So, like many of you .. I wrote my Congressman. Was not a very happy letter I might add.
And now he has e-mailed me back. Sorta. More like.. E-mailed everyone back..
.. but I understand perfectly that this is not a perfect World and
there is no way my Congressman, especially one as important as Mr. John A. Boehner -- ya, House Republican Leader .. like I had a chance in hell to
sway his vote.
Here is what he had to say:
Thank you for contacting me regarding the economic rescue plan. I appreciate hearing from you.
Let me begin by saying that I am as angry as the thousands of constituents who contacted me about the economic rescue package. My
constituents, and the American people, are angry that this has happened to them and are angry and terrified about what this means for their future. I
share the same frustration and fears about our economy and its future, as this was one of the toughest votes I have ever had to cast. The economic
rescue plan is not perfect. But the bipartisan plan was necessary because the risk of inaction is much higher than the risk of action. If I did not
believe that we were on the brink of economic crisis; if I did not believe that inaction would catastrophically diminish our retirement savings and
the ability of small businesses, college students, and homeowners to get loans; if I did not believe that inaction would imperil the bank accounts of
the American people, it would have been the easiest thing in the world for me to have said no.
As the House Republican Leader, I sought to work together with the Administration and the congressional leadership, in a bipartisan way, to
address this crisis that threatens the very foundation of our economy. I have heard from thousands of Americans that feel this rescue package has
little to do with the realities of their day-to-day lives, that they were prudent with their own budget, and that they should not be on the hook for
failures and greed on Wall Street. However, I believe that economic stabilization is necessary to address the problem for Main Street. A key
indicator of our economy is the health of the credit market. The credit market, at its basic level, is the circulatory system of the economy. To a
large extent, our economy operates on the constant and circular flow of funding from lenders to borrowers. Its smooth functioning is vital for
businesses to fund their day-to-day operations, and for consumers to buy cars or obtain student loans. Now that credit system is paralyzed. A
consequence of this paralysis is that banks are not lending to one another because they do not trust the financial health of other banks, and they
feel the need to conserve capital to weather the next potential crisis. If left unaddressed, the problem in our credit market could further impair
the ability of companies to meet payrolls or to finance expansions, leading to more job losses; make it increasingly difficult for prospective
homebuyers to obtain mortgages or individuals to acquire car loans; and block students' access to college loans. In short, what some have called a
huge "bailout for Wall Street" in fact aims at preventing painful consequences on Main Street.
A major component of the financial stress has been the boom and bust in housing. Over the past two decades, mortgages have increasingly been funded
indirectly through asset-backed securities and non-bank lenders. In most cases, once a mortgage was made, the mortgage was sold by the entity that
originated the loan to another institution, which pooled a large number of these loans together. From this pool, the institution then issued
securities whose returns were based on the payments made on the underlying mortgages in the pool. For a variety of market and regulatory reasons,
these mortgage-backed securities (MBS) became widely held by nearly every financial institution in the U.S. and in many institutions worldwide. It
has been argued that rapid house price appreciation in some areas and low interest rates led to overconfidence by investors, lenders, borrowers, and
regulators. Builders responded to higher prices with increased construction, and the pace of home price increases could not be sustained.
Inventories of unsold homes began climbing and prices stagnated at the same time as short-term interest rates began rising. In 2006 and 2007, the
rates of default and non-payment by mortgage holders increased significantly. Any borrowers, including those in the subprime market, who had depended
on being able to refinance at low interest rates or depended on rapid home price appreciation found their plans frustrated and defaults occurred at
increasing rates. The value of financial assets that depended on home owners making their payments, such as mortgage-backed securities (MBS),
declined significantly. These losses have rippled through the financial system. Due largely to the uncertainty about what future mortgage default
rates will be, as well as which financial institutions are currently holding MBS, financial markets have nearly frozen.
On September 21, 2008, the Secretary of Treasury Henry Paulson announced a proposal to allow the Department of Treasury to purchase up to $700
billion in unwanted mortgage-related assets from the balance sheets of financial institutions in an attempt to reduce disruptions in the financial
system. Concerned that the American public would be left holding the bag for mismanaged companies, I requested a House Republican working group,
including both moderate and conservative Members led by Rep. Eric Cantor (R-VA), to put forth a series of economic rescue principles aimed at ensuring
the recovery is funded by Wall Street, not Main Street. On behalf of myself and my Republican colleagues, in a letter to Speaker Nancy Pelosi (D-CA)
I outlined improvements to the rescue proposals necessary to forge an agreement. I reiterated that it must reflect core free-market, pro-taxpayer
principles in order for a large majority of Republicans to support Secretary Paulson's plan.
The final rescue plan (H.R. 1424), signed into law on October 3, 2008, authorizes a purchase program, called the Troubled Asset Relief Program
(TARP), that allows the federal government to hold up to $700 billion in unwanted mortgages or mortgage-backed securities from the balance sheets of
financial firms, and creates an insurance program to allow federal guarantees as an alternative to direct purchases. With 90 percent of mortgage
payments being paid on-time, it is reasonable to expect a substantial payback, if not profit, in our investment. As the holder of billions of dollars
in mortgage loans, the Treasury will create a plan to mitigate foreclosures and encourage servicers of mortgages to modify loans. Lastly, if after
five years the government has lost money on the program, the president is required to submit a proposal for recouping the shortfall from firms that
benefited from the program.
House Republicans stood on principle throughout the process of crafting the economic rescue legislation, and in doing so, we were able to secure
numerous reforms on behalf of taxpayers. We fought for, and won, an increase in the Federal Deposit Insurance Corporation (FDIC) cap from $100,000 to
$250,000 to protect savings and small businesses. We fought successfully for inclusion of an insurance program, paid for by participating firms, that
puts the financial burden on Wall Street instead of Main Street, a major change from the original plan proposed by the Treasury Department, which put
too much burden on taxpayers. We pressed successfully for the U.S. Securities and Exchange Commission (SEC) to change so-called "mark-to-market"
rules for certain assets that have worsened the credit crisis. We also stripped out special-interest earmarks for trial lawyers, labor bosses, and
thinly-veiled political organizations like ACORN that were included in the original deal struck between congressional Democrats and the Treasury
Also, Republicans insisted on real accountability by limiting the Treasury Secretary to utilizing up to $250 billion initially, with another $100
billion available after the Secretary reports to Congress on what happened with the initial $250 billion; and by allowing Congress to withhold the
remaining $350 billion. Republicans also insisted that taxpayers be first in line to recoup losses from participating financial institutions in the
event they fail or lose money - not shareholders and certainly not corporate executives, and that irresponsible corporate executives at participating
institutions not be rewarded with golden parachutes or severance pay. In addition, because of Republican efforts, the rescue plan helps local
community banks across the country by allowing them to write off losses on Fannie Mae and Freddie Mac mortgage assets they hold. While the
Treasury's initial proposal had minimal oversight, House Republicans secured in the final bill a more rigorous oversight structure by creating a
Financial Stability Oversight Board, a Special Inspector General, and a Congressional Oversight Panel, with an equal number of Democrats and
There is more in the next post..