Issue Position: Wall Street Bailout

Issue Position

On October 3, 2008, President Bush signed the Emergency Economic Stabilization Act (P.L. 110-343), also known as the Wall Street Bailout Bill, into law. This legislation provided $700 billion for TARP to be spent at the discretion of the U.S. Secretary of the Treasury. I voted against this legislation twice because it did not effectively limit the pay of Wall Street executives, it significantly increased the national debt, it did not sufficiently protect of taxpayer dollars, nor did it adequately address the needs of our economy.

My concerns proved true just days later when AIG executives, who received $85 billion in an emergency loan from the Federal Reserve, spent $440,000 on a corporate retreat at a posh hotel/spa in California. In 2007, Wall Street's five biggest firms, Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley, paid a record $39 billion in bonuses to themselves. Those bonuses were paid, even though the shareholders in those firms lost about $74 billion in stock declines, their worst year since 2002. If split equally among the approximately 186,000 workers at the former Big Five Houses, that bonus money means an average of $201,500 per person, more than four times the $48,201 median household income in the U.S. last year. Executives that ran these banks into the ground should not be rewarded by taxpayers for their incompetence.

The Treasury Department has failed to follow Congressional intent on the spending of these financial rescue TARP funds, and has not satisfactorily tracked or explained how $350 of the $700 billion taxpayer money was spent. The Treasury and Bush Administration officials have refused to enforce any lending obligations on institutions. There must be greater transparency and taxpayers must know how their money is being spent.

On January 21, 2009, the U.S. House of Representatives passed the TARP Reform and Accountability Act (H.R. 384) by a vote of 260 to 166. This legislation now awaits consideration by the U.S. Senate. I voted for this legislation, which will ensure that funds will be spent responsibly and with public disclosure. This bill would strengthen accountability, close loopholes, and require banks to publicly report how government funds are being spent.

This reform bill would require institutions that receive TARP funds to provide quarterly public reporting on how the money is spent, including information on the loans guaranteed with the funds. H.R. 384 also prevents executives from receiving "golden parachutes" and requires that the Treasury reclaim any compensation paid to executives from companies that misstate earnings. This bill would provide relief to homeowners struggling to prevent foreclosure by mandating that no less than $40 billion of the remaining $350 billion in TARP funds be spent to help individual homeowners pay their mortgages.

I have heard from numerous small businesses in Northern Michigan that have been unable to secure loans despite the $350 billion in tax dollars that has been provided to financial institutions. Businesses with good credit and good business plans should not be denied loans. Our economy cannot recover unless small businesses are able to access credit, to grow their business and weather the recession. H.R. 384 legislation would also clarify the intent of Congress that TARP should also be used to benefit small community banks, consumer lending, auto companies, and municipalities.

My opposition to the TARP remains, but I supported the increased oversight for use of TARP funds provided in H.R. 384. While TARP is now law without my support, Congress' first obligation has to be protecting taxpayer dollars.

On January 22, 2009, the House considered H.J. Res. 3, a resolution of disapproval which would prevent the release of the second $350 billion of TARP funds (Wall Street Bailout money). I voted to block the release of the remaining $350 billion of TARP funding because of the way in which the Treasury Department and Wall Street mismanaged the first $350 billion. Although the House passed the resolution of disapproval by a vote of 270 to 155, the U.S. Senate failed to pass similar legislation and the remaining $350 billion will be given to Wall Street.

Please be assured that I will work with the Obama Administration to ensure that any additional funds released are spent wisely.

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