Financial Crisis

Floor Speech

FINANCIAL CRISIS -- (Senate - October 01, 2008)

Mrs. CLINTON. Mr. President, I appreciate very much the extraordinary work that has been done with respect to the rescue package, led in a bipartisan fashion, which has certainly produced significant changes in the original request that came to the Congress from the Treasury Department. Tonight we will vote on legislation none of us wish we were considering and none of us can afford to see fail.

The costs of inaction are far too great. We are already seeing the consequences of a freezing credit market that will only worsen. I hear across my State of New York that small businesses are struggling to find affordable loans to keep their doors open and their inventories stocked. Even larger businesses are being pushed to the breaking point. Throughout the country, the impact of this credit crisis is beginning to be felt with students who are seeing the sources of student loans dry up, interest rates on car payments are rising, families who had saved up and acted responsibly are seeing higher mortgage rates shrinking their dream of home ownership.

Our economy runs on credit. Underlying that credit is trust. Both the credit and the trust is running out. Essentially, what we are doing in an intangible way is restoring trust and confidence, and in a very tangible way helping to restore credit. Banks will refuse to lend to businesses and even to one another; investors continue to withdraw to the safest investments: Treasury bills, even cash. Tens of thousands of jobs in New York have been lost. A study this morning projected that New York alone would lose at least 120,000 jobs.

I think we are here in some respects because we failed to tackle a home mortgage crisis. Now we are facing a market crisis. If we fail to tackle the market crisis, we risk an even deeper economic crisis. I do not think any of us want to see irresponsibility on Wall Street compounded by ineffectiveness in Washington.

That is why we must act, even as we do so with regret and reservations, because we have little choice. The proposal we are considering is far from perfect, but it is a far cry from the original plan sent over by the Treasury Department that instilled virtually unlimited powers in the hands of the Treasury Secretary. As I said when we first examined that original three-page proposal, we needed a plan that included checks and balances, not a blank check.

Thanks to the leadership in the Senate and in the House, we have negotiated through the Congress, on a bipartisan basis, a better alternative that instills taxpayer protections, asserts oversight, and maintains greater accountability.

As is the case very often in effective compromises, no one is happy. But we cannot let the perfect be the enemy of the good--or in this case, the enemy of what is necessary. But as we vote for this proposal tonight, we must do so considering what steps we will take next.

On the floor at this moment are three of the leaders who shaped this plan under the very able leadership of Chairman Dodd, and the chief Republican negotiator, Senator Gregg, and, of course, the chairman of the Finance Committee, Chairman Baucus. But I think we all recognize this is not the end but the beginning of what we must do. I believe there are three big goals we will have to address even after we pass the rescue package tonight in the Senate and send it over to the House.

First, we must address the home mortgage crisis. For 2 years, I and others have called for action as wave after wave of defaults and foreclosures crashed against communities and the broader economy. We are not yet through the woods. Millions of mortgages are underwater or under the specter of adjustable rates set to rise.

I am proposing what we are calling the Home Owners Mortgage Enterprise, an acronym obviously spelling ``home,'' to rewrite mortgages and homes so that creditworthy, responsible families can keep their homes and keep making affordable payments. Through such a HOME program we would also be able to consider freezing adjustable mortgage rates and even placing a short-term moratorium on foreclosures.

When our country enacted a similar program in the Great Depression, we saved 1 million homes without costing the taxpayers a dime. In fact, the program ended with a surplus. Only by rewriting the terms of the debt held by families whose mortgages can be salvaged will we recoup a great deal of the value of the debt we are purchasing from Wall Street firms.

I also believe we need to consider a real tax credit for home buyers to jump-start the housing market. This has been an effective tool in the past, and it can be an effective tool again. We have too much supply and too little demand. Getting the liquidity that will be injected into the credit markets to work its way through the entire economy will take time. I think we need not only a supply of liquidity but an increasing demand, particularly in the housing market.

Second, we must be vigilant on behalf of taxpayers, putting in place safeguards so the Treasury is maximizing the value of the assets purchased with taxpayer dollars.

We need to have the flexibility to ensure we are not just subsidizing investors and executives, but we should tie this debt relief to strong recapitalization requirements and greater accountability.

I also want to be sure that companies do not take undue advantage of this program and sell securities to the Treasury with one stroke of the pen and claim a deduction for the losses on those assets--in essence, double dipping, dumping their bad assets on taxpayers and getting a tax break as well.

I am proposing we build on a very creative provision in the bill before us and establish an e-TRUST program. That will stand for Transparent Rules Used to Safeguard Taxpayers. In the bill there is a provision that transactions be put on the Internet. I wish to ensure that the assets bought and sold by the Treasury Department are reported online in real time so any American can log on and see how their tax dollars are being spent. All assets bought and sold must be available on a publicly accessible Web site that discloses the buyers, sellers, and values of these assets. The American people are buying these securities, and so the American people must have easy access to their portfolio.

It is also important to the American people to understand that lying behind these complex transactions with all kinds of long names that you read in the newspaper--collateralized debt obligations and credit default swaps and all the other words that are used to in some way explain the complex financial transactions that brought us to this place--are real assets. There are real homes owned by real people on real land in real communities across America.

So we want to know how those securities that stand in for these real assets are being traded, bought and sold, and we want to be sure we realize for the taxpayer the benefits of these transactions.

Third, I think there is general agreement we must pursue a broader reform. That is one of the lessons of this turmoil. I know Chairman Dodd and others will be holding hearings to try to untangle how we got to where we are. We know we have to rein in executive compensation by giving shareholders a greater role in and eliminating loopholes that allow boards to conceal the value of salary packages. We have to end the quarter-by-quarter mentality in which long term prosperity is subverted by short-term stock valuations. Obviously, we have to end the culture of recklessness in our financial markets endorsed by an ideology of indifference in Washington.

If the American people invest in these companies, I think we should ask the companies to invest in the American people. I think we should consider requiring financial institutions participating in this Treasury plan to create an American priorities fund, to be part of their portfolio, to invest in clean energy, infrastructure, mass transit, manufacturing, education and other public goods and goals that would be well served by greater private investment.

Along with the rescue package will be a number of tax credits that will be passed by the Senate tonight. Again, Chairman Baucus has done yeoman's work getting these tax credits put together. The Senate supported them before. In it is a fix for the alternative minimum tax and an energy production tax credit.

In fact, we will be stimulating the economy for Main Street while we pass this rescue package for our credit markets. I think that is the right combination. But we need to do more. Instead of toxic securities that nobody can understand, are so complex and lack all transparency and accountability, banks should be investing in clean energy facilities in Buffalo or new auto manufacturing plants in Detroit to build more fuel-efficient cars.

We should be repairing our bridges, our roads, our tunnels. We should be investing in high-speed rail and making sure Amtrak is not a second-class railroad but competes with the best anywhere in the world.

I think the agenda before the Congress is a very important one for our country. We cannot continue to shuttle from crisis to crisis. This is a sink or swim moment for our country. We cannot merely catch our breath. We must swim for the shores and we must do so together, not only as a united Congress but as a united country. There is so much work to be done in America, so many investments that make us richer and stronger and safer and smarter that will enable us to look in the eyes of our children and grandchildren and tell them we are leaving our country in as good, in fact, better shape than when we found it.

At this moment, we cannot say that. But I am absolutely sure, based on the bipartisan cooperation we saw on this bill, in responding to a real crisis, that we will see more of that in the months ahead.

Our new President will certainly demand it of us, but we should be demanding it of ourselves and demonstrate to the American people that the Congress will lead the way into a much more confident and optimistic future for America.

I yield the floor.

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