The Economy (continued)
Floor Speech
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Mr. YARMUTH. Will the gentleman yield? We have been joined by another colleague. But I just have to follow up on something that Mr. Klein said because I almost thought he was telepathic there when he talked about the Great Depression.
None of us wants to be alarmist here. But when I was in college, I did my senior thesis on speculation in the 1920s. In fact, there is some remarkable parallels between the situation today with the housing crisis and what happened in the 1920s that led to the Great Depression.
The similarity is that back in the 1920s, if you wanted to buy stock, you only had to put up 10 percent of the price of the stock. You could borrow the rest of the money. The theory there, because the stock market was going higher and higher and higher, and everybody thought it was going to continue to get higher, happy days are here again, before they disappeared, and that was the psychology. So nobody ever thought about regulating that. Everybody thought that was an endless gravy train. So people would keep buying stock, paying 10 percent down, 10 percent down.
When the stock dropped 10 percent, their equity was gone. This happened time after time after time. The same thing has happened now with the housing market when people are lured into markets with low interest rates and then they borrowed against the equity and then when the value started to slip a little bit, they were in a negative equity situation, and that is what precipitated this crash.
I am hoping, and I don't believe that the situation in terms of the overall economy is as threatening as that situation was. The parallels are the same. After that situation in the 1920s, we created the SEC, we went to an environment, because the pendulum had swung over to the side of absolutely no regulation, and we saw the problems with that.
I listened to Senator Obama today on the campaign trail, and he made I think a very profound statement, and that was: Things go wrong when nobody is looking. That is what we have had over last 8 years, maybe more than that. We decided we didn't need to look at all that stuff. We found out now we need to pay attention. We need to hold all these institutions accountable. We need to set up certain rules.
We don't want to swing the pendulum to the other side, as my good friend Mr. Hodes said, but there is a happy medium. In order to avoid the pitfalls that we have experienced in the past, this is the time. I think this Congress is committed to that.
I yield back.
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Mr. YARMUTH. I thank the gentleman. It is good to see our colleague Mr. Hall here as well, and I thank him for his comments.
You know, it becomes almost a cliche, and actually an overly used one these days since we have a big presidential campaign, to talk about the contrasts between Wall Street and Main Street. But it has never been more apt, and particularly with the situation we have seen on Wall Street very recently.
We have a very serious orientation problem in this country. For many years, going back probably three decades now, we have taken the position in this country that we are going to let companies get as big as they can get because they say ``we need to get big so we can function in the global economy.'' But the ramifications of letting them get so big with no regulation has been that if they make a mistake, then it doesn't just affect their stockholders and their employees, it affects the rest of the country. Now we have seen that. As you said early on in the opening remarks, the chickens have come home to roost. That is where we are.
This Congress, this government, has to start standing up for Main Street, not for Wall Street, understanding that Wall Street provides great benefits for this country at times. But we have to make sure that ultimately we protect the average American working family. That is what this Congress I think has been committed to doing since day one, and we will continue to be committed to that as we move forward.
I yield back, and thank you for your leadership, Mr. Hodes.
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