and pay for their losses.
Unfortunately, we have allowed ourselves to undermine the very foundation of our credit markets through a series of well-meaning, but ultimately misguided actions. The continuation of the Troubled Asset Relief Program will not address these fundamental problems. We need a new approach. I'm hopeful Congress will be able to work with the new Administration in the coming months to improve our financial system and revitalize our economy.