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Public Statements

Blueprint For Recovery

Floor Speech

By:
Date:
Location: Washington, DC

BREAK IN TRANSCRIPT

Mr. WELCH. Thank you very much. I appreciate the opportunity to speak about trying to get jobs to start going up along with the stock market.

You know, it was only 1 year ago in one week that Wall Street, the stock market was crashed to its lowest level in years. In that past year, it has recovered; but while it has recovered, unemployment is still hovering in the range of 10 percent, underemployment is in the range of 17 or 18 percent. There are over 27 million Americans who are seeking work or not working enough, and we are not going to have an economic recovery until those folks are back to work.

How did this happen? It happened, we know, because of the excessive lending, reckless lending largely engineered by Wall Street firms that stood to gain an awful lot of profit. What happened? We, the American taxpayer, had to bail out Wall Street, $750 billion. People didn't want to do it, but they had a gun to the head of the American economy, and the collateral damage of inaction would have been much more havoc to people's pensions, to unemployment, and to Main Street. But 1 year later, Wall Street is back, but lending by Wall Street to our small businesses has gone down, not up. If we are going to get jobs back, if we are going to get people back to work, we need our banks--and it tends to be our local banks--to start doing some lending. They have been doing the job, but Wall Street hasn't.

What they've been doing in the past year--and quite successfully, they're very good at it--is returning to the casino economy. They've made an enormous amount of money by buying and selling derivatives, commodities, and currencies. And how did they do it? With the help of the American taxpayer: one, the $750 billion TARP transfer; second, the open window at the Federal Reserve where those banks had access to 0 percent interest money. Now, they've been so successful that they have set aside this past year for their bonus pool $150 billion.

They had three choices as to what they could do with that money: one, they could have added it to their balance sheets, strengthened it in order to basically fight another day so that if there was a downturn, they would be able to absorb it themselves and not come hat in hand to the taxpayer. Second, they could have lent it out. If you're getting 0 percent interest money from the Fed, you've got a local small business or a young family trying to buy their first home and you lend it out at 5 or 6 percent, most people would say that's a pretty good return. They didn't do that.

The third thing that they could do--and unfortunately they did do--is decide to put that money in their pocket with a bonus. That's good for them, but it certainly hasn't been good for the American economy.

So our legislation, the Wall Street Bonus Act, is very simple. It says that all those bonuses on Wall Street that went to banks that received taxpayer assistance through the TARP program, those bonuses above $50,000 would be taxed at 50 percent. And every single dollar that was collected would then be made available to the Small Business Administration to work with our local banks that have been making loans to lend to our job-creating small businesses around the country. So we would be taking a dividend for and on behalf of the taxpayers who basically put that money up in the first place, and we would be specifically making that money available for lending with a partnership of the SBA and our small banks.

Now, this is important for a couple of reasons: number one, the money that was made on Wall Street, that $150 billion bonus pool, yes, it was smart people buying and selling and trading derivatives, but the question for us is, when we put taxpayer dollars to work, is it good for the American taxpayer? Is it good for the Main Street economy? And, obviously, if it just goes into the pockets of the Wall Street traders, it does a lot of good for them, but no good for our broad economy; and our fundamental responsibility is to help people get back to work.

The second is that the bonus culture really is very destructive because what it encourages is placing a big bet, bet red, bet black, if you win, you make a lot of money, if you lose, as we've seen, the banks can come to the taxpayer and get bailed out. And people are furious about that, rightly so. So it is time for us to make a basic statement here that will reward investment, will reward hard work, but we're not going to have the taxpayers be on the hook for people who want to gamble.

The final thing really is this: we face a question about what business model we want America to follow. Do we want a business model where you make money by financial engineering, by having the quickest computer trading program, by a lucky bet on a speculation? Or do we want a business model where folks make their money by showing up for work, by investing in their community, by hard work for the long term, by being satisfied with a steady and sustainable rate of return and profit--which we need in a capitalist economy--by treating their workers right and by paying our fair share? That's the question.

The Populist Caucus is very strongly united in the view that hard work should be rewarded, that entrepreneurs, job creators, people who make money because they invest in their economy, because they invest in their workers, that is to be rewarded and encouraged. In fact, we have to do it if we're going to have an economy that works and expands rather than an economy that is based on flipping trades, about speculation, and financial engineering.

So this Wall Street Bonus Act would put some money into lending and help our small entrepreneurs. And I am very grateful that we have the strong support of so many Members of Congress for this.

I yield back.

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Mr. WELCH. Well, I appreciate that. You know, really what it is about is whether banking is going to be an activity that is about lending money to businesses, small businesses, families, to buy their first home, or it is going to be a mechanism for financial speculation. And it is really two totally different models.

I want to just take up on what you were saying. We need a banking system. We need a strong banking system. We need local bankers who are actually engaged in their community, who can make judgments about who is good for a loan. I want to give you an example of the local bank and the Wall Street operation.

In St. Albans, Vermont, we have a small bank, People's Bank. The president of that bank, Rick Manahan, his desk is in the entry of the bank. If you walk in, you see all the teller windows. There is a big vestibule area, the public area. His desk is there. People do not have a hard time asking Rick what is going on. He knows the folks in his community.

His bank and his board of directors see a good day's work when, at the end of the day, they have been able to authorize a loan to a local business--it might be a retailer, it might be a construction company--knowing that that business is going to use that money to help create a local job. Or it is a young family getting started. They have to make a tough underwriting decision. But they know that family, and they know they are going to do their level best to be good for it. At the end of the day, a house has been sold, a family has got a new place to live, and they go home and sleep pretty good at night, knowing that they have made a real contribution in the community.

The other model, just to give you an example, one of our most esteemed Wall Street banks, is Goldman Sachs.

They have the best and brightest of folks doing the work there. But here's one of the things that they did--and it was very successful for them making money. They bought a mortgage origination company in the South. They hired 26, 30-year-old young people to go out, knock on doors, and sell mortgages. Generally, subprime mortgages that people couldn't afford and didn't need. They then brought those mortgages back to New York, and they bundled them into products that they then sold.

But before they sold them, they got the best and brightest MBAs to knock on the doors of the rating agencies and persuade the rating agencies that these toxic instruments were AAA. Then they went to their sales department and had them contact trusted investors, pension funds, and said, We've got some AAA products here. You ought to buy them. It's going to be a good return for your pensioners. And they sold them. Then they went to their trading room and they said, You know what? These are junk. How do we know? We sold them. And they bet short against the instruments they'd just sold long.

That would not happen at People's Trust in St. Albans, Vermont. They couldn't even imagine doing that, selling something that wasn't worth investing in. They couldn't do it. And I know that every single one of us, Republican and Democrat, have local bankers who've met that standard, where the goal is to serve the community. And they know that their responsibility with this trust that they have of depositor money is to put it to good work to build the economy.

Wall Street has a different point of view. Not that they're not necessary; they obviously are. But when they are helpful, they see that the work that they do should be in service of the work that Main Street does. You know, that's why with the reforms that we must implement, whether it's a bonus tax, whether it's a Consumer Product Safety Commission, whether it's tightening up on the lending regulations and derivative trading, all of that, the bottom line is really very simple: Is the banking system going to be there to serve us, or are we going to be there to serve the financial engineering of the banking system? That's the question that this Congress faces and America wants an answer to. I yield back.

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