DORGAN SAYS WALL STREET BAILOUT PLAN IS "STAMPEDE IN WRONG DIRECTION"
Monday, September 22, 2008
STATEMENT OF U.S. SENATOR BYRON DORGAN
“The financial rescue proposal offered this weekend by the Bush administration is nearly unbelievable. President Bush wants Congress to provide a minimum of $700 billion in taxpayer money so that the federal government can purchase toxic securities from failing Wall Street firms without any safeguards or oversight attached to that bailout. The Bush administration is also asking for unlimited authority, proposing that, no matter what they do with the $700 billion in taxpayer money, it would not be subject to any oversight or review by the courts or Congress. Nothing like this has been done in the history of our country.
“I am prepared to take aggressive emergency action to prevent a collapse of our financial system. But this proposal looks to me like a stampede in the wrong direction. Right now it looks like a proposal to reward the very people on Wall Street who created this mess, and who pocketed more than $100 billion over the last several years making it.
“How did we get here? In 1999, when the Congress was pressured to repeal the financial protections that were put in place following the Great Depression, I voted against it. That bill, the mis-named Financial Modernization Act, repealed the Glass-Steagall Act. I warned then that a ‘financial swamp’ would result from the casino-like prospect of merging banking with the speculative activity of real estate and securities.
“In 1999, when the bill was debated, I warned, ‘This bill will also raise the likelihood of future massive taxpayer bailouts…I also think we will, in 10 years time, look back and say…we forgot the lessons of the past.’ I take no satisfaction that I was right.
“I agree that the Congress must now act, but that action must be smart and effective. That means any action taken must be guided by two principles: protecting U.S. taxpayers from being ripped off in a rushed, blank-check, no-strings-attached Wall Street bailout, and ensuring accountability and oversight to put an end to the very reckless business practices that led to this crisis and put our entire economy at risk.
“Congressional action must include:
1. Restoring the stability and safety of the banking system by recreating protections of the Glass-Steagall Act, which prohibited the merging of banking businesses with riskier investments. That post-Depression Era protection served us well for seven decades before its repeal.
2. Addressing the wildly excessive compensation on Wall Street, which has incentivized reckless behavior. In recent years, Wall Street has doled out more than $100 billion in bonuses to the very people who have steered us into this mess, including more than $33 billion in each of 2007 and 2006.
3. Developing a system of regulation that would require accountability for the speculative investment activities of hedge funds and investment banks that create and sell complex securities.
4. Providing for a period of forbearance on mortgages where homeowners could continue to pay mortgages at a set rate.
5. Creating a Taxpayer Protection Task Force that would investigate and claw back and claw back ill-gotten gains. This would be targeted at individuals and firms that profited from creating and selling worthless securities and toxic products. Despite the fact that this practice caused the current economic crisis, many of these individuals and firms now seek to benefit from a government bailout.
6. Making sure that U.S. taxpayers get to share in the increased values " not just the burden of risk " of the firms they are bailing out.
“If government action is taken without the safeguards described above, it will not address or cure the major problems of our financial system, and it could wreck our economy and lower our standard of living. This is a crisis and we must address it quickly, but we need to get this right.”
September 19, 2008
Statement of Senator Hillary Rodham Clinton on the Administration's Proposal to Restore Stability to U.S. Financial Markets
WASHINGTON, DC " Senator Hillary Rodham Clinton made the following statement on the administration’s proposal to restore stability to U.S. financial markets.
“When the American people, facing a foreclosure crisis and struggling economy, turned to this administration for help, the answer was no. Now, the administration is turning to the American people for help, to rescue the credit markets and take on hundreds of billions in debt and financial obligations as a consequence of that same foreclosure crisis. The truth is, Main Street came to Washington and got little. Now Washington is coming to Main Street and asking for a lot. The American people deserve to know that this isn't a blank check. While the need to address the current crisis is clear, I will only support steps that will prevent a widening crisis, tackle the worst kinds of abuse tolerated for too long by the Bush Administration, and address the root problems at work.
