EMERGENCY ECONOMIC STABILIZATION ACT OF 2008 -- (House of Representatives - October 03, 2008)
Mr. STEARNS. Madam Speaker, I rise today to express my reluctant and continuing opposition to the Emergency Economic Stabilization Act, H.R. 1424--a bill that was hastily crafted, inadequately vetted, and has now been made worse by an infusion of tax extenders and narrowly targeted earmarks, costing taxpayers $812 billion as reported by the Congressional Budget Office.
This new bill is still flawed because its basic premise is that taxpayers have to take over these toxic loans from ailing institutions, and Secretary Paulson is still granted the unprecedented authority to purchase almost any troubled asset or financial instrument he deems necessary, effectively allowing him to become a financial dictator. Tax expert Ryan Ellis has rightly stated that with this bill, ``Congress is giving a member of the executive branch virtually unlimited power for the entire economy.''
The bill today is very similar to the legislation that was voted down only a few days ago, but this time it contains frivolous add-ons. With the exception of the necessary increase of the FDIC insurance limit to $250,000, which I am happy to see included, this bill leaves little to be desired for American taxpayers.
To be specific, the Senate version of the Emergency Economic Stabilization Act that we are voting on today contains both energy and non-energy related tax extender language, targeted earmarks, and mental health parity legislation--provisions which have no business being placed into a bill which is meant to rescue our economy from a financial meltdown.
The mental health parity bill that has been thrown into the 440-page Economic Stabilization Act federally imposes more financial responsibility on employers who are already struggling to pay for their employees' health insurance, and will come at an additional cost of $3.8 billion dollars. Further, the bill we are voting on today contains narrowly targeted earmarks which are being described as ``tax relief provisions.'' Buried within this 440-page bill is a temporary increase in the amount of rum excise tax revenue paid to Puerto Rico and the Virgin Islands; a 7-year recovery period for motorsports racetrack property; an economic development credit for American Samoa; tax benefits for fishermen and those who suffered from the 1989 Exxon Valdez oil spill; and even an exemption for certain wooden arrows used by children. These provisions cost millions of dollars and are not paid for under this bill. Also included are nearly $42 billion in tax increases over ten years on oil and gas production, unemployment insurance, and investment income.
Madam Speaker, a bailout is still a bailout no matter which way you try to paint it. The American people understand full well that these targeted tax relief provisions were added for the sole purpose of winning votes, and today we are not voting on a clean bill.
I firmly believe there are viable, alternative ways to solve our deep-rooted financial problems without having to utilize a taxpayer-funded bailout strategy. Under this bill we have no way of determining how the Treasury Secretary will choose to price the toxic assets he will buy, and pricing them too low or too high will have serious repercussions. Some of our Nation's top economists along with my own colleagues have proposed far better solutions that would protect taxpayers and shore up our markets without rewarding Wall Street's bad behavior and putting us on a precarious path toward Socialism. I have personally proposed providing low-interest loans to these struggling financial institutions combined with giving taxpayers warrants so that they too can gain from any potential upside in our markets. I also support expanding the FDIC to cover all transaction accounts and put in place an oversight board that is separate from the Congress and the administration.
The issue of a lack of adequate oversight to protect taxpayers is truly worrisome. Former Speaker of the House, Newt Gingrich, points out that a plan which relies on the sole authority of the former chairman of a major investment bank to distribute billons of taxpayer dollars to struggling private sector companies will inevitably lead to corruption and crony capitalism. Further, Harvard political history professor Julian Zelizer has said of Paulson's unprecedented new powers: ``It ranks with the top list of delegations of power, especially since there's some flexibility for Treasury in deciding what to do with all of this money.
You don't like to give power over finance and taxes to people who are not democratically accountable like Congress is.''
In a matter of 1 week we have gone from a 2 1/2 -page bill, to a 109-page bill, and now to a 440-page bill, but no matter the increase and attempt at improvement, the bill is still inherently flawed. I think it is unfortunate that we haven't taken the necessary time to more carefully consider our options and to re-evaluate some of the more troubling financial trends that have directly contributed to this historic crisis For example, I question why Congress hasn't addressed the issue of Credit-Default Swaps, CDS--a $62 trillion, unregulated market that threatens to be our next financial crisis. Warren Buffett describes these insurance-like contracts that promise to cover losses on securities in the event of a default as ``financial weapons of mass destruction.'' The CDS market is spiraling out of control as we speak, and the Chairman of the SEC has started to ask Congress for the immediate authority to begin regulating Credit-Default Swaps which are intrinsically linked to subprime loans and exotic securities, but Congress has not acted.
