Letter to The Honorable Harry Reid, Majority Leader, United States Senate

Letter

Webb, Eight Democratic Senators Call for Clear Taxpayer Safeguards, Regulatory Fixes, Limits on Executive Compensation

Letter to Majority Leader Lays Out Five Criteria for Government Bailout Plan

As the White House and congressional leaders negotiate legislation proposal to respond to instability in the nation's financial markets, Senator Webb and eight of his Democratic colleagues sent a letter to Senate Majority Leader Harry Reid seeking assurances that any agreement being negotiated contain clear and specific protections for taxpayers, limits on executive compensation, and a strengthened regulatory structure to prevent future abuses.

The letter, which lays out five criteria that must be addressed "given the impact the legislation would have on U.S. taxpayers," was also signed by Senators Tom Harkin (D-IA), Bill Nelson (D-FL), Ben Nelson (D-NE), Blanche Lincoln (D-AR), Barbara Boxer (D-CA), Diane Feinstein (D-CA), Ken Salazar (D-CO), and Amy Klobuchar (D-MN).

The criteria include: (1) a new regulatory structure to protect our financial system against further instability, (2) releasing of funds to the Treasury in installments to ensure proper implementation and accountability; (3) a clearly specified limit on executive compensation in rescued companies; (4) ensuring that taxpayers are protected against loss and share in any possible gains; and (5) a restriction on financial assistance to foreign banks and institutions.

"This issue transcends party politics, going to the concerns that every single American holds for a secure financial future," said Senator Webb. "Those of us who have not been among the small group of negotiators have a duty to communicate clearly both our concerns and our expectations as the process moves forward. The markets should know that we want to reach a consensus expeditiously, but with a plan that protects the economy, gives a potential boost to the American taxpayer and brings accountability to those who got us in to this crisis."

A copy of the letter follows:

September 26, 2008

The Honorable Harry Reid
Majority Leader
United States Senate
Washington, DC 20510

Dear Majority Leader Reid:

The undersigned Senators appreciate the time-sensitive nature of the current financial crisis, but want to ensure that several provisions are included in any proposal. While we have not yet seen the proposed compromise legislation, our priority is to ensure that given the impact the legislation would have on U.S. taxpayers, a number of fundamental points must be addressed.

They are as follows:

First, a new regulatory structure must be established to protect our financial system against further instability. Given the time constraints of this crisis, regulation can be put in place following the completion of the current legislation, but should be developed no later than the first six (6) months after passage.

Second, the funds requested by the Treasury Department should be released in installments. A ‘tranched' approach would permit the Congress to properly fulfill its oversight role and to monitor the implementation of a new regulatory structure.

Third, limits should be proposed on the compensation of executives at private institutions participating in the Treasury's program. A mechanism could also be put in place to provide for executives to receive increased compensation if they return their companies to profitability and make taxpayers whole. But if taxpayers will be asked to make historical sacrifices, so should the institutions and individuals who facilitated this crisis.

Fourth, in exchange for taxpayer assistance, the government should take equity in the troubled institutions through warrants, contingent shares, or a senior debt instrument in the case of non-publicly traded entity. The goal of the valuation of the contingent shares/warrants received by the government should be to protect the taxpayers from loss to the greatest extent possible and any gains are returned to the U.S. Treasury.

Lastly, foreign central banks, not the U.S. taxpayer, should provide financial assistance to foreign-based institutions and their U.S. subsidiaries.

Sincerely,
Jim Webb (D-VA)
Tom Harkin (D-IA)
Ben Nelson (D-NE)
Bill Nelson (D-FL)
Blanche Lincoln (D-AR)
Barbara Boxer (D-CA)
Diane Feinstein (D-CA)
Ken Salazar (D-CO)
Amy Klobuchar (D-MN)

cc: The Honorable Christopher Dodd
Chairman
Senate Committee on Banking, Housing, and Urban Affairs

The Honorable Richard C. Shelby
Ranking Member
Senate Committee on Banking, Housing, and Urban Affairs

Source