The proposed intervention outlined today by Treasury Secretary Henry Paulson would be a watershed moment for our economy. I believe that such an intervention demands that we fundamentally alter the priorities and policies of our nation under the Bush Administration that allowed this crisis to take place and escalate. Corporations that will benefit must be held accountable not only to large shareholders but also to the American people. And American taxpayers deserve to know that their money will not allow for a continuation of the status quo: short term profit at the expense of long term viability; obscene bonuses and golden parachutes regardless of performance; reckless risk taking that have placed the markets in so much jeopardy; rewards for those who foreclose on middle class families and sell mortgages designed to fail to turn a profit; and outsourcing of good jobs to serve short term stock prices instead of America's long term economic health. The prevailing dynamic of corporate America, where the sole priority was the dividend, the inflated bonus and the quarterly earnings report, must give way to a new respect for the long term prosperity of the American worker and the well being of the middle class.
After eight years of failed policies " and two years of an absentee administration " our only option left may be an unprecedented government intervention into the private markets. The markets must be stabilized to stave off wider turmoil. Nevertheless, the urgency of this crisis does not mean that we should offer a blank check to financial institutions or the privileged few. Nor can we simply allow the administration to use the taxpayers like a ‘reset button.’ We cannot allow Wall Street to act without oversight by a vigilant SEC and administration " and without regard for the American people, who will now have paid twice: in falling prey to a widening credit crisis, and in paying the bill to hopefully bring it to an end.
I will be examining the administration's proposal very closely to ensure that we do not approve a policy that may stabilize the markets in the short term without addressing the root problems facing middle class families or the kinds of reckless gambling that was permitted for far too long by the administration. The Bush Administration may have changed its tune once the crisis facing Main Street hit Wall Street. But we need to be sure that the American taxpayers " asked to shoulder yet more risk and responsibility " have a voice.”
On Thursday, Senator Clinton outlined her plan to halt the market crisis in a speech on the floor of the Senate, calling for a series of specific proposals, including creating a new version of the Home Owners’ Loan Corporation (HOLC) to remove bad mortgage debt from the market and restore confidence, curbing the most damaging and manipulative trading practices, providing immediate relief to homeowners facing foreclosure through modifying troubled mortgages, and reasserting competent federal oversight. Senator Clinton also explained her plan in a letter to more than 15,000 New Yorkers who had expressed concern about housing and the economy.
In response, Senator Clinton outlined a series of proposals to address the crisis:
Create a new entity to buy up and quarantine toxic mortgage securities that are dragging down the markets which would allow the markets to stabilize. Last spring Senator Clinton was among the first to call for a new entity modeled after the successful Depression-era Home Owners’ Loan Corporation (HOLC) or the Resolution Trust Corporation (RTC) created after the Savings and Loan crisis.
Place a temporary moratorium on the most abusive stock transactions, many of which involve the “short-selling” of stocks. Yesterday, Senator Clinton wrote to the Securities and Exchange Commission urging such a moratorium, saying it would provide breathing room for the markets to recover, for investors to make accurate assessments of companies and for regulators to assess what trading practices should be permanently banned.
Convene an emergency economic summit to show the American people their government is working together. Bringing together leaders in the administration and Congress with lenders, consumer advocates, non profits, financial institutions, and all stakeholders will allow a coordinated response to the crisis.
Aggressively pursue and encourage mortgage modifications. Senator Clinton has introduced legislation to remove barriers to mortgage modification and to encourage lenders to voluntarily work with borrowers to keep them current on payments and in their homes.
Restore competent federal oversight of the increasingly complicated financial markets. The rapid evolution of the securities and banking industry overwhelmed the current regulatory framework, resulting in a “shadow banking system” that operates outside of oversight and without accountability.
Require transparency and accountability on executive pay. Senator Clinton has proposed the Corporate Executive Compensation Accountability and Transparency Act to impose new transparency rules on executive pay, end the accounting techniques that hide compensation, and provide shareholders a say in executive compensation packages.
Ensure the accountability of financial institutions borrowing money from the Federal Reserve’s new lending facilities. Taxpayers deserve to know that the companies they are bailing out are on the road to recovery and aren’t throwing more good money after bad.
Sept. 23 (Bloomberg) -- Members of President George W. Bush's own party are voicing their opposition to his financial rescue plan even as Democratic leaders narrow their differences with the administration.
