Mr. Speaker, I see no drug addicts in here. I only see hardworking Americans--people who make things with their hands and who support their families and who make cars that have been noted as outstanding cars, not only in America but also…
Mr. Speaker, I see no drug addicts in here. I only see hardworking Americans--people who make things with their hands and who support their families and who make cars that have been noted as outstanding cars, not only in America but also around the world. So I support the bail in of all of these taxpayers, and I am gratified that this particular legislation does answer the question.
I would like to yield to the gentleman, the chairman of the committee, to ask him about this auto czar and whether or not they have the authority to prevent the relocation of these plants overseas to take jobs away from Americans.
Well, let me just say that this bill focuses on restoring the ability of Americans to make things. It protects the taxpayers with the ``car czar.'' It protects retirees. It protects the pensioners. It protects the families. It stops, if you will, this massive bonus program. It's interesting that my friends now say do the bankruptcy process, but when the poor mortgage holder was asking for a bankruptcy, the process of my friends on the other side of the aisle would not allow them to do so.
Bankrupt companies selling cars do not work. Let us stand for the hardworking Americans who make things with their hands, who design things with their intuitiveness and who bring to America the pride that built the middle class.
I am proud of this bill, and I believe we should stand strong to support them. It is good to give tools to the next administration who can make this right. For my friends who want to help the small businesses, join me in supporting the economic stimulus package for which we're going to vote to help Americans to restore their lives.
Mr. Speaker I rise today in support of H.R. 7297. I would like to thank the Chairman of Financial Service Barney Frank for bringing this important piece of legislation to the floor. I rise today with the confidence that our system of government is strong and the constitutional protections of our government will protect America while we reform America's automobile industry.
Leadership has worked without tiring to ensure that this bill contains language that will ensure the betterment of the American people. Our leadership should be thanked for working on this bill during long hours into the night, weekends, and busy days. We toiled long into the night to incorporate Democratic principles in this bill.
I have worked with leadership to offer language from the bill that I introduced on November 20, 2008. The bill is H.R. 7297, ``Emergency Automobile Industry American Jobs Protection Act of 2008.''
The ideas included in H.R. 7297 are important because they will continue to keep America's economy strong, ensure that jobs remain in America and that the automobile companies develop a definite plan for growth. My legislation is aimed at stabilizing the American automobile industry through jobs, dealerships, including women and minority-owned dealerships, and American automobile industry suppliers. H.R. 7297 requires that any loan funds distributed to the ``Big Three'' automobile companies should be conditioned upon these companies filing a certification with the Congress.
The bill provides that before receiving loan funds, the ``Big Three'' must certify the following:
(1) United States automobile jobs will not be decreased by relocation to foreign companies;
(2) automobile dealerships will benefit from the receipt of these loan funds, and that the ``Big Three'' shall further provide for the stability of such dealerships, including women and minority-owned dealerships; and
(3) United States automobile suppliers will also be supported by and stabilized by such loan funding.
The bill also provides that no loan funds should be used by the ``Big Three'' to allow them to relocate overseas if it will result in the loss of United States automobile industry jobs, dealerships, or suppliers. Lastly, the bill provides that the loan funds should be distributed to the ``Big Three'' to ensure their stability and to establish a long-term plan of growth for United States automobile dealerships, including women and minority-owned dealerships, and United States automotive industry suppliers.
In fact, it is because I am concerned and desire that the maximum number of Americans get relief from this bill, that I offered amendments yesterday. To ensure that this bill provides relief for Americans, I offered the following amendments:
(1) Set aside $125 million (in fact the amount could been more) as a firm allotment to address the question of individual American homeowners facing foreclosure in light of the absence of a bankruptcy provision;
(2) Add Sense of the Congress language that the Bankruptcy Code should be reviewed and amended in the future to permit bankruptcy judges to address the question of individual home mortgage restructuring;
(3) Allow the courts to exercise rigorous judicial review and provide those courts with the
discretion to grant injunctive and/or equitable relief if the courts determine that such relief would not destabilize financial markets;
(4) Create a new independent commission to exercise oversight over the current financial situation with enforcement powers;
(5) Allow criminal liability for persons or corporate entities that have engaged in criminal malfeasance;
(6) Bar persons/corporate entities found to have engaged in criminal malfeasance with malicious intent in financial markets from doing business with the federal government in the future.
The bill in context
Segments of the economy have the ability to be strong. America needs to employ its full, faith, and credit to back its commitments. I feel strongly that this bill should have set aside $125 million to help homeowners who are facing mortgage foreclosure. This is important because it is money that would have been used to help the aggrieved: Main Street.
It is important to note that all five big investments--Bear Sterns, Merrill Lynch, Lehman Brothers, Goldman Sachs, and Morgan Stanley have altogether disappeared or morphed into regular banks. Given this phenomenon, the question arises and no one has or can seem to explain: Is this bailout still necessary?
Dr. James K. Gailbraith, of the University of Texas, wrote in the Washington Post, on September 25, 2008, that the bailout is not necessary because the point of the bailout has been articulated as buying assets that are illiquid ``but not worthless. But regular banks hold assets like that all the time. They are called `loans.'
