Federal Bailout is "Troubling," says LaRocco

Press Release

Federal Bailout is "Troubling," says LaRocco

U.S. Senate candidate Larry LaRocco said the difficulties of Freddie Mac and Fannie Mae that require additional federal support are "very troubling."

"The test is whether the federal bailout comes with sufficient oversight—something the Bush Administration has failed to undertake on its watch," LaRocco said.

The government has decided these institutions are "too big to fail," a policy Congress rejected when LaRocco served there from 1991 to 1995. He greets this targeted reversal of policy with caution. Mega-institutions need to hear a strong message that taxpayers will not be a safety net for reckless behavior.

"The new legislation, which gives the Treasury Department new regulatory authority with teeth, helps stave off a credit crunch that would hurt homeowners, homebuyers and businesses," LaRocco said. "This will help, but more needs to be done to reassure both lenders and borrowers."

"Capital is king," LaRocco said.

Had the Bush administration made sure the institutions had enough capital backing their activities, federal assistance would not be needed. But, the legislation includes a new regulatory regime that will ensure that these institutions are well-capitalized, regardless of size. That in term will prevent any future need for such bailouts.

"Of course, bank deposits that are insured by the Federal Deposit Insurance Corporation to the legal limit are already guaranteed by the full faith and credit of the federal government," LaRocco said.

LaRocco is a former member of the House Banking Committee.