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Members of both parties are rallying around one proposed change to the Treasury plan: limiting the compensation of executives in companies that take part in the government program to buy troubled assets.
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Paulson has opposed pay limits, saying "punitive'' terms would only discourage companies from selling their debt to the Treasury.
Paulson says dollar to reflect strong fundamentals
STANFORD, California (Reuters) - Treasury Secretary Henry Paulson on Friday reiterated his view that a strong dollar was in the U.S. interest and the greenback's value would ultimately reflect strong economic fundamentals.
"The strong dollar is in the nation's interest. Our economy like any other has got its ups and downs," Paulson told an economic policy conference at Stanford University. "The long term fundamentals are strong. And I'm confident they'll be reflected in currency market."
Paulson says economy strong despite oil strains
CANCUN, Mexico (Reuters) - Treasury Secretary Henry Paulson said on Tuesday that the global economy was being strained by costly energy but said U.S. economic fundamentals were sound.
In an interview on Mexican television, Paulson said he thought that most of the slump in U.S. housing prices would be over by year-end and that growth should be stronger by then.
"I think it's going to take some time to get out of this but don't forget that the foundation of the United States economy is very solid. I think the United States can compete with any economy of any industrialized country," Paulson said, according to a translation of his comments into Spanish.
WASHINGTON, July 22 (Xinhua) -- U.S. Treasury Secretary Henry Paulson said Tuesday that the U.S. banking system is sound and the long-term fundamentals of economy are strong.
Sunday September 14
Paulson voices confidences in U.S. fundamentals
WASHINGTON (Reuters) - U.S. Treasury Secretary Henry Paulson, trying to remedy the biggest U.S. financial crisis in decades, said on Sunday, "I wouldn't bet against the long-term fundamentals of this country."
"But this is a humbling experience to see so much fragility in our capital markets, and ask how did we ever get here," Paulson told NBC's "Meet the Press" as he sought to sell the U.S. Congress and the American people on his multi-billion-dollar rescue plan.
Should our Congress approve the Bush Administration's financial rescue proposal (blank check without accountability or oversight) or should our Congress insist on provisions to protect taxpayers as outlined above? What's the right thing to do for our country?
What if the bailout plan doesn't work?
Lawmakers raised doubts Monday about what would be the largest government bailout in American history, but a bigger, more terrifying question lurked right under the surface: What if it doesn’t work?
Failure, says one insider, is not an option.
“The alternative is complete financial Armageddon and a great depression,” said a former Federal Reserve official. “Where do they go after this? Well, the U.S. government could nationalize the banking system outright.”
A few months ago, that idea would have been laughed out of the room.
But no one’s laughing anymore.
While almost no one wants to dwell publicly on the possibility that a $700 billion package could simply be too small to forestall a financial meltdown, privately some aides were already thinking of what the government might do if the Treasury plan passes but fails.
In a statement Monday, President Bush said that “the whole world is watching to see if we can act quickly to shore up our markets and prevent damage to our capital markets, businesses, our housing sector and retirement accounts.”
What the president didn’t say is that the whole world will be watching to see not just if Washington can act but whether Washington’s actions can still make a difference.
Under the current plan, the U.S. government will buy up to $700 billion in assets from private holders on Wall Street. That would help banks stabilize their balance sheets, and in theory provide an incentive for banks to begin extending credit among themselves again " a critical component of a functional financial system.
So what’s Plan B?
There really isn’t one.
. . . Congress is talking about oversight, but we know what happened to billions in Iraq; much of it just disappeared into thin air.
Now they have the audacity to increase their gambling to $700 billion without understanding what the end-game will be. . . .
Most likely scenario, tried and tested: Keep your eye on the birdie; watch Congress vote for the bailout bill and see Bush sign it with a "signing statement", stating that he accepts the $700 bn but not the caps on executive compensation and without the oversight.
Michael S. Cullen, Berlin, Germany
Bernanke: Recession certain in absence of bailout
Federal Reserve Chairman Ben Bernanke bluntly warned Congress on Tuesday it risks a recession, with higher unemployment and increased home foreclosures, if lawmakers fail to pass the Bush administration's $700 billion plan to bail out the financial industry.