With banks, runs occur only when depositors panic, because they fear the loan book is bad. Deposit insurance takes care of that.''
Deposit insurance presently is capped at $100,000. We should have considered raising the FDIC insurance cap, increased the amount of capitalization in the FDIC corporation, increased the amount of reserves in the Treasury Department.
Dr. Galbraith wrote, ``In Texas, recovery from the 1980s oil bust took seven years and the pull of strong national economic growth. The present slump is national, and it can't be cured by legislation alone. But it could be resolved in three years, by a new Home Owners Loan Corp., which would rewrite mortgages, manage rental conversions, and decide when vacant, degraded properties should be demolished.''
As I consider this piece of legislation, three of the themes that are consistent throughout it are (1) where is the enforcement; (2) who receives the first dollar; and (3) what is the disastrous and catastrophic event that will occur if this bill is not passed today? Because of the complexity of the nature and extent of the problems within the financial markets, I would rather that Congress carefully review and consider the right solution.
Congress should order the SEC, FDIC, the Federal Revenue Service to use their current powers and prevent the consequences with some extraordinary powers such as cited above regulating lifting the caps at the FDIC and allowing the SEC to suspend certain accounting practices, all this can be done without the massive bailout all at once.
This legislation was considered at 10:00 p.m. in a closed rule last night; debate on the rule immediately transpired with less than 10 members participating at approximately midnight. In less than ten hours, members are expected to have read, understand, and speak intelligently upon this complex piece of legislation.
When we consider the magnitude and extent of the financial problem, we must consider how America has gotten here in the first place. During the past Administration, America underwent a housing boom. Depressed housing markets around the country experienced unparalleled increases in price. Middle-class, working Americans sought to achieve the American dream by purchasing a home.
At the same time, banks and financial institutions were selling unsophisticated consumers unconventional and creative mortgage financing alternatives. Financial institutions were apt to qualify borrowers for more house than they could afford. Financial institutions were lending subprime mortgages and engaged in predatory lending. Adjustable rate mortgages, which had an interest rate that would adjust within 1, 3, or more years, became more common within the last 7 years. Interest-only names became common names within the first home purchaser's market. Borrowers who were considered a credit risk were allowed to purchase homes. The banks and financial institutions were not paying attention to a borrower's credit rating, their ability to pay, or a borrower's potential to default.
Present Financial Situation
According to Bloomberg, this morning stocks around the world tumbled, the euro and the pound plunged and bonds rose as governments raced to prop up banks. Hong Kong's Hang Seng Index plunged 4.31 percent to 17,876.41, and Tokyo's benchmark Nikkei lost 1.3 percent to close at 11,743.61.
Europe's Dow Jones Stoxx 100 Index declined 3.2 percent. MSCI Asia Pacific Index lost 2.7 percent after Dexia SA sank the most since it began trading 12 years ago and ICICI Bank Ltd. retreated to a two-year low. Futures on the S&P's 500 Index fell 1.7 percent as Wachovia Corp. tumbled 91 percent. Citigroup Inc. agreed to buy the company's banking operations in a transaction the Federal Deposit Insurance Corp. helped arrange.
The British pound dropped the most against the dollar in 15 years and the euro weakened after European governments stepped in to rescue Bradford & Bingley Plc, Fortis, and Hypo Real Estate Holding AG.
So far, the $700 billion package to shore up banks hammered out by Treasury Secretary Henry Paulson and congressional leaders over the weekend failed to convince investors it will shore up banks saddled with growing mortgages losses. The crisis that began with bad home loans to subprime borrowers in the U.S. is threatening to push the global economy into a recession as consumers lose confidence as banks cut back on lending.
It is difficult to have a $700 billion rescue bill when the President failed to sign $60 billion to provide economic stimulus to working- class Americans.
In September, Fannie Mae and Freddie Mac, Lehman Brothers all filed for bankruptcy. Merrill Lynch agreed to sell itself to Bank of America, AIG was taken over by the Treasury, and Washington Mutual was seized by regulators in the biggest U.S. bank failure in history. Financial institutions worldwide have reported more than $550 billion of credit losses and asset writedowns since the beginning of 2007, according to data compiled by Bloomberg.
Even after the announcement of the rescue package, the worldwide markets are still declining. I fail to see the specific catastrophic events/consequences that the U.S. public will experience if this bailout does not occur.
I am cautious because I believe that we as members of Congress need to take the time to craft a real recovery plan for our economy, a plan that puts people first and addresses our multiple economic crises, including good jobs, affordable housing, health care, retirement security, infrastructure, and disaster relief (Katrina, Ike, etc.).
Last week, New York Mayor Michael Bloomberg announced $1.5 billion in public spending cuts. I do not believe that this was prudent. Schools, fire departments, police stations, parks, libraries, and water projects are getting cut. The persons who are feeling the effects of this economic decision are the more vulnerable populations, the elderly, the children, and the working-class. Mayor Bloomberg's reaction is not the solution either.