Certainly, the challenges that lie ahead of us are numerous and great. We are in the middle of a financial crisis of epic proportions, and I do hope the bill we are voting on today helps to shore up our markets and provide stability, but reluctantly I must oppose it. This legislation has been forced upon us by Secretary Paulson, and I question his ability to objectively implement the Treasury plan given his close ties to major investment banks and Wall Street. Surely Paulson's 25 years spent at Goldman Sachs and eventually becoming its chairman represents an overt conflict of interest.
Given the fact that taxpayers are getting toxic goods and there is no real reform of the Community Investment Act which has forced banks to make loans to people who have questionable credit and cannot afford to pay their mortgage back, I am voting against this bill, and I pray and hope the future will afford us a chance to craft a better bill on behalf of the American people.
EMERGENCY ECONOMIC STABILIZATION ACT OF 2008 -- (House of Representatives - September 29, 2008)
Mr. STEARNS. Madam Speaker, I rise today to address the historic vote we are holding on the largest government bailout in our Nation's history.
I do want to applaud the legislation we have on the floor, because it is much improved from the 2 1/2 -page document put forth by Secretary Paulson. However, while I commend my colleagues on their bipartisan efforts to improve the bill and insure better protections for American taxpayers, I still have strong reservations.
Our Nation faces a growing financial crisis that deserves strong Federal intervention, and I had hoped to support a proposal to shore up our Nation's financial markets while protecting taxpayers. However, I believe this legislation takes the wrong course in supporting troubled financial institutions while simultaneously exposing taxpayers to excessive risk.
To begin, this bill comes with a $700 billion price tag which will be paid for by the American people. Billions of taxpayer dollars are going to benefit an indiscriminate number of private financial institutions that utilized reckless investment strategies.
Even more troubling than the cost of this bailout is a provision that allows foreign banks to participate in the Treasury's purchase plan. Under this bill, a foreign bank, such as the Bank of China, could sell a portfolio of toxic assets to a U.S.-headquartered investment bank and then that bank could sell those same assets to the Treasury Department.
Unfortunately, this bill deals exclusively with the asset side of these troubled institutions and does not address the key issue of liability. Furthermore, it is very possible that we will still face the risk of a run on our banks.
Having gone through the Savings and Loan crisis as a freshman Member of Congress in the 1980s, I can better understand ways we can address this financial crisis. In putting forward $700 billion in public funds, I would like to see Congress pursue a more deliberative process in identifying the ills affecting our financial markets. We need to hold hearings and call in the best financial and economic experts in the Nation and take a careful look at our alternatives. One plan I recommended was providing low-interest loans to these institutions combined with giving warrants to taxpayers so that they too can gain from any future upside. Furthermore, we should expand the FDIC to cover all transaction accounts and put in place an oversight board that is separate from the Congress and the administration.
It is troubling that under this bill the Treasury will be ceded vast powers. Secretary Paulson and successors will decide how $700 billion in taxpayer dollars will be spent, and may buy not only mortgages and mortgage-backed securities, but also any other financial instrument he deems necessary.
And while the bill does set up an oversight board, Mr. Paulson would be one of the five members of the Board monitoring his own actions. Thus, if Mr. Paulson wishes to use his authority to buy financial assets not linked to mortgages, he can do so after consulting with the Fed Chairman, but he does not need his approval or the approval of the Oversight Board. Granting a single person this much power over our financial future is not acceptable in a democracy.
The bill also gives the SEC Chairman the ability to suspend the accounting rules that require banks to report on the market value of their assets if he believes it is in the best interest of the public. The bill also allows the Government to purchase troubled assets from pension plans and local governments and small banks that serve low and middle-income families. This expands the intended scope of the bill to allow the government to buy the toxic debt of States, cities and municipalities in places like Detroit and Chicago. This begs the question--who is going to make the basic decision on what cities, States and municipalities are going to be rescued?
However, the heart of the problem of the bill we are considering today is that the Government should not be deciding the winners and the losers. The investors who made mistakes should be held responsible, and those who navigated the Federal distorted market should be rewarded for their wisdom and prudence.
If we, as Americans, believe in the viability of the free market system, we should allow it to work by not perpetuating a continuing bailout strategy that places immense risk on the shoulders of American taxpayers
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