It is clear that something must be done, but this bill does not provide the answer that America seeks.
Recently, Congress sent an economic stimulus package to the President that would have provided $60 billion in relief to middle-class working Americans. The President vetoed this bill. However, the Administration sends to us today this bill requesting $700 billion to bail out Wall Street.
I would offer that we need to restructure our present financial system. However, the kinds of reform that I believe are necessary are not included in this bill. For example, the Federal Reserve itself needs to be reformed. As members of Congress we should be looking at establishing greater oversight, preventing predatory practices and establishing public alternatives to the reckless privatized system that brought us the crisis in the first place. We need to prevent the victims of predatory lending from losing their homes and restrict lobbying by the financial sector.
I have heard from my constituents that they are not supportive of this bill. Many themselves were community bankers. One community banker, for example, wrote:
``I am a community banker who is deeply concerned about the recent developments on Wall Street and the bailouts that our government has undertaken. The great, great majority of banks in this country never made one subprime loan, and ninety-eight percent are well-captialized . . . we don't ask for or need a bailout.''
Little Relief for the Nation's Homeowners
Because of the way that the bill is written, few if any homeowners will get mortgage relief, which is why I offered an amendment that would give $125 million directly to the homeowners facing mortgage foreclosure. The bill does not contain any provision allowing the terms of a mortgage to be changed without the consent of all the investors who own the mortgage. Few homeowners will benefit. For example, the bill would not provide relief to the majority of homeowners. The bill does not contain any provision allowing the terms of a mortgage to be changed without the consent of all the investors who own the mortgage. The bill is little more than a Wall Street earmark and is not really a bill for homeowners.
Although the bill does not provide for parachutes for executives, the executives' compensation remains the same.
This is because the Treasury will chiefly purchase mortgage-backed securities which will make the federal government one of several co- owners of millions of mortgages. Whether or not any mortgages are modified will be determined by the loan servicer acting on behalf of all the various investors who own a piece of the mortgage. That is why Section 108(d) states in part, ``The Secretary shall request loan services servicing the mortgage loans to avoid preventable foreclosures.'' Congress has already requested all loan servicers nationwide to avoid preventable foreclosures, so an additional request from the Treasury is unlikely to change current behavior.
Republican Commentary
Republican critics of the bill argue that the bill rescues persons that lack financial responsibility because they were living beyond their means or that the bill helps minorities who did not exercise fiscal responsibility. There is simply no credibility to these arguments. As I have attempted to stress today, the mortgage foreclosure crisis affects all Americans. Financial institutions engaged in speculation on Wall Street that we now see has had a deleterious effect on Main Street.
Speculation, in a financial context, is the assumption of the risk of loss, in return for the uncertain possibility of a reward. Speculation is one of the main causes of various economic crises around the world. In fact, speculators have played a major role in the present crisis. The speculators were greedy.
Nonprofits such as ACORN, NACA, and Homefree USA, among many others, have long been waging consumer campaigns to educate borrowers about the various financial instruments. And, I am resoundingly grateful to them for their hard work. We cannot make them the scapegoats. These organizations have allowed persons who might not otherwise have the knowledge or the opportunity to purchase a home, the opportunity to do so in the right way. These nonprofits should be applauded.
Everyone deserves the economic dream of owning their own home. But the financial institutions were dilatory in their responsibility to assess the borrower's ability to pay for loans and purchase a home. It was the squandering of this responsibility and preoccupation with greed and avarice that has led us to where we are today.
There are substantial improvements in the present version of the bill compared to the Bush administration proposal. However, the bill as it is presently written does not provide the necessary relief to middle- class America. Frankly, the bill provides no panacea to our present economic woes. Our markets will have the full faith and credit of the United States. This bill has not sent a sufficiently clear message because it lacks enforcement.
There are provisions now that address accountability measures by requiring a plan to ensure the taxpayer is repaid in full, and requiring Congressional review after the first $350 billion for future payments.
Principally, there are three phases of a financial rescue with strong taxpayer protections: reinvest, reimburse, and reform. One of the phases is to re-invest in the troubled financial markets to stabilize the markets. Another, reimburses the taxpayer and requires a plan to guarantee that they will be repaid in full. The last is to reform how business is done on Wall Street. The current legislation provides for fewer golden parachutes and, to its credit, provides sweeping Congressional oversight.
There are critical improvements to the rescue plan that yield greater protection to the American taxpayers and even to Main Street. The protection for taxpayers include the following:
(1) gives taxpayers a share of the profits of participating companies, or puts taxpayers first in line to recover assets if a company fails; and
(2) allows the government to also purchase troubled assets from pension plans, local governments, and small banks that serve low- and middle-income families.
For companies publicly auctioning over $300 million:
(1) there will be no multi-million dollar golden parachutes for top five executives after auction, although nothing prevents these executives from still reaping enormous salaries.
(2) there will be no tax deduction for executive compensation over $500,000.
However, with a ``pause'' we can help the financial markets and make America secured.